I'm not saying that dividends and capital gains should not be taxed. The question is, at what rate should they be taxed, because they have already been taxed once at the corporate level. Here's a very simple example:
So, if the dividend is taxed at the ordinary rate, plus marginal phase-outs, plus the 3.8% Obamacare surtax, plus say a California individual tax at 13.3 percent (for a combined total of about 58%), the individual shareholder would pay $113 or so on her $195 dividend. In this example, that would result in in combined total tax of $218 ($105 + 113) of tax on the $300 of actual earnings, for a total levy of 70%.
Just what do the liberals and practitioners of class warfare think is "fair"? (One never hears an answer to that question.) And at what point does the business owner, big or small, say, "Forget it. Try the unemployment office"?
In the case of capital gains, even though not historically taxed to the corporation, the result is the same because the value of the company shares is the future discounted cash flows which will be taxed. In other words, the discount rate used to determine the value of a corporation is the after-tax rate of return.
There's nobody advising the President who understands these concepts. (In the case of Buffet, he understands this; he's just not being honest about it.) That is a major reason why the economy remains in a funk, and why so few opportunities are being created for the traditional upward mobility of folks at the bottom of the economic ladder. That is, the truck driver for whom you claim to care.
Sponge, thanks for answering but I think you have missed my point.
You can't combine individual and business taxes. If I have divided income, my taxation should not depend on whether the dividend comes from a company with high corporation taxes or some company like AAPL (huge profit , little taxation). The tax brackets of individuals receiving income (wages or dividends) from a company should not directly be influenced by the tax bracket of said company.
I would agree with you that the top tax rate for corporations is too high but that's a different story.
My point is that you not only can combine business and individual taxes (as applied to one income stream), you have to combine them to understand the impact on business decision makers and investors. The fact that one company may have short-term special circumstances (NOLs, credits, or other benefits which are often the result of bad legislation) is irrelevant. Decisions are made based on total marginal rates, both historical and what the future holds.
Those are the economics, like it or not.
Any other approach screws up incentives, capital formation, productivity, etc.
I will make it very simple for those who work for Warren Buffet.
Salary 10.00 a hour current tax 0 in income pays state sales tax california 9 percent 9.10
Now lets see what happens when it is fair and equal !!
Instead of zero income tax he or she would pay 15% or 1.50 in 2012
In 2013 he or she would pay 39.16 % in income tax or 39.6 +.90 sales tax + .90 state income tax ,3.8% medicare surtax .38 for a grand total of 6.14 in taxes out of 10 dollars to make 3.86 bring home pay a hour.
Now that is fair if you want equal taxation for all.Unemployment pays 4.50 a hour by the way but you have to make 21.00 a hour to qualify.
0%, 15%, and 20% Tax Rates
Just like before, any qualified dividends and long-term capital gains that fall in the 15% tax bracket or below will not be taxed.
And, just like before, any qualified dividends and long-term capital gains that fall in the 25%-35% tax brackets will be taxed at a 15% rate.
What’s new is that any qualified dividends and long-term capital gains that fall in the new 39.6% tax bracket (which kicks in whenyour taxable income is above $400,000 if single and $450,000 if married filing jointly) will be taxed at a 20% rate.
New 3.8% Medicare Surtax
The other big change is that the 3.8% Medicare surtax created by the Affordable Care Act goes into effect this year. This 3.8% tax applies to the lesser of:
Now those of you making 10 dollars a hour think it is fair to bring home 3.86 after taxes ?
That is what you want the well off to pay!