Quote:
Originally Posted by The Don
And that is really the issue wrt dividends (ordinary dividends at least)... The company profits have ALREADY been taxed -- at the corporate level and rate. By sending checks out for some of the remaining profits, why has a taxable event been created?
If I have a savings account and earn interest on it, I pay taxes when the interest is put into my account; I do not create a taxable event by withdrawing my funds, including the interest. Same thing with dividends, they are MY earnings produced by the activities of MY company and have already been taxed.
Think about it.
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Don, excellent point and that was the whole whoopla behind "double taxation" of dividends. However, as i've stated before, you can still have enormous amounts of wealth generated through capitalistic activities such as dividends, but you have to implement the proper mechanics, so that once those individuals have been rewarded for assuming the risk of starting a business and watching it grow into a successful multination, they do not continue to reap excessive rewards on the backs of those they employ.
I'm not for wealth redistribution, but your point is well taken and very accurate. However, for other American citizens to participate fully in economic mobility that excess profit/capital needs to be taxed. Again my system is totally against taxing the middle class and rich, but for taxing the super wealthy at a tax rate that is proportional to what the middle class pays. Thus we can provide more economic mobility, because we have additional capital to fund additonal great ideas. Could imagine if we were able to fund a lot more great ideas how fast our technology would move forward? We could continously have lower taxes, better schools, and more job opportunities. Sure the private market does a great job of this,via venture capitalist etc but the American people as a whole could all benefit and the middle class would finally get some sort of breathing room.
Example 1
Guy E starts a small business
Guy E makes 200k a year
Guy E will never be able to take the company public
Guy E can still pay private dividends, but what does that amount to?
Guy E after running the business for 35 years cashes out for 5 million bucks to Guy A
Do you see my point and more than 90% of all small businesses are Guy E. This is why i see the point as moot, that it's unfair double taxation, thats a load of crap. It's unfair to double tax Guy E, because he'll never get to Guy A.
Now let's assume my plan for Guy E
Example 2
Guy E starts a small business (with sufficient access to capital, because Guy A who had been paying a flat rate on 90% of his income is now paying a 30% rate)
Guy E is able to hire more people
Guy E is able to take more risk, because there's a lot more access to capital
Guy E does not have to pay as high taxes
Guy E is finally able to take the company public
Guy E is now in the same position Guy A is in
Guy E is now giving back through taxes to help the next Guy E get access to capital expand his business and great idea.
Here we have economic mobility. Currently we are moving further away from economic mobility, because those with the most capital are allowed to keep all of it or use it only for themselves and what they think is a great idea. Do you know how many Facebooks or Myspaces we could have or Googles if we used my tax system and created more access to captial. Hell, we are a Nation of brilliant ideas and the tax system is the best way to tap into that market.
Would Guy A's pockets be seriously hurt if he brought in 400 million dollars in dividend income and was taxed at a rate of 30%
Is paying 120 million in taxes on that 400 million going to really hurt his lifestyle?
He's still left with 280 Million dollars each year.
Think about Guy E he under my plan he would get taxed at 5% on dividends.
Guy E brings in 50,000 dollars in dividend income @5% = he's taxed 2,500 dollars
Leaves him 47,500 to invest in his business
However current rates are
15% so under the same scenario for Guy E 50*.15 = he's taxed 7,500 dollars
Now he's only left with 42,500 after tax to invest.
Don't you think that's a bit unfair?
Look at it this way
42/50 = keeps 84% his dividend income (under our current plan)
340/400 = keeps 85% of his dividend income (under our current plan)
My plan
47/50 = keeps 94% of his dividend income (under my plan)
280/400 =keeps 70% of his dividend income (under my plan) Why - if he's paying a significant dividend the business has reached its growth peak and is now a "cash cow" it basically runs it's self and the dividend is just additional profits, so does he really need the dividend captial to reinvest in his business to get it to the next level?