I would argue that corporate capital gains DO have a rate preference. That's because ALL US corporate taxable income is taxed at a flat 21% rate. Compare that to an individual taxpayer who's at the top 37% marginal tax bracket. Is it any wonder the tax rules have always been corporation friendly???
That's an important comparison as far as tax rates on ordinary income (which is what both rates are). Individuals' net capital gain is taxed at lower rates than their ordinary income (so not 37%). I think the idea, though, is that corporate taxable income is taxed at the same rate whether it's capital gains or not.
@@ECO473 That certainly sounds right. But how does that relate to the idea you mentioned above ("I would argue that corporate capital gains DO have a rate preference. That's because ALL US corporate taxable income is taxed at a flat 21% rate.")?
@@BreakIntoTax Because corporate capital gains are treated the same as ordinary income as they're both subject to the 21% rate. There's no separation as it is for individual taxpayers. Thus, unless I'm missing something, it seems that the tax rules treat corporations more favorably than individuals.
@@ECO473 One thing is that the capital gains rates in IRC § 1(h) are under 21%. Even the top rate there is 20%. Another thing is that corporations aren't human beings, so if an individual sets up a corporation, presumably they also have to get the corporation's earnings out of the corporate form to actually consume them. The classical corporate tax is a "double tax" because the corporation is taxed on its income and then, generally speaking, the distribution to the corporation's owners (shareholders) is also taxed. This is a bit of an oversimplification, but that's the basic idea.
What's YOUR favorite misconception about tax? Was it included in this video?
I would argue that corporate capital gains DO have a rate preference. That's because ALL US corporate taxable income is taxed at a flat 21% rate. Compare that to an individual taxpayer who's at the top 37% marginal tax bracket. Is it any wonder the tax rules have always been corporation friendly???
That's an important comparison as far as tax rates on ordinary income (which is what both rates are). Individuals' net capital gain is taxed at lower rates than their ordinary income (so not 37%). I think the idea, though, is that corporate taxable income is taxed at the same rate whether it's capital gains or not.
@@BreakIntoTax That's true. But I think you'll agree that most individuals' taxable income comes from ordinary sources far more than capital gains.
@@ECO473 That certainly sounds right. But how does that relate to the idea you mentioned above ("I would argue that corporate capital gains DO have a rate preference. That's because ALL US corporate taxable income is taxed at a flat 21% rate.")?
@@BreakIntoTax Because corporate capital gains are treated the same as ordinary income as they're both subject to the 21% rate. There's no separation as it is for individual taxpayers. Thus, unless I'm missing something, it seems that the tax rules treat corporations more favorably than individuals.
@@ECO473 One thing is that the capital gains rates in IRC § 1(h) are under 21%. Even the top rate there is 20%. Another thing is that corporations aren't human beings, so if an individual sets up a corporation, presumably they also have to get the corporation's earnings out of the corporate form to actually consume them. The classical corporate tax is a "double tax" because the corporation is taxed on its income and then, generally speaking, the distribution to the corporation's owners (shareholders) is also taxed. This is a bit of an oversimplification, but that's the basic idea.