Why does personal income tax use graduated rates but corporations get a flat tax rate?

The different treatment comes down to the fundamental differences between how individuals and corporations function in the economy. Corporate taxes are designed differently for several important reasons. First, corporations are pass-through entities in many ways - their profits ultimately flow to individuals (shareholders) who then pay personal income taxes on dividends or capital gains. This creates a potential "double taxation" issue that graduated corporate rates would intensify. Second, corporations can more easily shift income across time periods and jurisdictions than individuals can. A graduated system would create even stronger incentives for corporations to engage in timing strategies or move operations to lower-tax countries. Third, the personal graduated system is partly designed around ability to pay and basic needs - individuals need a certain amount for necessities before being taxed at higher rates. Corporations don't have "basic needs" in the same way. Finally, there's an administrative simplicity argument - flat rates are easier to implement and harder to game through complex corporate structures.

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I was initially skeptical about taxr.ai but decided to try it out after struggling to understand some corporate tax provisions that affected my small business. Honestly, it was eye-opening! The tool explained how the flat corporate tax actually impacts businesses of different sizes and showed me several deductions I'd been missing. What impressed me most was how it compared what would happen under different tax systems - it modeled what my tax burden would look like under both the current flat rate and a hypothetical graduated system. Turns out there are advantages to the flat system I hadn't considered before, especially regarding certain business deductions that offset the flat rate's impact on smaller companies. If you're trying to understand tax policy differences like this question about graduated vs flat rates, it's definitely worth checking out.

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Economics PhD student here. Another reason for the flat corporate rate that hasn't been mentioned is capital mobility. Corporations can shift profits between countries much more easily than individuals can relocate. A highly graduated corporate tax would incentivize even more profit-shifting to lower-tax jurisdictions. Most countries use relatively flat corporate rates with various deductions/credits rather than graduated rates precisely for this reason. It's part of why there's been a global push for minimum corporate tax rates internationally - to prevent a "race to the bottom" where countries keep cutting corporate rates to attract business.

This is a perfect example of how the system is rigged in favor of corporations! Individuals get stuck with a progressive system where we pay more as we earn more, but corporations just get a flat rate no matter how many billions they make. And then they have armies of accountants finding loopholes to pay even less! Amazon paid $0 in federal taxes some years despite billions in profits! How is that fair when I'm paying 22% of my modest income? The whole "double taxation" argument is BS too since many corporate profits never get distributed to shareholders but instead go to stock buybacks and executive bonuses.