Jump to content

Christie: Buffett Should ‘Just Write a Check and Shut Up’


Liberty

Recommended Posts

Guest misterstockwell

Buffett is an old man. He paid taxes from income for many many years. He worked all that time, saved, and has the luxury to live off dividends of investments. I don't think he should pay any tax at all on the dividends. The company issuing the dividend already paid tax on that income at a full rate. Even 15% is larceny. In Obama's quest to get every thin dime out of every dollar into his redistribution pipeline, he wants a full rate tax AGAIN on that same money. One dollar of earnings generating $.58 in tax. BRILLIANT!

Link to comment
Share on other sites

  • Replies 97
  • Created
  • Last Reply

Top Posters In This Topic

http://www.bloomberg.com/news/2012-02-22/buffett-should-just-write-a-check-and-shut-up-governor-christie-says.html

 

More demagogery  Doubt he's telling people talking about issues he agrees with to shut up..

 

 

-This is how this thread started. Maybe I could suggest to those who start a new thread don't include a statement which reveals a certain bias in the political realm. But of course, if you do, maybe you could let me know if you disagree with these following sentiments: "especially with the knowledge that all (most?) posters are employing tactics to keep the tax which they pay as LOW as they can! Deep down, all (most?) of the people on this forum are here to make money for their own use, NOT for politicians to take and re-distribute to those who can keep them in office. (it will be interesting to see who disagrees with these statements!!)"

 

Anyone?

 

 

Link to comment
Share on other sites

Deep down, all (most?) of the people on this forum are here to make money for their own use, NOT for politicians to take and re-distribute to those who can keep them in office. (it will be interesting to see who disagrees with these statements!!)"

 

Did Buffett make this kind of statement?  Are you just putting words in his mouth?

 

I happen to agree with Buffett.  Should I also just write a check and shut up, too? Should everyone who happens to agree with BUffett also just write a check and shut up?  If you don't want to hear from us, why do you bother getting on this board considering you have "one" post about investing?

Link to comment
Share on other sites

http://www.bloomberg.com/news/2012-02-22/buffett-should-just-write-a-check-and-shut-up-governor-christie-says.html

 

More demagogery  Doubt he's telling people talking about issues he agrees with to shut up..

 

 

-This is how this thread started. Maybe I could suggest to those who start a new thread don't include a statement which reveals a certain bias in the political realm. But of course, if you do, maybe you could let me know if you disagree with these following sentiments: "especially with the knowledge that all (most?) posters are employing tactics to keep the tax which they pay as LOW as they can! Deep down, all (most?) of the people on this forum are here to make money for their own use, NOT for politicians to take and re-distribute to those who can keep them in office. (it will be interesting to see who disagrees with these statements!!)"

 

Anyone?

 

I'm not sure what you are implying and what most of this quote meant, but apart from not being an American and from not having any partisan tendencies (I don't think I've voted for the same party twice in a row in the past), I posted this because it had to do with Buffett and might interest people here, because, y'know, they are interested in Buffett. As for the rest:

 

Demagogy (/ˈdɛməɡɒdʒi/[1]) or demagoguery (/ˈdɛməɡɒɡəri/[2]) (Ancient Greek: δημαγωγία, from δῆμος dēmos "people" and ἄγειν agein "to lead") is a strategy for gaining political power by appealing to the prejudices, emotions, fears, vanities and expectations of the public—typically via impassioned rhetoric and propaganda, and often using nationalist, populist or religious themes.

 

In my book telling a public intellectual like Warren Buffett to "write a check and shut up" qualifies.

 

If I had known this would turn into a political thread, I wouldn't have posted it for sure. Political threads kill brain cells.

