Now Obama wants to triple the tax on corporate dividends

[miles]

Anybody who still supports this clown has shit for brains.

---------------------------------------------
President Obama's 2013 budget is the gift that keeps on giving—to government. One buried surprise is his proposal to triple the tax rate on corporate dividends, which believe it or not is higher than in his previous budgets.

Mr. Obama is proposing to raise the dividend tax rate to the higher personal income tax rate of 39.6% that will kick in next year. Add in the planned phase-out of deductions and exemptions, and the rate hits 41%. Then add the 3.8% investment tax surcharge in ObamaCare, and the new dividend tax rate in 2013 would be 44.8%—nearly three times today's 15% rate.

Keep in mind that dividends are paid to shareholders only after the corporation pays taxes on its profits. So assuming a maximum 35% corporate tax rate and a 44.8% dividend tax, the total tax on corporate earnings passed through as dividends would be 64.1%.


In previous budgets, Mr. Obama proposed an increase to 23.8% on both dividends and capital gains. That's roughly a 60% increase in the tax on investments, but at least it would maintain parity between taxes on capital gains and dividends, a principle established as part of George W. Bush's 2003 tax cut.

With the same rate on both forms of income, the tax code doesn't bias corporate decisions on whether to retain and reinvest profits (and allow the earnings to be capitalized into the stock price), or distribute the money as dividends at the time they are earned.

Of course, the White House wants everyone to know that this new rate would apply only to those filthy rich individuals who make $200,000 a year, or $250,000 if you're a greedy couple. We're all supposed to believe that no one would be hurt other than rich folks who can afford it.

The truth is that the plan gives new meaning to the term collateral damage, because shareholders of all incomes will share the pain. Here's why. Historical experience indicates that corporate dividend payouts are highly sensitive to the dividend tax. Dividends fell out of favor in the 1990s when the dividend tax rate was roughly twice the rate of capital gains.

When the rate fell to 15% on January 1, 2003, dividends reported on tax returns nearly doubled to $196 billion from $103 billion the year before the tax cut. By 2006 dividend income had grown to nearly $337 billion, more than three times the pre-tax cut level. The nearby chart shows the trend.

Shortly after the rate cut, Microsoft, which had never paid a dividend, distributed $32 billion of its retained earnings in a special dividend of $3 per share. According to a Cato Institute study, 22 S&P 500 companies that didn't pay dividends before the tax cut began paying them in 2003 and 2004.

As former Citigroup CEO Sandy Weill explained at the time: "The recent change in the tax law levels the playing field between dividends and share repurchases as a means to return capital to shareholders. This substantial increase in our dividend will be part of our effort to reallocate capital to dividends and reduce share repurchases."

And that's what happened. An American Economic Association study by University of California at Berkeley economists Raj Chetty and Emmanuel Saez examined dividend payouts by firms and concluded that "the tax reform played a significant role in the [2003 and 2004] increase in dividend payouts." They also found that the incentive for firms to pay dividends rather than sit on cash helped "reshuffle" capital from lower growth firms to "ventures with greater expected value," thus increasing capital-market efficiency.

If you reverse the policy, you reverse the incentives. The tripling of the dividend tax will have a dampening effect on these payments.

Who would get hurt? IRS data show that retirees and near-retirees who depend on dividend income would be hit especially hard. Almost three of four dividend payments go to those over the age of 55, and more than half go to those older than 65, according to IRS data.

But all American shareholders would lose. Higher dividend and capital gains taxes make stocks less valuable. A share of stock is worth the discounted present value of the future earnings stream after taxes. Stock prices would fall over time to adjust to the new after-tax rate of return. And if investors become convinced later this year that dividend and capital gains taxes are going way up on January 1, some investors are likely to sell shares ahead of paying these higher rates.

The question is how this helps anyone. According to the Investment Company Institute, about 51% of adults own stock directly or through mutual funds, which is more than 100 million shareholders. Tens of millions more own stocks through pension funds. Why would the White House endorse a policy that will make these households poorer?

Seldom has there been a clearer example of a policy that is supposed to soak the rich but will drench almost all American families.

