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Saturday, February 04, 2012

James Stewart is just figuring something out... 

James Stewarts' series on taxes are valuable, but his naivete is staggering. What's happening here is that sometimes business income and deductions appear on a separate corporate return and sometimes they flow through to an individual return. If you measure taxes as a percent of taxable income, they will be all over the map. If you measure them by personal AGI, you may not recognize expenses incurred to generate the income. In general, much more corporate AGI is flowing through to personal tax returns, (falsely*) adding to perceived inequality and making one person's taxes very hard to compare to another. Complexity in service of little.

* I should clarify that I don't think ALL the growth in inequality of income is due to the increase in flow-through business income from S-Corps, LLCs, etc., but it is clear that this number is a)large and b) has grown rapidly over the periods where income inequality has grown. So it is definitely a contributor, and a misleading one at that, since that income and tax accrued to individuals in the past but did not appear on individual tax returns.

1 Comments:

By Anonymous Anonymous, at Sun Feb 05, 03:01:00 PM:

Maybe it's just me, but whenever somebody brings up the name "James Stewart" the first thing that comes to mind is pretty good B-17 pilot who made a few alright movies and then died a dozen or so years back.  

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