Link to comment
Share on other sites

zippy1,

 

I am trying to find an area of agreement, so that when arguments do occur, at least there is a basis of understanding for why someone would frequent a value investing site. Buffett's main goal throughout his life was to build his pile of dough, not to give the most money to the US TREASURY. I agree with him there, and I am trying to find out if the rest of the posters on this investing board feel the same. If you think you should pay more taxes, charitable donations are accepted by the US TREASURY. But, if you want to use that money to donate to a private charity, or a place of worship, or use it for a vacation, then we can find another area of agreement. Chistie's use of the term "shut up" was not literal, it was simply to say we know what you believe, we believe differently, but you have an avenue for carrying out what you believe, so go ahead, NO ONE IS STOPPING YOU!

 

By the way, do you agree with me? "all (most?) posters are employing tactics to keep the tax which they pay as LOW as they can! Deep down, all (most?) of the people on this forum are here to make money for their own use, NOT for politicians to take and re-distribute to those who can keep them in office."?

Link to comment
Share on other sites

Liberty,

 

We disagree on who is a demagogue. I don't think Christie is, but I do believe Buffett is being used by my President.

 

Do we agree that we try to limit our taxes and try to improve our return/yield on earned income we have already paid taxes on? Do we think individuals spend their own money more wisely than a government bureaucrat could?

 

I imply nothing. I ask simple questions. I try to learn. I thank those who start these type of forums, they are valuable to me.

 

Cheers.

Link to comment
Share on other sites

http://www.bloomberg.com/news/2012-02-22/buffett-should-just-write-a-check-and-shut-up-governor-christie-says.html

 

More demagogery  Doubt he's telling people talking about issues he agrees with to shut up..

 

 

-This is how this thread started. Maybe I could suggest to those who start a new thread don't include a statement which reveals a certain bias in the political realm. But of course, if you do, maybe you could let me know if you disagree with these following sentiments: "especially with the knowledge that all (most?) posters are employing tactics to keep the tax which they pay as LOW as they can! Deep down, all (most?) of the people on this forum are here to make money for their own use, NOT for politicians to take and re-distribute to those who can keep them in office. (it will be interesting to see who disagrees with these statements!!)"

 

Anyone?

 

I'm not sure what you are implying and what most of this quote meant, but apart from not being an American and from not having any partisan tendencies (I don't think I've voted for the same party twice in a row in the past), I posted this because it had to do with Buffett and might interest people here, because, y'know, they are interested in Buffett. As for the rest:

 

Demagogy (/ˈdɛməɡɒdʒi/[1]) or demagoguery (/ˈdɛməɡɒɡəri/[2]) (Ancient Greek: δημαγωγία, from δῆμος dēmos "people" and ἄγειν agein "to lead") is a strategy for gaining political power by appealing to the prejudices, emotions, fears, vanities and expectations of the public—typically via impassioned rhetoric and propaganda, and often using nationalist, populist or religious themes.

 

In my book telling a public intellectual like Warren Buffett to "write a check and shut up" qualifies.

 

If I had known this would turn into a political thread, I wouldn't have posted it for sure. Political threads kill brain cells.

 

I wouldn't call Christie's comment demagoguery.  Rude, or stupid possibly, but not demagoguery.  Buffett's position is either intentional demagoguery or unintentional mistake.  The issue really isn't about politics.  It isn't about whether government should be bigger or smaller.  Whether we should have deficits or not.  Nor is it about trying to reverse the rich getting richer while the middle class struggle.  Rather it is an honest look at Buffett's argument. 

 

Buffett implies something that is totally false.  He says he pays a lower overall rate than his Secretary, when the facts are otherwise.  If the diagnosis is wrong, the prescription is likely wrong as well. 

 

Political threads can be helpful for those who will honestly look at an issue.  I know it is rare, but it can and does happen.       

Link to comment
Share on other sites

Buffett is an old man. He paid taxes from income for many many years. He worked all that time, saved, and has the luxury to live off dividends of investments. I don't think he should pay any tax at all on the dividends. The company issuing the dividend already paid tax on that income at a full rate. Even 15% is larceny. In Obama's quest to get every thin dime out of every dollar into his redistribution pipeline, he wants a full rate tax AGAIN on that same money. One dollar of earnings generating $.58 in tax. BRILLIANT!

