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In that respect, sales tax is also an add on to corporate tax since the final sale of the product is lets say 7% higher than it could be otherwise.
Also, another reason for raising capital gains/dividend taxes is that it might discourage investment into the stock market, thus making it less volatile. I'm not sure about this point though.
According to the most successful investor in history, Warren Buffett, that isn't true.
Quote:
Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.
I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation. http://www.nytimes.com/2011/08/15/op...uper-rich.html
Ok, I knew I would come back to this post someday. The reason we need to cut corportate taxes to zero and raise dividend and capital gains taxes to income level is that
1. it benefits large aka publicly traded companies over small privately owned ones. Corporation tax on top of income tax for a sole ownership company is greater than capital gains/dividend tax on top of corporation tax for large companies.
2. Investors do not necessarily increase the amount of things your dollar can buy, companies do. So why are investors paying less tax than the companies are?
3. I can't think of any reason why not to.
Basically I think the current tax system over rewards investors (aka the ones that already have money) and under rewards entrepreneurs (people that make your dollar go further). Perhaps failure to adjust these taxes is why we have such an income gap in the US.
1. Whatever the owner pays him/herself in salary is not subject to corp tax. For dividends/cap gains, public or private, big or small; the result is the same. Most small businesses have pass-through status and avoid the corp tax anyway.
2. Companies do not create, finance and govern themselves. Ultimately, investors are the company, so they are responsible for the value created and for all taxes due as a result.
Understand: All corporations are ultimately owned by people. Corp taxes are assessed only on owners' earnings. Corp taxes are effectively paid by the investors.
I am not in favor of wealthy tax cuts either, but this won't accomplish anything.
1. Whatever the owner pays him/herself in salary is not subject to corp tax. For dividends/cap gains, public or private, big or small; the result is the same. Most small businesses have pass-through status and avoid the corp tax anyway.
2. Companies do not create, finance and govern themselves. Ultimately, investors are the company, so they are responsible for the value created and for all taxes due as a result.
Understand: All corporations are ultimately owned by people. Corp taxes are assessed only on owners' earnings. Corp taxes are effectively paid by the investors.
I am not in favor of wealthy tax cuts either, but this won't accomplish anything.
Wouldn't it be simpler to cut the corp tax and raise the dividend/capital gains tax though? You wouldn't have to make loopholes for small companies.
The corp tax actually simplifies administration. The earnings of thousands of shareholders are consolidated to one corporate return.
You're also assuming all corporations pay dividends. Under your solution, a company could simply stop paying dividends and wealthy investors could go years without paying any taxes whatsoever.
It also assumes all industries should be taxed equally. Should alcohol and tobacco be taxed the same as renewable energy or healthcare?
Altogether this creates more problems than it solves. It's easy to look at a wealthy guy paying 15% and conclude it's not fair. I'm not thrilled either. But you have to grasp the big picture.
In that respect, sales tax is also an add on to corporate tax since the final sale of the product is lets say 7% higher than it could be otherwise.
Also, another reason for raising capital gains/dividend taxes is that it might discourage investment into the stock market, thus making it less volatile. I'm not sure about this point though.
Again until the classical economic model is reintroduced for the tax model there will be no ability to provision government without discouraging values created by human labor. So as of now I have no rational capital gains tax position to apply since it causes harm as much as it does good.
The corp tax actually simplifies administration. The earnings of thousands of shareholders are consolidated to one corporate return.
You're also assuming all pay dividends. Under your solution, a company could simply stop paying dividends and wealthy investors could go years without paying any taxes whatsoever.
It also assumes all industries should be taxed equally. Should alcohol and tobacco be taxed the same as renewable energy or healthcare?
Altogether this creates more problems than it solves. It's easy to look at a wealthy guy paying 15% and conclude it's not fair. I'm not thrilled either. But you have to grasp the big picture.
Well don't investors have to fill out taxes when they own a stock? I had to for my stocks last year. All you would have to do is file gains or losses on the market on your schedule D or whatever under income instead of a separate category taxed at 15%. And if companies stop paying dividends, you still have to report the stocks you own on your tax sheet because no stock stays the same price for a year and you have to account for capital gains or losses.
And corporations have to fill out taxes currently, so we could have them keep doing that, just have the tax rate be 0%. Investors wouldn't have to fill out K1's individually.
As far as different industries being taxed at different rates, you could adjust for that in the sales tax rather than the corporation tax.
Not exactly. Cap gains tax is only due when those gains are realized - i.e. when the stock is sold. If you don't sell the stock, you don't pay any taxes on unrealized capital gains. Again, investors can hold the stock and not pay a dime in taxes for as long as they wish. Deferral is at their discretion.
Corporations aren't governed by Subchapter K. What you're suggesting basically abolishes joint-stock corporations altogether and makes them partnerships. So since that option is already available to business owners, your solution does not offer any benefit whatsoever.
That's how partnerships are taxed now. That option is already available to investors. C-corp double-taxation is another.
Again, no one here has articulated a coherent problem with the dividend/cap gains rate as-is. People asked why they are lower - because the same investor return is hit twice.
(BTW, they are taxed as ordinary income for short-term trading.)
So when you lose money are they going to give a tax deduction on stocks and investment?
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