English Major Math

We like Kevin Williamson even more that Jonah but here we are complaining about both of them in one day.  Kevin often jokes about his English major math to show that even English majors can have a talent for economics and arithmetic.  Today, however, it lets him down.

We agree with his article that the corporate tax rate should be zero.  It is the only correct answer to the question: What should the corporate rate be?  We agree with his reasoning that it would eliminate all the lobbying joy of getting deductions from Congress and accounting joy of creating ones the Congress didn’t quite envision.  It is also much easier to tax capital gains and dividends.  Increasing both of those will recover some of the lost revenue.

The arithmetic problem.  Sigh.  Kevin says:

The simplified version: If Corporation X makes $1 billion and has $900 million in expenses, then it has $100 million in taxable income, which is subject to a top rate of 39 percent. Most corporate income is taxed at the highest rate.

The corporate tax schedule does have a top rate of 39% but very little is taxed at the highest rate.  See tax rates here.  The highest rate is only for income from $100,000 to $335,000.  The tax on $100 million would be 35% or $35 million.

We do support eliminating the corporate tax (the death tax, the gas tax (replaced by a carbon tax), and all tariffs ) but the average and marginal corporate is 35% after $18,333,333.  That’s why the table says 35% of the amount over zero.

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