 

 

It's very simplistic view. You are ignoring the enormous benefits the government is granting by allowing a corporation to exist as a free standing legal entity.

 

If a corporation produces a dangerous product or goes bankrupt then the investors receiving dividends are not on the hook. Investors share the risk of their invested capital but it stops there. Government is allowing transfer of all other risks from investors to society as a whole. This transfer of risk should not be free. Some price has to be paid and that price is corporate tax. I don't have any opinion on rate but it can not be free.

 

Investors can form partnership and avoid paying tax at corporation level. Corporate status is voluntary and investors consider the benefit of corporate status to be worth the price. It's not double taxation. Tax is paid by two separate legal entity. If Investors are not getting enough benefit by having two separate legal entity then they are free to keep only one and assume all the risk. It is understandable that investors would want to get benefits from the government at no cost but it is not practical.

 

Pass through entity having legal status is recent development but this double taxation argument is very old one.

 

Link to comment
Share on other sites

Yankee only post on political threads which is unlike any other poster here. Even Ben Graham and that other guy post about LVLT..."

 

Ben Graham has been banned to the abyss!  The other guy knows he will get hit on the nose with a rolled up newspaper when he gets out of line.  ;D

 

I didn't realize until I attempted to ban Ben Graham, but when I looked on the "ban" administrative panel, he had some 20 IP addresses he was using to post from.  I've banned them all, and will try to feret him out if he attempts to re-register.  Cheers!

 

Congrats man. The board has been much more coherent over the last few days. It all makes sense.

 

 

If Ben Graham comes back I think we'll notice him. Luckily for us, he has a very distinct WRITING 8) STYLE given to HIM by the GLORIOUS value investing GODS !!!!!!!!!

 

Post of the day. I thought he was back, when I saw this on the RSS feed.

 

Southern Yankee did have one post on investing.  He asked what is a short sale.  ???

 

LOL.

Link to comment
Share on other sites

Quote from: Parsad on Today at 12:09:14 PM

Yankee only post on political threads which is unlike any other poster here. Even Ben Graham and that other guy post about LVLT..."

 

Ben Graham has been banned to the abyss!  The other guy knows he will get hit on the nose with a rolled up newspaper when he gets out of line. 

 

I didn't realize until I attempted to ban Ben Graham, but when I looked on the "ban" administrative panel, he had some 20 IP addresses he was using to post from.  I've banned them all, and will try to feret him out if he attempts to re-register.  Cheers!

 

Congrats man. The board has been much more coherent over the last few days. It all makes sense.

 

 

Quote from: Hester on Today at 01:18:17 PM

 

If Ben Graham comes back I think we'll notice him. Luckily for us, he has a very distinct WRITING  STYLE given to HIM by the GLORIOUS value investing GODS !!!!!!!!!

 

Post of the day. I thought he was back, when I saw this on the RSS feed.

 

 

Quote from: twacowfca on Today at 02:21:42 PM

Southern Yankee did have one post on investing.  He asked what is a short sale. 

 

LOL.

 

-Happy when certain posters are banned and laughs at others for lack of knowledge about a subject --- must be a source of pride for you!

Cheers!

Link to comment
Share on other sites

I have a deep lack of knowledge regarding investing (you should see some of my mistakes lol), but I am interested and post about it. I post analysis and ask questions, but I primarily just read. I read pretty much every post on the board via RSS except for the LVLT thread. You on the other hand only seem to have a passion for politics. You post, analyze, read, and ask questions but they are pretty much solely related to politics. Thats fine, but this is an investment board you know...

