Maybe I miss your sarcasm, but if so let me be the sucker and play it straight… BULLSHIT.

He doesn’t fix anything, the article and lead remain as they are; he adds an appendix: “oh by the way if you read this far I kind of screwed up and here’s what I should have said…”. Except that it isn’t even this transparent or apologetic. And anyway, the lead in to the article with the broken-for-its-purpose graphs remain as is (in the 50′s we taxed almost 95% of all profits???).

Kudos would be to him if he fixed the article, fixed the headline, and removed the search engine bait. But he won’t do this, he’s going to hide behind some convenient “ethics” which will preempavely paraphrase as “whatever I blog, however wrong it its, must stay there forever in its original form, and the best I can do is to publish SEPARATE corrections and apologies – yes I could get the source material corrected too but that is morally impossible for me to even contemplate because it’s a mortal sin to change what has been published however evil or wrong my initial drunk rantings were.”

Felix, can you revise the article to put WHAT YOU CONCEDE is the _right_ graph as the front of the article and rewrite the first paragraph to reference it instead?

To people other than Felix: please not that he’s not going to respond this this, and he’s certainly not going to do it (11′th commandment to Moses, though shouldnt no show weakness and admit errors other than by addendum, else thoust historical record be muddied).

I think you make a great point about the corporate tax not being effective in this day and age. By eliminating the corporate income tax and only taxing capital gains and dividends (at higher rates than currently) we will eliminate the double taxation of corporate profits.

One thing I wish the expert bloggers would do is talk about how globalization, due to the emergence of many developing economies, has changed the way businesses operate and interact with different governments. To me this is the most important question going forward.

Without reevaluating America’s role in the new global economy we will all get left behind.

My takeaway from this is that the corporate income tax ought to be eliminated entirely. It may have worked 50 years ago, but it cannot be effective in a global economy. Corporations can game the system too easily.

Make up the revenue by repealing the preferential treatment for dividends and capital gains.

No one has denied that the corporate tax rate in America is lower than it used to be (especially compared to the 1950s) and I wouldn’t claim that these graphs are misleading, because they aren’t.

However, I think it is more telling to look at this interactive graph The Guardian put together of the history of corporate tax rates around the world and realize that in general corporate tax rates have been trending downward. http://bit.ly/qAvkIE

We can argue all we want over how high corporate tax rate should be; but to lament about how low the rate is compared to what it used to be does nothing to advance the corporate tax discussion.

The greater dilemma is how to treat international earnings. Imagine a business that reaps half of its segment earnings from the US and half of its segment earnings overseas, with “corporate office” expenses equal to half its segment earnings. If I understand the present tax law correctly, they would report the US half of their earnings and *all* of the corporate expenses to the IRS — for zero net tax liability. The international earnings would remain in an off-shore subsidiary and would not be taxed until repatriated.

I suspect the other reason why corporate income taxes (for 2010) have been depressed is writeoffs from the recession. Even when you take an immediate charge to earnings (likely in 2009), you might be forced to carry over the tax benefit until you can show a matching profit. I know that Wells Fargo is continuing to apply losses reaped by Wachovia against current income.

There are other dodges/credits/exclusions also in play. But don’t blame the corporations for the fact that our tax system is a complete mess. Blame the Congressmen who sold out to them.

I think it would be helpful to dive in how the companies who are all showing massive taxes paid on their financial statements end up not paying taxes. Is it just that they are somehow deffering them?

Lets avoid the confusion of the international stuff that muddies the waters at XOM or GE,(both of which legitamitly earn much more outside of the U.S. than inside it. I looked at a dozen S&P companies for ones that seem to have the greatest % of sales in the states, TJX looks like the most US centric I could find in 5 minutes.

In on TJX’s most recent year they paid $824,562,000 in tax on $2,164,092,000 pre-tax income. That works out to 38% – above the max rate.

They showed roughly similar rates in the two prior years. So what’s up. If those checks aren’t making their way to the treasury then why are those numbers on their audited financials.

The fact that it started near 95% thought should trigger your b.s. detector, but you thought this chart is nevertheless useful and informative…

Please, aside from the fact that it shows a falling level from a “makes no sense at all” starting value, can you say more about how we are supposed to read this chart. But this time, be a bit clearer about what values it is actually plotting and what the magnitudes mean?

The second graph, tax/gdp is a bit crazy. Absent other data, the most obvious explanation is that we have such an efficient market that corporate profits are not growing in proportion to economic activity – which (if true) would be regarded as a good thing since we’d rather consumers capture surplus rather than corporations. Well, that’s probably not what is going on, but you need to look beyond this graph to argue this. On the face of it, with no other context, the second graph shows a great success story for the 99%.

You really need to take the first chart down. It is not “This is a chart of corporate income tax as a percentage of total corporate profits”. It appears to be a chart of corporate income tax as a percentage of after tax corporate profits (as Beer_numbers noted).

I think you are correct. The chart appears to be taxes divided by after tax corporate income. You can get the raw data from http://www.bea.gov/national/nipaweb/Sele ctTable.asp.

“Charlie November 17, 2011 at 3:30 pm

The first graph illustrates federal taxes paid by corporations as a percent of total after-tax corporate profits. Poorly done. Obviously corporations did not pay 90% of their profits to taxes in the 1950s. A better graph shows total corporate taxes paid as a percent of total before-tax corporate profits: http://research.stlouisfed.org/fredgraph .png?g=3pv

This shows, more realistically, that corporations used to pay about 50% of their before-tax profits to taxes and now pay about 22%.”

You can get the same data from http://www.bea.gov/national/nipaweb/Sele ctTable.asp

From Marginal Revolution comments, this seems to be a more appropriate graph using taxes relative to pre-tax income:
http://research.stlouisfed.org/fredgraph .png?g=3pv

That said, the company might not actually pay the effective amount on its federal return for a given tax year. I’m not sure it would be particularly meaningful to know the federal tax liability in an arbitrary tax year, since for a large corporation there are going to be a lot of deferrals and other timing distortions.