dividend tax does NOT amount to double taxation

Discussion in 'Economics' started by richardyu301, Sep 8, 2008.

  1. What is your view on this???


    Greg Mankiw Promotes the Myth of Double Taxation

    There is an old myth developed by rich people at some point in the distant past that paying taxes on dividends amounts to "double-taxation." The argument is that profits are already taxed at the corporate level, so taxing money when it is paid out as dividends to shareholders is taxing the same profit a second time. Gregory Mankiw, a Harvard University professor and former top economist in the Bush administration, pushes this line in a column in the NYT.

    The trick in this argument is that it ignores the enormous benefits that the government is granting by allowing a corporation to exist as a free standing legal entity. The most important of these advantages is limited liability. If a corporation produces dangerous products or emits dangerous substances that result in thousands of deaths, shareholders in the corporation cannot be held personally responsible for the damage. The corporation can go bankrupt, but beyond that point, all the shareholders are off the hook, the victims of the damage are just out of luck.

    By granting corporate status, the government has allowed investors to shift risk to society as a whole. In exchange for this and other privileges of corporate status, the corporation must pay income tax on its earnings. We know that investors consider the benefits of corporate status to be worth the price in the form of the corporate income tax, because they voluntarily choose to form corporations. If investors did not consider the benefits of corporate status to outweigh the cost of the income tax, then they are free to form partnerships which are not subject to corporate income tax. In this way, the corporate income tax is a completely voluntary tax. Anyone can avoid the tax by investing in a partnership, or alternatively, any corporation can be restructured as a partnership.

    The complaint about double taxation is an effort to get the benefits of corporate status for free. It is understandable that rich people would want to get benefits from the government at no cost, just like most of us would prefer not to pay our mortgage or electric bill. But, there is no reason for government to be handing out something of great value (corporate status) for free. If rich people don't like the corporate income tax, they have a very simple way to avoid it -- don't invest in corporations. The problem is that the rich are just a bunch of whiners.

    --Dean Baker
  2. Socialistic crock-o-shit, imv. If income is going to be taxed, it should be taxed ONCE...

    For shareholders to first pay Corporate income tax, then personal income tax on dividend distributions is totally immoral.

    Then again our entire system of taxation is unfair and immoral... (Gummint doesn't care about "moral" or "fair" taxation.. they only care about "get more tax money... period")

    It's even MUCH worse than mere "double taxation of dividends".

    Do you realize that as a stockholder.....

    1. Your corporation can pay up to 35%, Corporate Income Tax on net earnings.

    2. You pay ordinany income tax of up to 35% Federal and 9+% state income tax on dividends.

    3. Then if your stock is sold at a capital gain, you can pay capital gains tax...

    4. Then, if you hold stock in your estate at the time of death, your estate can pay up to 55% in Federal Estate Tax.

    So... out of every $1 earned by the corporation, the taxes could theoretically amount to >$.95.

    YOU take the risk, the Gummint gets up to 95% of the profits.... pretty cool, eh?

    The only reason the Gummint gets away with this crap is because few of us "get it", so there is never the appropriate wave of protest.... which is exactly the same basis for the ignorance we display when voting for President! :mad: :mad:
  3. Daal


    The flaw in this guy argument is that he even considers that freedom from litigation needs to 'paid for'. Its like saying 'you get freedom of speech so you need to pay income tax you whiner'. a shareholder doesn't run a company and in general doesn't make decisions(and when he does its 99% likely to be legal like choosing a ceo and such). Its absurd to think that this 'freedom' needs to be paid for
    Going after shareholder's assets in a lawsuit is like arresting the cousin of a drug dealer 'because they are related' when there is no proof of criminal behavior
  4. Double taxation is claiming taxable any money already taxed, including self-employment, corporate dividends and investing returns. If one can document that money necessary for any business or investment (capital) has been taxed, no further taxation should be imposed on profits that the individual that started such vehicles. This applies to sole proprietorships with no employees, single-member LLC and C-corps only. Multi-employee firms fall under the tax code, while at least on paper in law, individuals are not bound to pay ANY income tax. Part of the new brand of liberal courts' error is overstepping their bounds in the area of taxation, creating case law (decisions) that have no statute or legislation to back them.
  5. According to this article, private sector's share of the economy has droped frm 88% to 57% now due to government spending growth.

    Check the content under "#1 Core Problem: INCREASED GOVERNMENT-DOMINANCE OF OUR ECONOMY"

  6. Allen3


    That may be one of the most unsophisticated arguments I've seen from someone I assume thinks of himself as a commentator or reporter. To try to equate paying for goods and services used to whether or not to tax again the money paid from profits of corporations is just ludicrous. One obligation has nothing to do with the other. That said, our tax system is set up in such a way that any time money changes hands the government gets a cut. Why should dividends be different. Until and if we can ever get to a consumption tax model, everybody pays all the time. That's just the way it is...
  7. And one day, Gummint will account for 90%... just as in the former Soviet Union. THAT'S THE PLAN... :mad:
  8. Allen3


    Ah, gnome you always brighten my day. :cool: :D I have a dream. That some day, some how, people will get what you are saying. Judging by the understand of P Diddy , pop cultures social and government policy laureate, we are far far far from landing on that shore.