corporate tax

Examples of corporate tax in the following topics:

• Corporate and Payroll Taxes

  • Two examples of these are corporate and payroll taxes.
  • Many countries impose a corporate tax, also called corporation tax or company tax, on the income or capital of some types of legal entities.
  • Many countries tax all income of corporations organized in the country.
  • These, however, are rarely referred to as "corporate taxes" .
  • Corporations, such as CBS, whose headquarters are pictured above, are subject to multiple forms of tax, from corporate income tax to payroll taxes.

• Financing the US Government

  • For example, income taxes due to their progressive nature are used to equitably derive revenue by differentiating tax rates by income strata.
  • The following is a list of taxes in common use by governmental authorities:
  • Excise tax: tax levied on production for sale, or sale, of a certain good.
  • Sales tax: tax on business transactions, especially the sale of goods and services.
  • Capital gains tax: tax on increases in the value of owned assets.

• Corporations

  • Because corporate stock is transferable, a corporation is not damaged by the death or disinterest of a particular owner.
  • As distinct legal entities, corporations must pay taxes.
  • The dividends they pay to shareholders, unlike interest on bonds, are not tax-deductible business expenses.
  • And when a corporation distributes these dividends, the stockholders are taxed on the dividends.
  • (Since the corporation already has paid taxes on its earnings, critics say that taxing dividend payments to shareholders amounts to "double taxation" of corporate profits. )

• Financing State and Local Government

  • Taxes are the primary source of revenue for state and local governments; income, property, and sales taxes are common examples of state and local taxes.
  • Income taxes are taxes imposed on the net income of individuals and corporations by the federal, most state, and some local governments.
  • State taxes are generally treated as a deductible expense for federal tax computation.
  • Sales tax is collected by the seller at the time of sale, or remitted as use tax by buyers of taxable items who did not pay sales tax.
  • Property tax rules and rates vary widely.

• Fiscal Policy -- Budget and Taxes

  • The federal government raises another 10 percent of its revenue from a tax on corporate profits, while miscellaneous other taxes account for the remainder of its income.
  • (Local governments, in contrast, generally collect most of their tax revenues from property taxes.
  • The 1862 tax law also established the Office of the Commissioner of Internal Revenue to collect taxes and enforce tax laws either by seizing the property and income of non-payers or through prosecution.
  • The Tax Reform Act of 1986, perhaps the most substantial reform of the U.S. tax system since the beginning of the income tax, reduced income tax rates while cutting back many popular income tax deductions (the home mortgage deduction and IRA deductions were preserved, however).
  • The Tax Reform Act replaced the previous law's 15 tax brackets, which had a top tax rate of 50 percent, with a system that had only two tax brackets -- 15 percent and 28 percent.

• How Corporations Raise Capital

  • Corporations have five primary methods for obtaining that money.
  • Corporations benefit by issuing bonds because the interest rates they must pay investors are generally lower than rates for most other types of borrowing and because interest paid on bonds is considered to be a tax-deductible business expense.
  • However, corporations must make interest payments even when they are not showing profits.
  • For this reason, smaller corporations can seldom raise much capital by issuing bonds.
  • In general, the value of shares increases as investors come to expect corporate earnings to rise.

• Comparing Marginal and Average Tax Rates

  • An average tax rate is the ratio of the total amount of taxes paid, T, to the total tax base, P, (taxable income or spending), expressed as a percentage.
  • Broadly, the marginal tax rate equals the change in taxes, divided by the change in tax base, expressed as a percentage.
  • A progressive tax is a tax in which the tax rate increases as the taxable base amount increases .
  • A regressive tax is a tax imposed in such a manner that the average tax rate decreases as the amount subject to taxation increases .
  • A proportional tax is a tax imposed so that the tax rate is fixed, with no change as the taxable base amount increases or decreases.

• The Economy in the 1980s

  • Reagan (1981-1989) based his economic program on the theory of supply-side economics, which advocated reducing tax rates so people could keep more of what they earned.
  • In the early 1980s, while he was cutting taxes, Reagan was also slashing social programs.
  • The combination of tax cuts and higher military spending overwhelmed more modest reductions in spending on domestic programs.
  • In the United States, meanwhile, "corporate raiders" bought various corporations whose stock prices were depressed and then restructured them, either by selling off some of their operations or by dismantling them piece by piece.
  • Critics watched such battles with dismay, arguing that raiders were destroying good companies and causing grief for workers, many of whom lost their jobs in corporate restructuring moves.

• Taxes

  • Examples of an indirect tax include sales tax and VAT (value added tax).
  • Progressive Tax: The more a person earns, the higher the tax rate.
  • Regressive Tax:In a regressive tax system, poorer families pay a higher tax rate.
  • Although a regressive tax system is never explicitly used, some claim a sales tax is a type of regressive tax.
  • Categorize types of taxes into ad valorem taxes and excise taxes

• Pensions and Unemployment Insurance

  • Another federal agency, the Pension Benefit Guaranty Corporation, insures retiree benefits under traditional private pensions; a series of laws enacted in the 1980s and 1990s boosted premium payments for this insurance and stiffened requirements holding employers responsible for keeping their plans financially healthy.
  • Although the program is run by a federal agency, the Social Security Administration, its funds come from employers and employees through payroll taxes.
  • Employers pay taxes into a special fund based on the unemployment and benefits-payment experience of their own work force.
  • The federal government also assesses an unemployment insurance tax of its own on employers.
  • Whether to extend jobless-pay benefits frequently becomes a political issue since any extension boosts federal spending and may lead to tax increases.