Thursday, January 06, 2011

Corporate Taxes - The Very Big Picture

According to the IRS website, the Federal government collects about 2.3 trillion dollars of tax income in recent years.

50% of this is personal income taxes.  37% is employment taxes.  Only 10% are corporate taxes.  (The remaining 3% is excise, estate, and gift taxes.)

Why are corporate taxes such a small portion?  Because the corporate tax law, as Dilbert recently pointed out, is designed to employ lawyers instead of take in tax revenue.

That lowly 10% is still about 225 billion dollars of tax income.  How much does it cost the Federal government to collect that amount?  I cannot say for sure.

This IRS page shares that overall the IRS has operating costs of about 12 billion dollars: only 0.5% of the money it collects.  The IRS is very efficient, despite how our country's tax laws are not efficient.

That page suggests that collecting corporate taxes perhaps requires around 5 billion dollars, or about 2% of what is collected from corporations.  Even when pursuing corporations who have many lawyers and many loopholes, the IRS is quite efficient.

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