 

I am on probably 4-5 other forums, but have never seen a member have no interest in the primary point of the forum, and only post about something else. Logically the person usually just finds a forum geared towards that topic, and either lurks or leaves. Its why I find your posting habits interesting. The moment anything remotely political pops up, you come in like clock work to give us the republican talking points. On most other topics you are ghost, like I said its interesting. The board has plenty of die hard liberals, and conservatives, but all the other ones are also interested in Investing and are primarily here for that.

 

If you dont know why we are happy about the banning of Ben Graham, then you really only read the political threads....

Link to comment
Share on other sites

Quote from: Parsad on Today at 12:09:14 PM

Yankee only post on political threads which is unlike any other poster here. Even Ben Graham and that other guy post about LVLT..."

 

Ben Graham has been banned to the abyss!  The other guy knows he will get hit on the nose with a rolled up newspaper when he gets out of line. 

 

I didn't realize until I attempted to ban Ben Graham, but when I looked on the "ban" administrative panel, he had some 20 IP addresses he was using to post from.  I've banned them all, and will try to feret him out if he attempts to re-register.  Cheers!

 

Congrats man. The board has been much more coherent over the last few days. It all makes sense.

 

 

Quote from: Hester on Today at 01:18:17 PM

 

If Ben Graham comes back I think we'll notice him. Luckily for us, he has a very distinct WRITING  STYLE given to HIM by the GLORIOUS value investing GODS !!!!!!!!!

 

Post of the day. I thought he was back, when I saw this on the RSS feed.

 

 

Quote from: twacowfca on Today at 02:21:42 PM

Southern Yankee did have one post on investing.  He asked what is a short sale. 

 

LOL.

 

-Happy when certain posters are banned and laughs at others for lack of knowledge about a subject --- must be a source of pride for you!

Cheers!

 

Our board welcomes novices who want to learn about investing.  But only one Investing 101 question in 90 posts?! This is an investing board, with an occasional political rant to blow off steam.  It's not for people who care less about investing.

Link to comment
Share on other sites

twacowfca, myth,

 

I have explained my reasons for my silence on investment topics. I also explained that reading many different outlets over the years has been a fruitful experience, actually earlier in this thread when PlanMaestro pointed out my lack of comments on investing posts (I answered twacowfca as well).  Politics seems to be a topic which comes up at times on this forum, and yes, I do engage. They are discussions which I find important, for the simple fact most posters are at this site TO MAKE MONEY! Most posters try to pay as LITTLE TAX AS POSSIBLE (assumption on my part, but that is why I ask the question), just like Buffett (would it be incorrect to say that avoiding tax increases an investments yield?). So when a thread pops up AGAIN about Buffett wanting to tax the wealthy more, it is very interesting to see who responds and how they respond.

 

Ben Graham - I believe I do know who he is, he is the reason why I bought LVLT at $1.15 (doubled and sold  ;D), and then bought again around $1.40 (in the money :) ). When he takes over a thread with ValueCarl (?), I either read it or ignore. Are you NOT able to do that?

 

I am a novice investor, who through divine intervention or dumb luck, has done very well for himself the last 4-5 years. I am reading more books, listening to more audiobooks and radio, lessening my exposure to sports (except from April to June) and celebrity news. Please allow me to continue my perusing of this forum, I don't call people names, and ask questions where I genuinely would like an answer. I also try to find areas of agreement (wrote this earlier in the thread), so that the disagreements don't get blown out of proportion as to the reason why we are here (again - TO LEARN HOW/WHERE TO MAKE MORE MONEY!!).

 

Cheers to you both, I'll be lurking. November 2012 is coming soon!

Link to comment
Share on other sites

Investors can form partnership and avoid paying tax at corporation level. Corporate status is voluntary and investors consider the benefit of corporate status to be worth the price. It's not double taxation. Tax is paid by two separate legal entity. If Investors are not getting enough benefit by having two separate legal entity then they are free to keep only one and assume all the risk. It is understandable that investors would want to get benefits from the government at no cost but it is not practical.

