The Dividend Tax bill arrives

[soccerballtux]

Dividends have next to nothing to do with economic growth or innovation. Companies pay dividents to attract capital and prop their stock prices up (critically important to top level management compensation) when that is the best use of the money. A company on a growth path will instead reinvest its revenue instead of distributing it to shareholders. For example, Apple (AAPL) has never paid a dividend.

I own stock, a small fraction of which earn dividends. I see absolutely no reason why dividends should be taxed at a lower rate than ordinary income-for example the interest paid on a savings account.

BTW, the 15% rate is both historically and ridiculously low. Prior to Ronald Reagan the tax rates on dividends were way higher than what they are now.

it's not even constitutional except for the windfall profits clause. LOL. You fail at being American.

 

[DaveSimmons]

FYI, you have to be making over $375,000 (after any deductions) before you would pay a 35% tax on dividends, if Congress allows the Bush tax cuts on dividends to lapse.

Obama isn't the one proposing this, it's the Senate budget committee.

http://www.bnasoftware.com/News_Art...ns_if_Dividends_Rates_Will_Top_40_Percent.asp
"In his fiscal year 2011 budget proposal, President Obama called for continuing to tax capital gains and dividends at up to 15 percent for individuals earning less than $200,000 per year ($250,000 per year for joint filers), while households above those income thresholds would pay 20 percent tax rates."

 

[theeedude]

Except the nominal dividend tax rate can't be compared directly to the income tax rate. Even at a "low" dividend tax rate of 15%, dividends are already taxed at an effective rate of 44.75%. Raising the dividend tax rate to 39.6 makes the actual tax on the disbursement of profits through dividend a whopping 60.75%. There will be virtually NO dividends paid out under a scheme like this.

And as I said before, collecting taxes on corporate profits through a scheme of a reasonably high corporate tax rate (slightly lower than the top personal marginal rate) and finishing the job with a dividend tax rate to make up the difference is highly preferable to doing it all at the personal level because it collects taxes on the dividends that are disbursed outside the country too.

I'm not expecting much in the way of response. Your ignorance is evident here:It is NOT just the rich affected. Dividends are paid into the funds that are held in everybody's retirement plans. Also the effect on market stability of forcing companies to hold on to profits they don't want to can not be understated. Forcing companies to give returns solely in the form of capital gains is NOT the stock market you want. There are many companies that can't grow effectively at a rate determined by their profits. (Pretty much every blue chip.) They need a way to bleed off the pressure, and dividends provide that. I know to you it sounds crazy to say stuff like this so you'll go back to your moronic hobby horse one liners about those evil rich and their horribly low dividend taxes, but that only advertises your ignorance. Then again, that seems to be your whole purpose for posting here...

Simple, make dividends tax deductible expenses for corporations, ordinary income for individuals.

 

[piasabird]

Most people retire based on investments in the Stock Market. You will only be shooting yourself in the foot. Do you think retirement money grows on trees?

Even if you dont own stocks, your employer probably does.

Another thing you need to realize, is they have Stock Markets outside of the USA and truly rich people can just move to another country.

 

[spidey07]

This is terrible. All it's going to do is limit investment. Oh, and it IS going to affect you.

How many of you have dividend re-investment programs with your retirement accounts and individual portfolios?

 

[nonlnear]

Simple, make dividends tax deductible expenses for corporations, ordinary income for individuals.

Agreed, a sane solution really is that simple. I don't imagine they are going to do that though. In today's political climate it would be pilloried as a handout to big evil business.

 

[dmcowen674]

Quote:
Originally Posted by dmcowen674
It's not US.

It's only you rich affected so excuse me while I play a tiny violin for you.

If you don't like it you know where to go.

It is NOT just the rich affected.

Dividends are paid into the funds that are held in everybody's retirement plans. [/QUOTE]

Who is everybody?

I'm not in that group and hardly anyone I know are in that group.

 

[BoberFett]

Simple, make dividends tax deductible expenses for corporations, ordinary income for individuals.

I hate to agree with senseamp, but this seems like a logical solution.

 

[palehorse]

Who is everybody?

I'm not in that group and hardly anyone I know are in that group.

You know "hardly anyone" who has a retirement plan?!

 

[nonlnear]

You don't know anyone who has a retirement plan?!

Considering the level of intelligence required to tolerate his company, it doesn't surprise me.

 

[thegimp03]

This will most definitely hurt retirees who have a fixed income - a lot of which is supported by regular dividend payments.

 

[ElFenix]

> That is a completely unreasonable increase.

Even on incomes of $251 million?

So far a Google search isn't turning up anything except bloggers quoting the free first paragraph of the WSJ, without anyone giving the rest of the story.

the very first link on google is the WSJ article, and if you click on it from google you get the whole article for free.


anyway, if this is true the only thing that will happen is companies will stop paying dividends. according to efficient markets theory whether a dividend is paid or not doesn't matter at all.

 

[JEDI]

http://online.wsj.com/article/SB100...81173165478.html?mod=WSJ_hpp_sections_opinion

"Last week the Senate Budget Committee passed a fiscal 2011 budget resolution that includes an increase in the top tax rate on dividends to 39.6% from the current 15%—a 164% increase. This blows past the 20% rate that President Obama proposed in his 2011 budget and which his economic advisers promised on these pages in 2008.


