Thanks for the reply! I have a few followup questions and points, though, if you don't mind.
Aren't state income taxes completely deductible from federal income taxes? So shouldn't that be just a 38% income tax for a sole proprietorship?
For the corporate side, i think you glossed over the part of who (the corporation, or me the ceo and code writer) owns the code and how much you (i) was paid by the corporation for it. It seems like in your example that the author gave the code to the corporation for free.
Wouldn't it be better for the author to charge (either as a licenseing fee, or as something like x% of the gross profits for 5 years after ownership of the code is transferred) the corporation a fixed percentage of gross profits for the code? That way that part is only subject to personal income tax, and the rest subject to the 35% corporate tax minus anything paid to the author of the code as a standard business expense.
I am also curious why you didn't account for the business expense of paying the code author/ceo, which should be directly deductible from the total corporate tax owed, right?
I think I am getting confused by the relationships between the corporation and the ceo, and the corporation and the code author. Isn't the corporation supposed to be its own person in the case of income tax that then pays its employees and dedcuts those payroll costs from its taxes?
Finally,it might surprise you based on the last few comments i've made, but i'm not a fan of any corporate income tax at all, because it think it makes the tax laws and the line between natural person and non-natural person much more complicated. I think it would be much easier to only tax natural persons on their income/benefits/investments. There's also a direct benefit to the consumer, since a few studies/articles I've read have claimed that all corporate taxes are just passed onto the consumer as a price increase.
Finally, while the US might have the highest corporate tax rate on paper, I think it's entirely relevant that it has an effective/empirical corporate tax rate of only 12.1% (source: [1]).
Aren't state income taxes completely deductible from federal income taxes? So shouldn't that be just a 38% income tax for a sole proprietorship?
For the corporate side, i think you glossed over the part of who (the corporation, or me the ceo and code writer) owns the code and how much you (i) was paid by the corporation for it. It seems like in your example that the author gave the code to the corporation for free.
Wouldn't it be better for the author to charge (either as a licenseing fee, or as something like x% of the gross profits for 5 years after ownership of the code is transferred) the corporation a fixed percentage of gross profits for the code? That way that part is only subject to personal income tax, and the rest subject to the 35% corporate tax minus anything paid to the author of the code as a standard business expense.
I am also curious why you didn't account for the business expense of paying the code author/ceo, which should be directly deductible from the total corporate tax owed, right?
I think I am getting confused by the relationships between the corporation and the ceo, and the corporation and the code author. Isn't the corporation supposed to be its own person in the case of income tax that then pays its employees and dedcuts those payroll costs from its taxes?
Finally,it might surprise you based on the last few comments i've made, but i'm not a fan of any corporate income tax at all, because it think it makes the tax laws and the line between natural person and non-natural person much more complicated. I think it would be much easier to only tax natural persons on their income/benefits/investments. There's also a direct benefit to the consumer, since a few studies/articles I've read have claimed that all corporate taxes are just passed onto the consumer as a price increase.
Finally, while the US might have the highest corporate tax rate on paper, I think it's entirely relevant that it has an effective/empirical corporate tax rate of only 12.1% (source: [1]).
[1]: http://thinkprogress.org/economy/2012/02/03/418171/corporate...
sorry for the blog link, but wsj is behind a pay wall, and this has the relevant part quoted.