 

[RobDownSouth]

Anybody who still supports this clown has shit for brains.
<derp snip>

Speaking of support, Miles Ben Zonah, 100 people didn't support you posting my family's personal information!

 

[JohnnySavage]

That "dividends are taxed twice" argument always makes me laugh. As money flows though the economy, of course it's taxed multiple times. The metric is who pays the tax. The individual receiving the dividend income only pays taxes on it once; what happened to the money prior to, is irrelevant.

The same gripe could be advanced if I hire a maid. I pay the maid from my after tax income (i.e. that money has been taxed) and then the maid has to pay tax on the money I pay her. She pays the tax once, but the money has been taxed before.

 

[KRCummings]

That "dividends are taxed twice" argument always makes me laugh. As money flows though the economy, of course it's taxed multiple times. The metric is who pays the tax. The individual receiving the dividend income only pays taxes on it once; what happened to the money prior to, is irrelevant.

The same gripe could be advanced if I hire a maid. I pay the maid from my after tax income (i.e. that money has been taxed) and then the maid has to pay tax on the money I pay her. She pays the tax once, but the money has been taxed before.

It's Miles, he's a moron.

 

[JohnnySavage]

It's Miles, he's a moron.

How can you tell? I've never seen him post any kind of analysis or make any argument for or against an issue. All I've ever seen him post are snide comments and the standard "Obama sucks"

He's background noise.

 

[KingOrfeo]

Why aren't corporate dividends already simply taxed as income? That would make more sense than treating them as "capital gains," a tax category that simply should not exist as anything but a name for a form of fully-taxable income.

 

[KRCummings]

How can you tell? I've never seen him post any kind of analysis or make any argument for or against an issue. All I've ever seen him post are snide comments and the standard "Obama sucks"

He's background noise.

Yes but it's clear he believes much of the garbage he posts. Sorta like when Vette went on that tangent over Obama's India trip because he read that bogus article.
You can't hide that kind of dumbassery.

 

[mercury14]

Yes but it's clear he believes much of the garbage he posts. Sorta like when Vette went on that tangent over Obama's India trip because he read that bogus article.
You can't hide that kind of dumbassery.

He's always so serious when he's being a dumbass though.

 

[busybody..]

Surtax on wealthy in UK results in lower revenue









Barack Obama has spent the last several months insisting on a tax hike for higher income earners in the US, casting it as an issue of “fairness” and of deficit reduction. In his State of the Union speech, Obama used the word “fair” or a derivative nine different times, and calling for the wealthy to pay their “fair share” of taxes — even though the wealthy account for a much higher percentage of income-tax revenues both as a share of the revenues and as a share of income than the rest of the population. Democrats have tried to push through a “surtax” on income over a million dollars in a year in order to put Obama’s rhetoric into reality.

Speaking of reality, the UK did exactly what Obama and the Democrats propose to do here — pass a surtax on high-income earners. The new tax rate of 50%, which took effect at the beginning of the year, was expected to raise a billion pounds in extra revenue each month. So how did that work out? Tax revenues dropped by more than £500 million:



The Treasury received £10.35 billion in income tax payments from those paying by self-assessment last month, a drop of £509 million compared with January 2011. Most other taxes produced higher revenues over the same period.



Senior sources said that the first official figures indicated that there had been “manoeuvring” by well-off Britons to avoid the new higher rate. The figures will add to pressure on the Coalition to drop the levy amid fears it is forcing entrepreneurs to relocate abroad.



The self-assessment returns from January, when most income tax is paid by the better-off, have been eagerly awaited by the Treasury and government ministers as they provide the first evidence of the success, or failure, of the 50p rate. It is the first year following the introduction of the 50p rate which had been expected to boost tax revenues from self-assessment by more than £1billion.

Oopsie! It turns out that the wealthy can find ways to shelter income when government drives the cost of taxes high enough to make it worthwhile. If that means taking their money and going where the tax laws are more welcoming to investment, then this particular population has fewer barriers to making that solution work than most of the middle class. Instead of gaining more revenue, the UK will end up losing revenue, and not just from the sheltering — but also in lost economic growth as the wealthy have to put that capital to sleep rather than make it work in the economy.

