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So my question to you is: Why do you think it's better to go for single taxation and higher rates than it is to have double taxation and lower rates, despite the political near-impossibility of "raising tax rates"?
What makes you think we have to raise rates at all? Get someone that's not Obama into office and the republicans will play ball again.
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Originally Posted by TaxPhd
Are you sure abut that?
Positive. The shareholder needs to have basis, but the distributions won't be taxed. If there is no basis then the CGT will be triggered, but in that case the shareholder can wait for basis to increase or take a loan if the money is needed.
Positive. The shareholder needs to have basis, but the distributions won't be taxed. If there is no basis then the CGT will be triggered, but in that case the shareholder can wait for basis to increase or take a loan if the money is needed.
I understood your previous statement to be that dividends would NEVER be taxed. Of course you are correct on the basis issue.
What makes you think we have to raise rates at all? Get someone that's not Obama into office and the republicans will play ball again.
A non-revenue-neutral change would be an apples to oranges comparison. Elimination of double taxation would require raising rates to be revenue-neutral, while an extension of double taxation to include debt dollars as well as equity dollars would require a reduction in tax rates to be revenue-neutral.
Of course you could argue that revenue levels as they stand are too high or too low, but that is a separate topic that would need its own thread. Also, any modified level of revenue would still involve the same question as is being posed with the current level of revenue, only you'd be holding revenue constant at a *different* level while changing the tax treatment of debt and equity. I suppose you could say holding current revenue constant is an apples to apples comparison, and holding it constant at a different level would be an "oranges to oranges" comparison, which is equally a valid one.
If you take the value of the company to consist of book assets and goodwill, retained earnings increases book value by the same amount. Hence you get capital gain unless goodwill is substantially reduced.
I understood your previous statement to be that dividends would NEVER be taxed. Of course you are correct on the basis issue.
Yes, I was speaking in generalities. The tax code is riddled with exceptions and exclusions.
Quote:
Originally Posted by ncole1
A non-revenue-neutral change would be an apples to oranges comparison. Elimination of double taxation would require raising rates to be revenue-neutral, while an extension of double taxation to include debt dollars as well as equity dollars would require a reduction in tax rates to be revenue-neutral.
Of course you could argue that revenue levels as they stand are too high or too low, but that is a separate topic that would need its own thread. Also, any modified level of revenue would still involve the same question as is being posed with the current level of revenue, only you'd be holding revenue constant at a *different* level while changing the tax treatment of debt and equity. I suppose you could say holding current revenue constant is an apples to apples comparison, and holding it constant at a different level would be an "oranges to oranges" comparison, which is equally a valid one.
There's no need to make this complicated. Politics aside, it is perfectly viable to craft a revenue neutral tax change without changing rates. Once you acknowledge the fact that Congress is Congress then you must acquiesce the simple fact that this entire discussion is merely academic. Having said that, and realizing how Congress works, then you must also know that Congress will never bite the hand that feeds them by removing the interest deduction. Furthermore, corporate taxes provide a measly 10% of revenue. Of that 10%, the dividends are a tiny fraction.
Yes, I was speaking in generalities. The tax code is riddled with exceptions and exclusions.
There's no need to make this complicated. Politics aside, it is perfectly viable to craft a revenue neutral tax change without changing rates. Once you acknowledge the fact that Congress is Congress then you must acquiesce the simple fact that this entire discussion is merely academic. Having said that, and realizing how Congress works, then you must also know that Congress will never bite the hand that feeds them by removing the interest deduction.
Not so sure about that. It is difficult politically but not as difficult as raising tax rates!!!
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Originally Posted by lycos679
Furthermore, corporate taxes provide a measly 10% of revenue. Of that 10%, the dividends are a tiny fraction.
Saying it's a tiny fraction doesn't make a revenue neutral reform into a non-neutral one, so it doesn't change the basic argument. Also, 10% of revenue is not "measly" - it makes the difference between doubling the deficit or not!
If you take the value of the company to consist of book assets and goodwill, retained earnings increases book value by the same amount. Hence you get capital gain unless goodwill is substantially reduced.
Who gets capital gains? The stockholders?
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