 

Where do REITs stand in terms of this argument?  The income is only taxed at the individual level and there is no legal recourse to the shareholder of the REIT (like if there is a hotel fire or something).  It seems like in the case of the REIT the government is satisfied to not collect tax as long as the REIT income is distributed at a high payout ratio.  The government could apply the same logic to any corporation (no tax as long as high payout rate) -- the government could allow Coca Cola to become a BPIT (Beverage Product Investment Trust). 

Link to comment
Share on other sites

I had no real issues with Ben Graham and ignored his posts. It did cost me a few minutes each day, which I have now gotten back. He did however annoy just about every member on the board, and eventually got a bit too far into left field. Glad to see he made you some cash, but I doubt he will be missed.

Link to comment
Share on other sites

Buffett is an old man. He paid taxes from income for many many years. He worked all that time, saved, and has the luxury to live off dividends of investments. I don't think he should pay any tax at all on the dividends. The company issuing the dividend already paid tax on that income at a full rate. Even 15% is larceny. In Obama's quest to get every thin dime out of every dollar into his redistribution pipeline, he wants a full rate tax AGAIN on that same money. One dollar of earnings generating $.58 in tax. BRILLIANT!

 

 

It's very simplistic view. You are ignoring the enormous benefits the government is granting by allowing a corporation to exist as a free standing legal entity.

 

If a corporation produces a dangerous product or goes bankrupt then the investors receiving dividends are not on the hook. Investors share the risk of their invested capital but it stops there. Government is allowing transfer of all other risks from investors to society as a whole. This transfer of risk should not be free. Some price has to be paid and that price is corporate tax. I don't have any opinion on rate but it can not be free.

 

Investors can form partnership and avoid paying tax at corporation level. Corporate status is voluntary and investors consider the benefit of corporate status to be worth the price. It's not double taxation. Tax is paid by two separate legal entity. If Investors are not getting enough benefit by having two separate legal entity then they are free to keep only one and assume all the risk. It is understandable that investors would want to get benefits from the government at no cost but it is not practical.

 

Pass through entity having legal status is recent development but this double taxation argument is very old one.

 

I think you are vastly overstating the benefits of incorporation.  For most companies the cost of liability insurance would be a fraction of what they pay in taxes.  As an investor it is not something I see as worth the price at all.  Rather it is just the way it is.  Fort eh super wealthy they are paying a high price for liquidity.  I would argue it is unfair to tax the person/entity twice for the same benefits. 

 

I used to work for Peter Kiewit Sons, a private employee owned company.  This is the same Kiewit where Buffett has his office.  It is also compounded book value faster than BRK.  Anyways, in 2002 they were going to convert to an LP due to the cost of double taxation.  They even stated that if they were starting today (2002) they would not incorporate.  At the time they had $4 billion in annual revenue from heavy construction (bridges, highways, treatment plants) and also coal mining.  All industries with significant risk yet they were willing to do it.  While never publicly said, they reason was due to the likelihood of the tax rate on dividends being raised if Gore beat Bush in the 2002 election.  Since Gore lost (sorry to bring up a sensitive subject for Democrats) they cancelled the plan. 

 

Businesses aren't stupid.  If the US raises dividends to the same level as earned income there will be consequences.  Companies will convert to S-Corps or partnerships to minimize taxes.  LBO's will be more attractive.  Why pay 35% corporate tax and then have dividends taxed at 45% when you can borrow and the interest is deductible?  The irony is that changes based on "fairness" will probably cost the Treasury tax revenues.     

Link to comment
Share on other sites

Buffett is an old man. He paid taxes from income for many many years. He worked all that time, saved, and has the luxury to live off dividends of investments. I don't think he should pay any tax at all on the dividends. The company issuing the dividend already paid tax on that income at a full rate. Even 15% is larceny. In Obama's quest to get every thin dime out of every dollar into his redistribution pipeline, he wants a full rate tax AGAIN on that same money. One dollar of earnings generating $.58 in tax. BRILLIANT!

