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Re: Dividends, Taxes and SWR
Old 10-01-2004, 10:35 AM   #21
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Re: Dividends, Taxes and SWR

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Rich people ALREADY get a free ride. *For example, they can invest all their money in tax-free funds and not pay any tax.

Removing taxes on interest, dividends, and capital gains would help the not-so-rich-guy get rich by saving and encourage EVERYONE to save.


But then again, the not-so-rich guy can already use those same tax-free funds too, can't s/he?
Anyone can use tax-free funds, but it makes a lot of sense for someone in a high tax bracket to use those funds and almost no sense for someone in a low tax bracket.
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Re: Dividends, Taxes and SWR
Old 10-01-2004, 10:52 AM   #22
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Re: Dividends, Taxes and SWR

Three things happen when you lower taxes:

1) people will spend more, especially those with lower and middle income
2) the wealthy will save/invest more
3) tax revenues will decrease, so the govt will spend less

In the short-term (1) is good for the economy, (2) is good for the stock market, but eventually (3) will bite you, unemployment will rise, the economy will slow, stocks will crash, and taxes will go back up in a big way to make up for the short-fall.
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Re: Dividends, Taxes and SWR
Old 10-01-2004, 11:37 AM   #23
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Re: Dividends, Taxes and SWR

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3) tax revenues will decrease, so the govt will spend less
Actually, it's tax revenues will decrease, so the govt will write more IOU's and pass the bill on to the next generation. When has the government ever REALLY cut spending. Cut the increases? Sure. Cut overall spending? Not sure I've ever seen it.
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Re: Dividends, Taxes and SWR
Old 10-01-2004, 03:09 PM   #24
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Re: Dividends, Taxes and SWR

As long as we continue deficit spending, elimination of taxes on dividends amounts to a transfer of taxation away from the wealthy of today and onto the poor and middle class of tomorrow.

The bills have to be paid eventually, and if the wealthy, who would receive the lion's share of the tax break, aren't paying, then everyone else is.

http://www.spinsanity.org/post.html?...6_archive.html


There are at least two forms of income that are significant to the wealthy and much less so (or completely insignificant) to the poor and middle class -- inheritance and dividends. Reducing these taxes while deficit spending is a tax transfer from rich to poor.

If we need to transfer tax burden from the rich to the poor (something that I don't believe would be a very popular position) we should be up-front about it, and pay as we go rather than burden the poor of the future without their say or knowledge.
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Re: Dividends, Taxes and SWR
Old 10-01-2004, 07:19 PM   #25
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Re: Dividends, Taxes and SWR

Hey wab,

I agree with your points 1 & 2, but I think JFK proved
that tax revenues actually go up eventually because
of the stimulus provided by 1 & 2. I think it is called
"supply side" economics. The trouble comes when
spending is not held in check. But what do I know ?
I majored in EE not Eco.

Cheers,

Charlie
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Re: Dividends, Taxes and SWR
Old 10-01-2004, 08:09 PM   #26
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Re: Dividends, Taxes and SWR

Charlie, at least with an EE degree you should be able to model the economy as a non-linear feedback system or something. * I just pull my theories out of thin air *

My (3) was just one scenario. * I agree that deficit spending can stimulate the economy, but that'll eventually bite us as well. * There may be some balance of taxation, spending, and monetary policy that will turn the economy into a perpetual motion machine, but I don't think we've come close to hitting it yet.

One thing I think is clear is that the gap between rich and poor is widening, and reducing taxes will speed up that process. * That sort of thing always ends badly.
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Re: Dividends, Taxes and SWR
Old 10-01-2004, 08:45 PM   #27
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Re: Dividends, Taxes and SWR

