Manufacturing 2.0
Rock River Valley manufacturing experts discuss the many facets of manufacturing: technology, education, training, events, people and any other aspects of this important segment of our economy. They’ll use this blog to get the word out and solicit feedback on local and global manufacturing. They hope to better engage our employers, employees and our future work force and increase their understanding of manufacturing.

Corporate Taxes and Manufacturing

October 16th, 2008 at 03:12pm Bob Trojan

Last night we heard comments about corporate taxes and  who would raise them.  While taxes are one element of a companies costs, it does have some bearing on what a company does regarding the location of manufacturing.  I posted this a while ago and I thought it deserves repeating.

So what’s the story about corporate taxes?  Are they too high or too low?  Compared to what?  How about compared to our our international competitors?  So I did a little investigation from internet sources and here’s what I found:

A corporation will pay anywhere from 25% to 39% income tax depending on their taxable income.  For example, if the income is $50-75,000 then the rate is 25%; if income is between $100-335,000, then the rate is 39% and drops to 35% if income is $18 million or more.

Then there is state taxes on corporations and in Illinois it’s a flat rate of 7.3%.

So for example, a small-medium manufacturer in the Rockford region making between $110-335,000 net income will pay 39% plus 7.3% or 46.3% of it’s income.

Don’t forget the Federal FICA rate on payrolls of 15.3% and State Unemployment Insurance of 3.4% of payroll.  This amounts to 18.7% taxes on your payroll in our region.

Of course, many corporations own their own buildings and property and guess what, they pay taxes on that as well, I won’t even hazard a guess on that one….

I won’t include sales taxes that individuals pay for goods they purchase; in Europe they call this VAT.

So for our example, the corporation pays 46.3% tax on its income and 18.7% tax on it’s payroll.

I looked at the data from Wikipedia and here are a few examples of countries that are competitors to us:

China: Corporate: 25%; Payroll: 0%

India: Corporate: 30-40%; Payroll: 0%

Germany: 29.8% (ave.); 0% Payroll

Mexico: Corporate: 29%: Payroll: 0%

Ireland: Corporate: 12.5%; Payroll: 16.75%

UK: Corporate: 21-28%; Payroll: 23.8% (National Insurance).

As Wikipedia advises, these are guidelines, but it does make you think:  should we raise taxes on corporations?

Entry Filed under: Export, Productivity, Economy

2 Comments Add your own

  • 1. Rob  |  October 16th, 2008 at 5:37 pm

    The public, and many politicians are confused.
    Where does everyone think the “profit” a corporation makes go?
    Some, of course, goes to owners and shareholders. ALL this distributed money IS taxed as personal income or dividends or whatever your want to call it.
    Much “profit” is put back into the business. One good use of this profit would be cash in the bank account for a “rainy day”. Then the company would have money to pay workers instead of laying the worker of.
    Corportate profits are perceived as free money. They are not. The government and public are legally stealing from business.
    I you are bothered by the corporate greed, please feel free to start your own business and give half your profits away.

  • 2. Bob Trojan  |  October 17th, 2008 at 8:40 am

    Rob;
    Thanks for your comment. I did exactly that, we started RLA 7 years ago. Let me tell you, there ain’t no comparison, should have done this years ago! Corporate greed and ladder climbers are gone!

Leave a Comment

Required

Required, hidden

Security Code:

Some HTML allowed:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>

Trackback this post  |  Subscribe to the comments via RSS Feed