 

 

It's very simplistic view. You are ignoring the enormous benefits the government is granting by allowing a corporation to exist as a free standing legal entity.

 

If a corporation produces a dangerous product or goes bankrupt then the investors receiving dividends are not on the hook. Investors share the risk of their invested capital but it stops there. Government is allowing transfer of all other risks from investors to society as a whole. This transfer of risk should not be free. Some price has to be paid and that price is corporate tax. I don't have any opinion on rate but it can not be free.

 

Investors can form partnership and avoid paying tax at corporation level. Corporate status is voluntary and investors consider the benefit of corporate status to be worth the price. It's not double taxation. Tax is paid by two separate legal entity. If Investors are not getting enough benefit by having two separate legal entity then they are free to keep only one and assume all the risk. It is understandable that investors would want to get benefits from the government at no cost but it is not practical.

 

Pass through entity having legal status is recent development but this double taxation argument is very old one.

 

I think you are vastly overstating the benefits of incorporation.  For most companies the cost of liability insurance would be a fraction of what they pay in taxes.  As an investor it is not something I see as worth the price at all.  Rather it is just the way it is.  Fort eh super wealthy they are paying a high price for liquidity.  I would argue it is unfair to tax the person/entity twice for the same benefits. 

 

I used to work for Peter Kiewit Sons, a private employee owned company.  This is the same Kiewit where Buffett has his office.  It is also compounded book value faster than BRK.  Anyways, in 2002 they were going to convert to an LP due to the cost of double taxation.  They even stated that if they were starting today (2002) they would not incorporate.  At the time they had $4 billion in annual revenue from heavy construction (bridges, highways, treatment plants) and also coal mining.  All industries with significant risk yet they were willing to do it.  While never publicly said, they reason was due to the likelihood of the tax rate on dividends being raised if Gore beat Bush in the 2002 election.  Since Gore lost (sorry to bring up a sensitive subject for Democrats) they cancelled the plan. 

 

Businesses aren't stupid.  If the US raises dividends to the same level as earned income there will be consequences.  Companies will convert to S-Corps or partnerships to minimize taxes.  LBO's will be more attractive.  Why pay 35% corporate tax and then have dividends taxed at 45% when you can borrow and the interest is deductible?  The irony is that changes based on "fairness" will probably cost the Treasury tax revenues.   

 

I think the same way you're accusing rranjan of overstating the benefits of incorporation you're also vastly understating its benefits also.

 

Inherent to the corporation form and its existence as a separate legal entity is the fact that it can raise vast amounts of cash through the capital markets. Do you see a world where the big capital providers, the pension funds, mutual funds etc. buy shares in companies where they will be held accountable for the manager's mistakes and their own assets will be on the line every time, due to bad management, a company goes bankrupt? I personally don't think it's plausible and I would be interested in finding someone who can prove me wrong.

 

As long as companies feel the need to go public so that the Mark zuckerbergs of the world can put on their resumes that they're running a company valued at $100B+, I reckon the people providing them with billions will want it to be a corporation.

 

I don't have the data, so I'm just going with my opinion here, but I would think a pretty big chunk of the dividends paid by S&P 500 companies are paid by the big boys in there. So can you tell me what companies, in say the S&P 100 group, you see converting to Partnerships if the dividend tax regulations are changed?

 

But even if we put all this aside, one thing that is constantly missing from the arguments those on the right make is that they have nothing to prove what they are claiming the taxes will cause is based on any sort of facts. Please remember, it was only in 2003 that the Bush tax cuts were introduced to us. Can you show us any empirical proof that prior to 2003 companies were converting to partnerships en masse because dividends were taxed higher? It should be fairly easy to prove if it was true, we're only talking about 2003 after all. And yet, this is what you're claiming will happen.