Obama’s plan to hike capital-gains taxes to 20% and push a surtax on higher earnings will produce the same result here. The capital that might have gone to work in the US will go to work somewhere else or not at all, which will not just kill the direct revenues expected in static tax analysis from the hike, but also discard the revenues that would have occurred had the capital been put to work here. That’s the lesson from the British face-plant on surtaxes, and hopefully the US learns that lesson the easy way.

 

[Obama_Sucks]

But he is our savior!

 

[mercury14]

That "dividends are taxed twice" argument always makes me laugh. As money flows though the economy, of course it's taxed multiple times. The metric is who pays the tax. The individual receiving the dividend income only pays taxes on it once; what happened to the money prior to, is irrelevant.

The same gripe could be advanced if I hire a maid. I pay the maid from my after tax income (i.e. that money has been taxed) and then the maid has to pay tax on the money I pay her. She pays the tax once, but the money has been taxed before.

Miles knows you're right. But he'll never admit it.

 

[4est_4est_Gump]

That "dividends are taxed twice" argument always makes me laugh. As money flows though the economy, of course it's taxed multiple times. The metric is who pays the tax. The individual receiving the dividend income only pays taxes on it once; what happened to the money prior to, is irrelevant.

The same gripe could be advanced if I hire a maid. I pay the maid from my after tax income (i.e. that money has been taxed) and then the maid has to pay tax on the money I pay her. She pays the tax once, but the money has been taxed before.

It's a tax on widows and orphans...

Cops and Firefighters...

Teachers...

Me.

 

[4est_4est_Gump]

Surtax on wealthy in UK results in lower revenue









Barack Obama has spent the last several months insisting on a tax hike for higher income earners in the US, casting it as an issue of “fairness” and of deficit reduction. In his State of the Union speech, Obama used the word “fair” or a derivative nine different times, and calling for the wealthy to pay their “fair share” of taxes — even though the wealthy account for a much higher percentage of income-tax revenues both as a share of the revenues and as a share of income than the rest of the population. Democrats have tried to push through a “surtax” on income over a million dollars in a year in order to put Obama’s rhetoric into reality.

Speaking of reality, the UK did exactly what Obama and the Democrats propose to do here — pass a surtax on high-income earners. The new tax rate of 50%, which took effect at the beginning of the year, was expected to raise a billion pounds in extra revenue each month. So how did that work out? Tax revenues dropped by more than £500 million:



The Treasury received £10.35 billion in income tax payments from those paying by self-assessment last month, a drop of £509 million compared with January 2011. Most other taxes produced higher revenues over the same period.



Senior sources said that the first official figures indicated that there had been “manoeuvring” by well-off Britons to avoid the new higher rate. The figures will add to pressure on the Coalition to drop the levy amid fears it is forcing entrepreneurs to relocate abroad.



The self-assessment returns from January, when most income tax is paid by the better-off, have been eagerly awaited by the Treasury and government ministers as they provide the first evidence of the success, or failure, of the 50p rate. It is the first year following the introduction of the 50p rate which had been expected to boost tax revenues from self-assessment by more than £1billion.

Oopsie! It turns out that the wealthy can find ways to shelter income when government drives the cost of taxes high enough to make it worthwhile. If that means taking their money and going where the tax laws are more welcoming to investment, then this particular population has fewer barriers to making that solution work than most of the middle class. Instead of gaining more revenue, the UK will end up losing revenue, and not just from the sheltering — but also in lost economic growth as the wealthy have to put that capital to sleep rather than make it work in the economy.

Obama’s plan to hike capital-gains taxes to 20% and push a surtax on higher earnings will produce the same result here. The capital that might have gone to work in the US will go to work somewhere else or not at all, which will not just kill the direct revenues expected in static tax analysis from the hike, but also discard the revenues that would have occurred had the capital been put to work here. That’s the lesson from the British face-plant on surtaxes, and hopefully the US learns that lesson the easy way.

We need "sin" taxes on wealth.

We need to prevent the accrual of evil Capital; it should all go to government charity...

