taxableincome

6 top rate today individual form is best before tra86

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Unformatted text preview: f (1 − τc)(1 − τcg ) > 1 − τi US fed taxes in 2013: τc = 35%, τcg = 20% (less because of deferral value), τd = 20% τi = 39.6%, (top rate) Today, individual form is best Before TRA’86 (and especially before ERTA’81), top individual rate τi was much higher so corporate form was best Shifts from corporate to individual base increases business profits at the expense of dividends and realized capital gains Large part of TRA’86 response is due to such shifting 17 The Top 0.01% US Income Share, Composition, and MTR 90% 80% 3.0% 70% 2.5% 60% Wages Sole Prop. Dividends Interest 40% Other 1.5% S-Corp. Partnership 2.0% MTR 30% 1.0% 50% 20% 0.5% 10% 0% 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 0.0% Source: Saez et al. (2010) Marginal Tax Rate for the top 0.01% Top 0.01% share and composition 3.5% Bottom Line on Behavioral Responses to Taxes 1) Clear evidence of strong responses to tax changes due to re-timing or inc...
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