In 2009, the United States ranked 26th out of 28 OECD countries in total federal, state, and local taxes as a percent of GDP. Only Chile and Mexico had lower tax rates.
According to the Center on Budget and Policy Priorities, “federal taxes on middle-income Americans are near historic lows.” For taxpayers in the top 1%, the tax burden has fallen dramatically in recent years.
At very high income levels, beginning at about the million dollar range, federal income tax actually becomes regressive. Effective tax rates level off at about 25%, and then go down from there. This is because all incomes over $388,000 are subject to the same 35% maximum. The $4 billion hedge fund manager pays no more, percentagewise, than the $400,000 doctor. In fact, even less. At the highest levels most of the income comes from capital gains, which are taxed at 15%.
How about corporations? Even worse. They paid only 12.1% in 2011, dramatically lower than the 25% average since 1987. According to U.S. Office of Management and Budget (OMB) figures, they’re paying about a THIRD of the inflation-adjusted share of GDP paid by corporations in the 1960s.
Compared to foreign countries, U.S. corporations paid a smaller rate of income taxes than 24 of 25 OECD countries analyzed by the Office of Management and Budget and the Census Bureau.
Most stunning is the shift in taxpaying responsibility from corporations to workers over the years. For every dollar of workers’ payroll tax paid in the 1950s, corporations paid three dollars. Now it’s 22 cents.
Corporate taxes should be low; that has long been established by economists, but it’s difficult to sell to the average person. They see corporations making billions of dollars and think that they should be paying more. The best way to capture that income is by taxing the individuals who are profiting from it. That money has to go somewhere, and it is spread out through salaries, bonuses, stock, and bonds. Taxing a corporation means there is less money to go to salaries, bonuses (most wont mind that though), and it will limit the stock value.
Have a gander at this graph: http://en.wikipedia.org/wiki/File:Income_Taxes_By_Country.svg As you see, the only country with a higher corporate tax rate is Japan. Socialist countries like Denmark, Sweden, and Norway have corporate tax rates that are 10-15% lower than the United States. However, they do all have higher personal income tax rates. This is a much more successful taxation model because it allows the money to go through more hands before it is taxed. Instead of the money going to taxes from the corporation, that money can now go to pay salaries and bonds. This allows the individual to spend more (or save) in the local economy, benefiting far more people than it would if the taxes were taken out at the corporate level.
But again, this is almost impossible to sell to Americans because they have been told stories about GE or BP not paying anything in corporate taxes. This is unfair (especially for BP, who used the Gulf cleanup as a write-off). However, these cases are the exception, not the rule. For every BP, there are thousands of small businesses that are paying almost 40% of their business profit in taxes, followed by another 20-30% in personal income taxes.