 

The bottom line is this, the tax cuts only contributed to exacerbate the deficit and the nation's debt because they happened at a time when the Bush administration was increasing spending significantly and we all agree on spending cuts to solve our problems but tax reform also needs to be part of the solution and I for one don't buy made up arguments like corporations will turn into partnerships if we change anything, why weren't they partnerships before 2003 then?

Link to comment
Share on other sites

Unfortunately you are reading into what I wrote. 

 

AZ: Inherent to the corporation form and its existence as a separate legal entity is the fact that it can raise vast amounts of cash through the capital markets. Do you see a world where the big capital providers, the pension funds, mutual funds etc. buy shares in companies where they will be held accountable for the manager's mistakes and their own assets will be on the line every time, due to bad management, a company goes bankrupt? I personally don't think it's plausible and I would be interested in finding someone who can prove me wrong.

 

Response: I answered this already.  For nearly every, if not all, the cost of insurance would be a fraction of the cost of what they pay in taxes.  I never said that nearly every corporation would make the change.  If they are smart, they would see that the cost of liquidity is not worth giving up 40% of the profits. 

 

 

AZ: But even if we put all this aside, one thing that is constantly missing from the arguments those on the right make is that they have nothing to prove what they are claiming the taxes will cause is based on any sort of facts. Please remember, it was only in 2003 that the Bush tax cuts were introduced to us. Can you show us any empirical proof that prior to 2003 companies were converting to partnerships en masse because dividends were taxed higher? It should be fairly easy to prove if it was true, we're only talking about 2003 after all. And yet, this is what you're claiming will happen.

 

Response:  The discussion is about taxes not politics.  I just gave you one example of a large company.  I know of a number of small otc companies that went that route too.  Feel free to call up every corporation and ask them.  I don't have the time.  Often it takes one company to lead the way then others will follow.  There is plenty of proof that small business changed structure in the 80's in response to tax changes.  I'm not saying all or most large corporations will change.  I recognize that for most large corporations it is extremely difficult.  Why has BRK switched to buying companies versus equity investments?  Tax savings and control of capital allocation.

 

AZ: The bottom line is this, the tax cuts only contributed to exacerbate the deficit and the nation's debt because they happened at a time when the Bush administration was increasing spending significantly and we all agree on spending cuts to solve our problems but tax reform also needs to be part of the solution and I for one don't buy made up arguments like corporations will turn into partnerships if we change anything, why weren't they partnerships before 2003 then?

 

Response: My comments have nothing to do with a discussion on the deficit.  If you cannot separate the two then there is nothing to discuss. 

Link to comment
Share on other sites

Tim,

Why did the Republicans favor the 15% dividend rate (potentially high combined 40+% rate) that taxes their profits higher than regular income (top 35% rate)?  This is what they don't want (double taxation), yet they put that gun to their head themselves.  It's a smaller caliber weapon now that the rate has been reduced to just 15%, yet still it's potentially a higher tax than the regular income rate of 35%.

 

They could instead have opted for a dividend franking system where the recipient takes a tax credit for taxes already paid by the corporation.  This guarantees that you pay no higher than the regular income tax rate and makes it largely unnecessary to worry about the tax effects of the corporate structure.

 

Even today, they still don't talk about this.  It's the most obvious route.

 

Personally, I think many corporations pay a lower rate and then with the 15% dividend rate they wind up actually with an combined tax rate that it actually lower than the 35% top individual rate.  Therefore, the Republicans certainly DON'T want to rock the boat on that good deal.

 

Thoughts?

 

Link to comment
Share on other sites

Tim,

Why did the Republicans favor the 15% dividend rate (potentially high combined 40+% rate) that taxes their profits higher than regular income (top 35% rate)?  This is what they don't want (double taxation), yet they put that gun to their head themselves.  It's a smaller caliber weapon now that the rate has been reduced to just 15%, yet still it's potentially a higher tax than the regular income rate of 35%.

