Alan Greenspan on Corporate and Wealthy Tax Rates, Debt, Fiscal Policy (2011)

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• published: 19 Feb 2016
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Corporate tax is imposed in the United States at the federal, most state, and some local levels on the income of entities treated for tax purposes as corporations. Federal tax rates on corporate taxable income vary from 15% to 39%. State and local taxes and rules vary by jurisdiction, though many are based on federal concepts and definitions. Taxable income may differ from book income both as to timing of income and tax deductions and as to what is taxable. Corporations are also subject to a federal Alternative Minimum Tax and alternative state taxes. Like individuals, corporations must file tax returns every year. They must make quarterly estimated tax payments. Controlled groups of corporations may file a consolidated return. Some corporate transactions are not taxable. These include most formations and some types of mergers, acquisitions, and liquidations. Shareholders of a corporation are taxed on dividends distributed by the corporation. Corporations may be subject to foreign income taxes, and may be granted a foreign tax credit for such taxes. Shareholders of most corporations are not taxed directly on corporate income, but must pay tax on dividends paid by the corporation. However, shareholders of S Corporations and mutual funds are taxed currently on corporate income, and do not pay tax on dividends. The United States has the third highest general top marginal corporate income tax rate in the world at 39.1 percent (consisting of the 35% federal rate and a combined state rate), exceeded only by Chad and the United Arab Emirates .[1] However, the average corporate tax rate in 2011 dipped to 12.1%, its lowest level since before World War I, largely due to the great recession and a bonus depreciation tax break. Corporate income tax is imposed at the federal level[3] on all entities treated as corporations (see Entity classification below), and by 47 states and the District of Columbia. Certain localities also impose corporate income tax. Corporate income tax is imposed on all domestic corporations and on foreign corporations having income or activities within the jurisdiction. For federal purposes, an entity treated as a corporation and organized under the laws of any state is a domestic corporation.[4] For state purposes, entities organized in that state are treated as domestic, and entities organized outside that state are treated as foreign.[5] Some types of corporations (S corporations, mutual funds, etc.) are not taxed at the corporate level, and their shareholders are taxed on the corporation's income as it is recognized.[6] Corporations which are not S Corporations are known as C Corporations. Domestic corporations are taxed on their worldwide income at the federal and state levels.[7] Corporate income tax is based on net taxable income as defined under federal or state law. Generally, taxable income for a corporation is gross income (business and possibly non-business receipts less cost of goods sold) less allowable tax deductions. Certain income, and some corporations, are subject to a tax exemption. Also, tax deductions for interest and certain other expenses paid to related parties are subject to limitations. Corporations may choose their tax year. Generally, a tax year must be 12 months or 52/53 weeks long. The tax year need not conform to the financial reporting year, and need not coincide with the calendar year, provided books are kept for the selected tax year.[8] Corporations may change their tax year, which may require Internal Revenue Service consent.[9] Most state income taxes are determined on the same tax year as the federal tax year. Federal corporate income tax is imposed at graduated rates. The lower rate brackets apply to lower rates of income when compared to higher tax brackets that coincide with higher rates of taxable income. All taxable income is subject to tax at 34% or 35% where taxable income exceeds $335,000. Tax rates imposed below the federal level vary widely by jurisdiction, from under 1% to over 16%. State and local income taxes are allowed as tax deductions in computing federal taxable income. Groups of companies are permitted to file single returns for the members of a controlled group or unitary group, known as consolidated returns, at the federal level, and are allowed or required to do so by certain states. The consolidated return reports the members' combined taxable incomes and computes a combined tax. Where related parties do not file a consolidated return in a jurisdiction, they are subject to transfer pricing rules. Under these rules, tax authorities may adjust prices charged between related parties. https://en.wikipedia.org/wiki/Corporate_tax_in_the_United_States