Logarithmic Taxation on Corporations

Logarithmic taxation based on minimum wage may apply not only to individuals but to corporations as well. Because corporations earn a lot more than individuals, corporations would tend to have a larger tax rate than individuals given the same equation, which would unduly cripple corporations of necessary capital. However, an equation more suited for corporations would not look so different than the one originally used for individuals:

Tax Rate = [5 * log (W/M)]%, where

• W = net corporate income before taxes
• M = minimum wage
• The calculated value is rounded down to the lower tenth of a percent

Using this formula, every ten-fold increase in income above the minimum wage would result in a 5% increase in tax rate instead of 20% seen in individuals.

For example, we look at a corporation earning ten thousand times the minimum wage (at $10 minimum wage, that would be $100,000):

Tax Rate = [5 * log (100000/10)]%

= (5 * log 10000)%

= (5 * 4)%

= 20%

Net Income After Tax = 100000 – (0.20 * 100000)

= $80,000.00

In a previous example, an individual with the same net income would be taxed at 80% and keep only $20,000.

For a corporation to be taxed at 80%, it would have to earn a staggering ten quadrillion times the minimum wage ($100,000,000,000,000,000):

Tax Rate = [5 * log (100000000000000000/10)]%

= (5 * log 10000000000000000)%

= (5 * 16)%

= 80%

 

At this point, it would be impractical to compute for the net income after taxes because no corporation would have a net income of ten quadrillion times the minimum wage.

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How will this affect policy making? Whenever there is an increase in the minimum wage, corporations suffer because they are able to hire less workers, resulting in higher unemployment rates. However, using this method, increasing the minimum wage would effectively lower corporate taxes, increasing their capability to hire more employees. Consequently, increasing the minimum wage would have a smaller impact on unemployment.