 

They could instead have opted for a dividend franking system where the recipient takes a tax credit for taxes already paid by the corporation.  This guarantees that you pay no higher than the regular income tax rate and makes it largely unnecessary to worry about the tax effects of the corporate structure.

 

Even today, they still don't talk about this.  It's the most obvious route.

 

Personally, I think many corporations pay a lower rate and then with the 15% dividend rate they wind up actually with an combined tax rate that it actually lower than the 35% top individual rate.  Therefore, the Republicans certainly DON'T want to rock the boat on that good deal.

 

Thoughts?

 

You want to me explain what Politicians were thinking?  Thanks for an easy question.  Based on history I would have to say they acted largely in self-interest.  They presumably thought lowering the rate to 15% would help their reelection chances by either improving the economy or improving their fund raising, or some combination of both.  I would agree that a dividend franking system makes sense, but they must have believed that the other side would attack them on it, or no one proposed it.  Washington DC suffers from serious groupthink.   

 

I read the other day that on average US corporations have paid 25%.  It did not detail how the calculated the figure, which would have been very helpful.  In the last two years the article said the rate has plummeted to I believe less than 10% due to tax credits and the like.  At the historical 25% effective rate it works out to 36.25% so that would be slightly higher, but pretty close. 

Link to comment
Share on other sites

Tim,

Why did the Republicans favor the 15% dividend rate (potentially high combined 40+% rate) that taxes their profits higher than regular income (top 35% rate)?  This is what they don't want (double taxation), yet they put that gun to their head themselves.  It's a smaller caliber weapon now that the rate has been reduced to just 15%, yet still it's potentially a higher tax than the regular income rate of 35%.

 

They could instead have opted for a dividend franking system where the recipient takes a tax credit for taxes already paid by the corporation.  This guarantees that you pay no higher than the regular income tax rate and makes it largely unnecessary to worry about the tax effects of the corporate structure.

 

Even today, they still don't talk about this.  It's the most obvious route.

 

Personally, I think many corporations pay a lower rate and then with the 15% dividend rate they wind up actually with an combined tax rate that it actually lower than the 35% top individual rate.  Therefore, the Republicans certainly DON'T want to rock the boat on that good deal.

 

Thoughts?

 

You want to me explain what Politicians were thinking?  Thanks for an easy question.  Based on history I would have to say they acted largely in self-interest.  They presumably thought lowering the rate to 15% would help their reelection chances by either improving the economy or improving their fund raising, or some combination of both.  I would agree that a dividend franking system makes sense, but they must have believed that the other side would attack them on it, or no one proposed it.  Washington DC suffers from serious groupthink.   

 

I read the other day that on average US corporations have paid 25%.  It did not detail how the calculated the figure, which would have been very helpful.  In the last two years the article said the rate has plummeted to I believe less than 10% due to tax credits and the like.  At the historical 25% effective rate it works out to 36.25% so that would be slightly higher, but pretty close.

 

They had control of House/Senate/OvalOffice.  It was a blown opportunity. 

 

The games played to keep your US corporate taxes low are somewhat less alluring when you know there will be no tax credits for you come dividend pay day.  Perhaps some corporations would use less debt (it's enticing to use the interest expense to keep taxes down) and thus perhaps we could reduce risk in the system.

 

I would even add that share buybacks should be taxed as if they were distributed dividends (because effectively they are a way of undermining the dividend tax).  I don't expect that to be popular though.  The Democrats may like the concession though as a means of approving a dividend franking system.  This of course introduces the possibility of double taxation of capital gains but most people booking capital gains don't have a zero cost basis -- meaning the return of money to shareholders via buybacks is already in a huge tax advantage due to the tax only being applied to your gain (thus making it far more attractive than paying dividends if your cost basis is well above zero).  It also means that you just pay a higher mix of dividends to use up your tax credits (buybacks are really only interesting from a tax-saving perspective). 

 

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now



×
×
  • Create New...