(See "The Obama Tax Plan," August 14, 2008, by Jason Furman and Austan Goolsbee: "The tax rate on dividends would also be 20% for families making more than $250,000, rather than returning to the ordinary income rate.")
And that's only for starters. The recent health-care bill includes a 3.8% surcharge on all investment income, including dividends, beginning in 2013.

This would nearly triple the top dividend rate to 43.4% in Mr. Obama's four years as President. We suppose the White House would call this another great victory for income equality


Just when you thought they were running out of ways to tax the hell out of us....

what are dividends?

interest i get from bank money market acct?

 

[DaveSimmons]

the very first link on google is the WSJ article, and if you click on it from google you get the whole article for free.

anyway, if this is true the only thing that will happen is companies will stop paying dividends. according to efficient markets theory whether a dividend is paid or not doesn't matter at all.

D'oh, I didn't think to read the cached version.

I did find the info elsewhere though: the Senate committee is going against Obama's current recommendation of 15% for income under $250K, 20% above. The committee resolution (not a law yet) allows rates to return to pre-Bush levels as the Bush cuts are set to expire.

That wouldn't be 39% for anyone making under $250K though, you have to make over $375,000 before being taxed as ordinary income brings the rate up to 35%.

 

[blackangst1]

what are dividends?

interest i get from bank money market acct?

No. Dividends are distribution of profit by a corporation to its shareholders.

 

[Dr. Zaus]

We do try to set the laws so that companies are always encouraged to do the best for all stake-holders, but politicians control making the rules.

very good point. Keeping the government to doing what it can actually help with (requiring and enforcing regulation that leads to more 'sunshine') seems like a great idea.

One drives the price up, depending on the expected current value of the new line, and one drives the price down because of lower expectations for dividend payments.

right, but if the stock has paid dividends in the past it is owned, simply by natural selection, by a class of stock holder that expects dividends; therefore there is a dependency on the part of the company to maintain what it has been doing: this kind of structural inertia actually keeps a company alive and thriving, until one day the environment changes and the ship runs into an ice-burg.

I think most of these arguments apply more clearly to government organizational structures than corporate ones. Specifically, hypothesis A-3 points very strongly to government as much more likely to fall victim to the outlined process of misguided bureaucratizing.

the prop, for everyone is:

The more uncertain the relationship between means and ends the greater the extent to which an organization will model itselfafter organizations it perceives to be successful.

Interestingly, you are very right about this proposition. The best empirical evidence of this particular proposition comes from municipalities and non-profit organizations.

Yes, it is rampant in business, but at least business has some vaguely objective yardsticks for measuring its own performance, and for establishing causal relationships between organizational practices and measurable success. Neither of these is even remotely present in government.

Right! there is a point, in businesses at-least, ware this pressure is overcome by concerns of true efficiency (Meyer, Rowan 1977). That is, unless they are selected out of the environment before this happens(Hanna Freeman 1984)

Simple, make dividends tax deductible expenses for corporations, ordinary income for individuals.

Totally fair but: wouldn't that discourage retained earnings?

hum... now that I think about it most of the shenanigans of wall-street are based on bad retained earnings numbers;

Ok, I'm sold.

Who is everybody?

I'm not in that group and hardly anyone I know are in that group.

If you think this qualifies you to steal other people's money then you are a worthless sub-member of society and don't deserve a seat at the discussion table with the big boys.

Now; if you can understand how the well-being of investors is directly related to employment and innovation then you can gain some perspective on the whole thing.

But knowing you, that just ISN'T going to happen. (But then I don't think you are dumb, just ideologically blinded)

No. Dividends are distribution of profit by a corporation to its shareholders.

right! the, theoretically, entire point of owning a stock.

 

[DucatiMonster696]

Barack "Karl Marx" Obama FTW!

Fixed it for you.

 

[DucatiMonster696]

Quote:
Originally Posted by dmcowen674
It's not US.

It's only you rich affected so excuse me while I play a tiny violin for you.

If you don't like it you know where to go.

It is NOT just the rich affected.

Dividends are paid into the funds that are held in everybody's retirement plans.

Who is everybody?

I'm not in that group and hardly anyone I know are in that group.

Calpers...go look it up.

 

[PeteG2]

Your article “The Dividend Tax Bill Arrives,” is packed with outrage at a proposal that does nothing more than tax dividends at the same rates that work income and bank interest are taxed. I believe that the proposal is only a step in the right direction.

Because of our current favored tax rates for investment income and the fact that unrealized capital gains are not taxed, investment returns are taxed at about one-fifth the rate of income from work. (If you included unrealized capital gains as income, Warren Buffett's income tax rate in 2006 was about 0.1%. See calculations and more details at http://fairsharetaxes.org.) This contributes to our worsening wealth disparity, by which the top 1% of households in the United States have come to hold 40% of the nation's wealth.

Favored tax treatment of investment is, in effect, a government subsidy to investors. When you consider that the investors profit more than anyone from the largesse of all taxpayers (an educated workforce, retirees enabled to remain consumers, roadways, financial bailouts, national and domestic security, and other economic infrastructure), their tax rate subsidy is particularly onerous.

Furthermore, favored tax treatment of investment and the wealth disparity it exacerbates leads to excessive investment. Too much money chases too few worthy investments. By supply and demand, prices climb to unsustainable levels - a bubble. When these investment bubbles inevitably burst, they trigger or worsen recessions.

A very small tax on net worth is a practical way to, in effect, tax investment returns at rates commensurate with those for work income. This would end the distortion of market forces that has lead to the investment bubbles, which have bedeviled our economy over the last decade.

http://fairsharetaxes.org