Does Taxing the Wealthy Hurt the Lower Class ?

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Making capital gains tax exempt, however, creates an incentive for companies not to pay out profits in the form of dividends. If the principle of investment is to create return for the investor, then differential tax treatment of dividends and capital gains is inappropriate.

Furthermore, the tax is assessable on the gain only--not on the original principal amount of the investment. So the after tax money used for that purpose is not taxed twice in the adjusted cost base.

The incentive not to pay a dividend, or pay out small dividends is already there in the form of capital gains tax. Warren Buffett said it the best himself when he said that the reason Berkshire has never paid a dividend and never will is that his stockholders would have to pay taxes on every dollar, and he's turned every dollar into more than a dollar.

To me the dividend is a nice bonus, but I'd rather have the dividend paid through the appreciation of the stock in a good company unless I for some reason want to diversify.




What I mean by saying "taxed twice" is that I already paid taxes for my $1, I only got the additional money from being a good boy and investing it at a risk of loss, so at the very least I should be able to deduct the return at a risk free rate from the gains tax. In essence I get punished by having 28% of my dollar taken away because I didn't immediately spend it on something useless like most people would.

I also already took inflation loss on that dollar, for the period that it was invested, so in the end I end up paying a higher capital gains tax (depending on inflation) than most people pay income tax.

Alternatively, I should only have to pay capital gains tax on returns that I don't reinvest. Half the reason I'm registered as a limited liability company for my trading is that I don't have to pay 28%, but only 3% on 28% on dividends in addition to having access to a wide variety of other loopholes.

in denmark there is a grace amount before companies are required to pay taxes, it is rather small.
it does however allow for small or hobby buisness to function without any tax, if you pull money out of the company as profits however you still have to count it towards your taxable income.

if that ammount were doubled i think it could give more upstart buisnesses a real chance at success

Not entirely. Simplifing the tax code, with or without a flat tax, would eliminate some of the bureaucracy in our bloated government, and improve efficiency. It's a drop in the bucket, but you have to start somewhere.

The funny thing is that enough drops in that bucket and you can put out a fire. Bloat in government isn't as bad as it used to be, but its still excessive when compared to the private sector.

The question is, is there enough money for everyone who wants to have the high salary, benefits, pensions, etc to have them? NO. That's what I meant. There is only a certain amount of money in print. The Fed does not print enough money to meet demand because of inflation.

That's funny, I thought the Fed just print however much they want.

Companies would hire all those people if the hirings had a positive NPV. The difference between a private sector job and a public sector job is that the private sector does not hire people unless the employee creates value for the company.

And the chances of getting laid off are higher in the private sector if the NPV decreases.

That's why the private sector doesn't bloat like the public sector does. If your job doesn't involve you producing enough of a service or good to represent a net gain for society, then you should be fired.

I've been "fired" in the private sector a few times by non-productive corporate drones. Your theory does not stand.

But you only realize the gain when you sell, which obliges investors to engage in speculative trading in order to lock in their gains. It also means that companies can have their cake and eat it too, because they are "providing" their shareholders with a return on investment (actually, it's other investors who are doing that, but never mind), and they never have to pay out a penny in cash.

At the end of the day, the broader the base on which tax is imposed, the lower the marginal tax rate that government must charge in order to meet its revenue requirements. By completely exempting capital gains, government is putting a higher burden on other sectors of the economy to generate that revenue.



First, you have that 28% taken away, regardless of what you spend it on. The only exceptions are spending in areas that create tax credits or income deductions. (Pension contributions are a key example). But the gain that you realize on the investment that you make is never taxed. And the risk is reflected in your ability to write off capital gains with capital losses.

The inflation issue is a canard. Tax applies to income in nominal dollars in the year that it is realized. You could just as easily argue that your income tax on salary should be adjusted downward to account for inflation--but since that does not occur, why should it occur in the case of any other type of income.

As for reinvestment, remember that the principal amount of reinvestment contributes to your adjusted cost base on your next capital gain--you are only taxed on new value--never on the adjusted cost base.

Isn't this statement:

Contradicting this statement:



?

In other words, it only makes sense if you ignore the bolded portion. But isn't the bolded statement relevant, and any attempt to ignore it is a denial of reality?

haha lol

Not in the least.

If I buy a share of ABC Corp for $100, hold it for two years and receive no dividends; and then sell it in two years for $110, I have made a $10 capital gain.

The company and I have never had any business transaction--I have bought my share on the market from another shareholder (or in the case of an IPO from the bank underwriting the share offer)--and I have sold it to another buyer on the market. Now that's not so say that the company is not responsible for my gain--after all, it is the company's reputation that means that a buyer is willing to pay me $10 more for my share than I paid for it--but that gain is still coming out of the pocket of the buyer, not the company. The company has never put one penny of its accumulated earnings into my pocket.

Ok. I see what you're getting at.