Bush's No Dividend Tax on small companies?

Discussion in 'Taxes and Accounting' started by cashonly, Jan 6, 2003.

  1. cashonly

    cashonly Bright Trading, LLC

    Has anyone heard if Bush's proposed plan to eliminate taxes on dividends applies to publicly traded stocks or all stocks?
  2. I was wondering the same thing.. Suddenly a c-corp seems like a good idea..
  3. Removing the penalties for stock ownership might just encourage it. It might also encourage cash fat companies to pay dividends.

    Of course, some whizbanger made an interesting case <i>against</i> divindends in the WSJ last week sometime.

    Still, if it's my company, and I want to pay my shareholders for their loyalty, I don't want the government subverting their incentive to be loyal.

    it seems like a good step to promote long term participation, which is something this market needs.

  4. Dividends have always fallen under double taxation at the corporate profit level, so I'm all for it. However, this really only benefits the upper-class and totally leaves the lower and middle classes high and dry.

    Another fine tax-cut for the yacht-club members, but more bullshit for the rest of the 90% of America.
  5. If it applies to all companies, private/public then many will benefit. Small business owners/shareholders/ employee stock ownership plans would all qualify for this tax free reliquification of the economy.
  6. So if the dividend tax is eliminated then we'll see many S-Corp's and LLC's convert to C-Corp's ?
  7. def

    def Sponsor

    I don't buy this argument for a second.

    1. Take someone earning a million a year. At 33% (the actual rate is higher) they are paying 333,000 dollars a year in taxes. Sure they may get a disproportionately higher benefit from a savings in the dividend tax but they are already paying the vast majority of gross taxes.

    2. Lest you forget the total value of funds under management mutual funds - HUGE.

    3. senior citizens/retirees tend to focus on high yielding dividend stocks in order to generate income to cover living expenses

    4. If a wealthy person saves a couple of grand per year in taxes, where will the money go:
    a: back into a bank account
    b: reinvested back in the market
    c: other investments (real estate, new business, etc.
    d: charity
    e: spend on goods and services

    ever hear of the multiplier effect ? Even if it goes back into a bank account, it increases the money supply in which banks can make loans.

    This shouldn't be a democratic vs. republican battle. IMO it comes down to if the above items generate more income than the tax loss then it is a no brainer - no matter who gets the initial money. On this one, I have no clue but i'd love to find out.

    What I do know is that helping someone making 30K a year save a couple hundred bucks isn't going to do as much for the economy as someone earning 500K per year saving the same percentage.
  8. also a good way to move money around to purposely make a loss for a small company...

    You can say your company lost money because you had to pay dividend to a holding company...

    Those sorts...
  9. cashonly

    cashonly Bright Trading, LLC

    They did a survey of what people did with that $600 last year and they said that about 80% of it either put it in savings or paid down credit card debt.

    If that had come not as a check, but as a reduction in taxes, it wouldn't have all been a lump sum and it probably would have been treated different. At $12/week reduction in withholding, it probably would have been spent by the average taxpayer just like his regular income. With the reduction in dividend tax, it'll probably happen like that for the average taxpayer... going into spending. The only problem is that a much higher percentage of the $$$ will be going to the big $$$ taxpayers and they're probably just going to re-invest it or save it.

    I'm not an economist, so I don't know how all this affects things, just my thinking.

    Regardless, I started this thread wondering about the effect on the small schedule "C" corp. Will those dividends be included in this "no tax" deal or is it only public companies?
  10. scJohn


    I do not think that all of those retired people are going to keep their money in a bank account. Banks credit your account (CD etc.) with interest which will still be taxable. So banks are going to have to raise the rates they pay their depositors to compensate for the taxable interest. If banks do raise there rates, then there cost of funds raise and they will have to raise the rates at which they loan out the money. If they do not raise there interest rates, there will be a huge exit of money from banks.

    There seems to be confusion as to the money paid by a REIT will be considered as a dividend.

    For myself, I have about a half dozen preferred stocks, in a taxable account, that will likely be sold and the money put into dividend paying stocks or mutual funds.

    Question. If a mutual fund invests in bonds, will the dividend they pay be taxable or tax free?
    #10     Jan 7, 2003