Let's drug-test the rich before approving tax deductions, US congresswoman says

[WFU Lurker]

um, sure, the potential value at the time of sale might be larger but that has nothing to do with it being a capital gain or loss. that's like saying capital gains amount is dependent on the amount of debt on the books

If cash flows are growing more quickly than expected then the value of the asset would increase more in a tax free environment than in a taxed environment. If cash flows are growing more slowly than expected then there would be a capital loss under either situation and this discussion becomes irrelevant.

 

[ImTheCaptain]

If cash flows are growing more quickly than expected then the value of the asset would increase more in a tax free environment than in a taxed environment. If cash flows are growing more slowly than expected then, in a pure world, there would be a capital loss.

i understand that all of that contributes to the value of said gain/loss

but for RJ's purposes, it's all baked into the line on your tax form that you report when you realize the gain/loss.

 

[RJKarl]

Let's take this in pieces:

Social security: What does "paid for entitlement" mean? All entitlements are paid for. Whether by tax payers or by debt that is then funded by tax payers. In the current world, because your benefit is derived from your contribution, you could say that social security was not an entitlement. I would disagree because there isn't a direct link between the benefit and the contribution (otherwise it wouldn't be in danger of insolvency in the first place), but that's for another day. For now, if you remove the link that is there by saying that contributions should far out measure benefits for some segment of the population then I don't see how it is anything but an entitlement.

Food stamps, Medic-aid, other welfare programs are paid for by taxes. SS is funded by a specific tax that is paid to pay out this benefit. Initially, your taxes pay for current beneficiaries.By the time you are getting it taxes from others are paying you. It was ALWAYS meant to be an entitlement, but one that paid for itself.

Dividend income: Let's assume a theoretical world where a high level executive works for a firm with a corporate income tax rate of 25%, pays a personal income tax rate of 25%, and there is no difference in taxes between salary and dividends.

For each $1000 of salary, the government receives $0 from his company and receives $250 from him.

For each $1000 of dividends, the government receives $333 from his company ($1333*75%=$1000) and receives $250 from him.

This is the same circular gibberish that says the customer pays corporate taxes not the company.

It's totally IRRELEVANT what the corporation pays in taxes when you are talking about paying an employee in dividends. They are two different entities. They aren't the same and never will be.

The dividends are taxed more. That isn't sidestepping; that's math.

Capital gains: I am afraid I do. The value of a financial asset is based on its future cash flows. If corporate income was tax free then the cash flows would be larger, the asset would be worth more, and the capital gain would be larger.

If you sell your house and make a capital gain, you owe taxes a lower rate.

If you buy 1000 shares of XYZ corp at $20 at $40, you pay on the $20 profit. he price is set by myriad of factors. Your "logic" is strained beyond belief.

 

[WFU Lurker]

i understand that all of that contributes to the value of said gain/loss

but for RJ's purposes, it's all baked into the line on your tax form that you report when you realize the gain/loss.

Maybe I'm being dense but I don't follow.

Do you disagree that equity, whether dividend paying or not, is taxed at the corporate level? (ignoring loopholes, carry-forwards, etc that have been touched on in other threads).

 

[ImTheCaptain]

yes

i think i jumped into the discussion at the wrong time and made things confusing

 

[WFU Lurker]

If you sell your house and make a capital gain, you owe taxes a lower rate.

If you buy 1000 shares of XYZ corp at $20 at $40, you pay on the $20 profit. he price is set by myriad of factors. Your "logic" is strained beyond belief.

Social security: A lot of people would say that social security is not an entitlement. I am glad we agree. I don't really have a strong stance for or against a cap, but don't like some of the double-speak that happens around it. Thanks for the clarification that that is not what's happening here.

Dividends: It isn't irrelevant at all. A company with less profit cannot pay as much in dividends. That seems pretty straight-forward, no?

Capital gains: My logic is basic finance. If you don't think that corporate valuations would increase in a world without corporate taxes then we have nowhere else to go on this topic.

 

[RJKarl]

It's NOT about the corporation. It's a scam to enrich certain employees unfairly. The fact a corporation paid taxes on their income has ZERO bearing on an individual employee's pay. NONE and never will.

Very basically. Employee A makes $100,000 + a 25,000 bonus. He pays income tax on $125,000. Employee B is paid $100,000 and gets $25,000 of his pay in dividends.He pays less tax on the same income than A. That's not fair.

RE: Capital gains, which, of course, aren't just selling of stocks: we don't live in a world with zero corporate taxes. Thus, your point is irrelevant.

 

[ChrisL68]

It's NOT about the corporation. It's a scam to enrich certain employees unfairly. The fact a corporation paid taxes on their income has ZERO bearing on an individual employee's pay. NONE and never will.

Very basically. Employee A makes $100,000 + a 25,000 bonus. He pays income tax on $125,000. Employee B is paid $100,000 and gets $25,000 of his pay in dividends.He pays less tax on the same income than A. That's not fair.

RE: Capital gains, which, of course, aren't just selling of stocks: we don't live in a world with zero corporate taxes. Thus, your point is irrelevant.

That's not really true in the case of dividends. They represent ownership of a C Corporation that has already paid taxes on that income. It is a distribution of after tax income so there is a substantial argument for applying a lower rate.

It isn't paid based on your employment but on your ownership in the company.

 

[RJKarl]

By definition, dividends means ownership. But it's away not pay them salary or bonuses.

What are the other ways that people pay the lower rate besides dividends?

 

[ChrisL68]

By definition, dividends means ownership. But it's away not pay them salary or bonuses.

What are the other ways that people pay the lower rate besides dividends?

Not really. It is a payout of the after tax profits of a company and has to be paid pro-rata to all owners.

 

[06deacon]

Forget it he's rolling

 

[Wakelaw2006]

Since he posted an article about hedge fund managers, I am guessing that rj is railing against (or trying to rail against) the capital gains treatment of carried interests in funds. If that is the case, from a policy perspective I agree with him, but I have no idea what else he could be trying to get at with all of this talk of dividends in a corporate context.

 

[RJKarl]

Since he posted an article about hedge fund managers, I am guessing that rj is railing against (or trying to rail against) the capital gains treatment of carried interests in funds. If that is the case, from a policy perspective I agree with him, but I have no idea what else he could be trying to get at with all of this talk of dividends in a corporate context.

This basically it.