 

[Ishmael]

Ya know that this is hardly worth serious discussion. Primarily because Obama's proposals are not put forth with any serious intent.

He knows damn well that congress, not even the democrats, are going to pass any of that bullshit. And the fact that the chances of any of that crap passing has about as much a chance as more than a few women here at Lit. have at finding a meaningful relationship gives him political fodder to use this year in running against the 'do nothing' congress.

This is all just political smoke and mirrors.

Ishmael

 

[mercury14]

Ya know that this is hardly worth serious discussion. Primarily because the Ryan Plan, The Balanced Budget Amendment, and virtually everything to come out of the Republican House are not put forth with any serious intent.

This is all just political smoke and mirrors.

Ishmael

So you would also make this post as well, no?

 

[off2bed]

We need "sin" taxes on wealth.

We need to prevent the accrual of evil Capital; it should all go to government charity...

That's the whole motivation behind "progressive taxation." They pretend they aren't using morality to make law because that would be judgmental, but the whole concept of progressive taxation is nothing but.

 

[Ishmael]

So you would also make this post as well, no?

It won't even make it through the Senate idiot. I doubt that the senate will even take it up. It's all smoke and mirrors.

Ishmael

 

[4est_4est_Gump]

Ya know that this is hardly worth serious discussion. Primarily because Obama's proposals are not put forth with any serious intent.

He knows damn well that congress, not even the democrats, are going to pass any of that bullshit. And the fact that the chances of any of that crap passing has about as much a chance as more than a few women here at Lit. have at finding a meaningful relationship gives him political fodder to use this year in running against the 'do nothing' congress.

This is all just political smoke and mirrors.

Ishmael

He's trying to sound Republican; he's running in the middle. The Left knows it's wink, wink, :nod: :nod:...

2012, the Year of the Tax

Getting even...

 

[off2bed]

It won't even make it through the Senate idiot. I doubt that the senate will even take it up. It's all smoke and mirrors.

Ishmael

It's all a set-up so 0bama can use it as a "gotcha" trick. Because he has zero substance and no real ideas of his own.

 

[mercury14]

We need "sin" taxes on wealth.

We need to prevent the accrual of evil Capital; it should all go to government charity...

If taking the capital gains tax from 15% to 20% forces investors to take their capital overseas, why weren't they forced to do so last time it was 20%?

 

[off2bed]

If taking the capital gains tax from 15% to 20% forces investors to take their capital overseas, why weren't they forced to do so last time it was 20%?

They did, dummy.

 

[unregistered]

 

[4est_4est_Gump]

That's the whole motivation behind "progressive taxation." They pretend they aren't using morality to make law because that would be judgmental, but the whole concept of progressive taxation is nothing but.

But it is upon the law that socialism itself relies. Socialists desire to practice legal plunder, not illegal plunder. Socialists, like all other monopolists, desire to make the law their own weapon. And when once the law is on the side of socialism, how can it be used against socialism? For when plunder is abetted by the law, it does not fear your courts, your gendarmes, and your prisons. Rather, it may call upon them for help.
Frédéric Bastiat
The Law

 

[4est_4est_Gump]

Obama submitted his budget knowing it wouldn't get a Democrat vote. He knows that stooges like Merc 14 will use the inaction as an opportunity to blame Republicans.

This is the Trojan slipped upon the horse's head...

 

[mercury14]

It won't even make it through the Senate idiot. I doubt that the senate will even take it up. It's all smoke and mirrors.

Ishmael

And none of that changes the fact that the Ryan Plan, Balanced Budget Amendment, and a long list of other Republican House measures were doomed to also go nowhere. Doesn't matter if they passed one House, they knew they were engaging in smoke and mirrors BS when they constructed the measures.

The Balanced Budget Amendment even renders the Ryan Plan unconstitutional. Doesn't matter though, the Republicans in the House tried to pass both of them anyway. It's pure political theater meant to please the conservative base and the Tea Party.

Do you even believe that the House Republicans were all united over these measures? Nope. In knowing that none of the rubbish they produced would ever become law they were able to show the country what giant conservative cocks they had. There's simply nothing like voting for things you never have to be responsible for.