Mathematical Question

[dullard]

Originally posted by: JS80
So company of the shares you own makes money, pays corporate income tax at 35%, and then they pay a dividend to the shareholder and you pay income tax on something that's already been taxed. Does that make sense to you? If you live in California, that would make it a 60% tax from earned to in your pocket. (0.65*0.65 assuming you're at 25% federal)

So the company you work for cuts your income to $0 and pays you dividends instead - you pay no income tax at all. Does that make sense to you? Let dividends be taxed at the normal income tax rate. End the corporate income tax (which history shows is rarely paid at the full rate anyways and in reality is just a sales tax on consumers).

 

[JS80]

Originally posted by: dullard

Originally posted by: JS80
So company of the shares you own makes money, pays corporate income tax at 35%, and then they pay a dividend to the shareholder and you pay income tax on something that's already been taxed. Does that make sense to you? If you live in California, that would make it a 60% tax from earned to in your pocket. (0.65*0.65 assuming you're at 25% federal)

So the company you work for cuts your income to $0 and pays you dividends instead - you pay no income tax at all. Does that make sense to you? Let dividends be taxed at the normal income tax rate. End the corporate income tax (which history shows is rarely paid at the full rate anyways and in reality is just a sales tax on consumers).

We have laws against that. The IRS will deem that as payroll income. It would not work as a loophole. I agree with the latter part of your statement. Personally I would rather have a consumption tax than an income tax (for different discussion).

 

[dullard]

Originally posted by: JS80
We have laws against that. The IRS will deem that as payroll income. It would not work as a loophole.

It happens all the time though. And the IRS has no way of disproving it - ie you can't be caught.