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It is true that those in higher tax brackets get more bang for the buck in tax free munis, but it also follows that those in lower brackets or paying 0% in taxes would get proportionally less or even no bang out of removing taxes on interest, dividends,etc. *Additionally, if their income is low enough to be in a low bracket to begin with, it is less likely that they will be able to be saving and investing significant amounts anyway, so it really wouldn't be much of an encouragement for them. *As for the rich getting *a free ride, that doesn't ring true to me at all. *Nice sweeping generalization though.
Oh boy, you are so off the mark, I don't know where to begin. Let me just say that the rich do not need to save anymore. They don't need incentives like tax-free funds and Roth IRAs to save. THE POORER YOU ARE, THE MORE YOU NEED TO SAVE. Even if you can only start saving $25 a week in a Roth IRA, it's a good start. Believe me, smart poor people utilize vehicles like Roth IRAs to help them become rich. Stupid poor people don't contribute to Roth IRAs and many times waste their money on $5 lattes, cigarettes, and lottery tickets.
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Re: Dividends, Taxes and SWR
Old 10-02-2004, 12:22 AM   #28
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Re: Dividends, Taxes and SWR

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Do you know the black market that would exist to avoid the consumption tax (as it does in Europe) if there was no requirement to account for your income (no tax returns required)? A lot of illegal money would be spent on non-register items like electronics sold from a truck on the side of a road.
Hey, retire@40, waddya mean "would" be spent? That's where we make some of our best purchases! But we draw the line at buying stuff that fell off the truck...
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Re: Dividends, Taxes and SWR
Old 10-02-2004, 10:23 AM   #29
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Re: Dividends, Taxes and SWR

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If a poor slob at the poverty level had $25 a week to save, and that's a really big if, a Roth would be of no immediate use to him. *Nor would any tax-deferred investment vehicle. *When you're poor, it's all about making it through today. *Now talk about lazy or stupid or wasteful people, that's not limited to one's economic status. *I got to where I am by consistant hard work, living well below my means, and I don't have a Roth and didn't get a free ride. *I guess I'm dumber than all those supposed rich people who apparently had it handed to them and aren't contributing to society. *Obviously, the poorer you are the *more you need to save, but I would say the more you need to earn first. *Which means the better your skills and education need to be first. *Which means the harder you have to apply yourself to the task of personal improvement. *Which means the more self disciplined you need to be. *It is more complex than lottery tickets and coffee. *Now where is that confounded mark?
Well, in your first post, you said that "if their income is low enough to be in a low bracket to begin with, it is less likely that they will be able to be saving and investing significant amounts anyway." *Now you are saying that it all starts with self-discipline to eventually earn more and save more. *I like the more positive philosophy you used in your second post about what a person needs to do to get into a better financial situation, instead of the more negative philosophy in your first post about why a person can't.

By the way, as an example, I started off with zero, and my parents came to this country not knowing any English and with no more than a 3rd grade education between the both of them and not even enough money to pay the bills for the first 6 months so they had to live with relatives just to get started. *I could say I grew up poor too, but I didn't feel poor even though I knew we were not even in the middle class. *I just know my father worked as hard as he could to support his family AND save for his future while my mother stayed at home raising 4 kids. *I managed to put myself through college without any financial help from my parents and then work hard enough to start my own business and work just as hard as my father sometimes 7 days a week for months because I feared ever being poor again. *I nor anyone in my family ever looked for a federal hand-out, never felt like we were entitled to any special treatment, and always knew the only way to get ahead in life was to help ourselves. *

There are a lot of people in this country that grew up and have done the same as I have. *One major difference I have found is that I feel it's important to stop and smell the roses. *Just as I have maximized my savings, I also want to maxamize the fruits of my labor as soon as possible.
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Re: Dividends, Taxes and SWR
Old 10-02-2004, 04:20 PM   #30
 
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Re: Dividends, Taxes and SWR

This is in answer to a previous post by retire@40
with a question about the dividends I receive from my holding company. The answer is that I bought the company which was already set up as a "C" corp. and could not be converted to Sub S.
The dividends might have been a problem for me
but it turned out okay.

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Re: Dividends, Taxes and SWR
Old 10-02-2004, 04:31 PM   #31
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Re: Dividends, Taxes and SWR

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The answer is that I bought the company which was already set up as a "C" corp. and could not be converted to Sub S.
Not to belabor the point, but I'd love to know why the C-corp could not be converted to an S-corp as soon as you bought it.
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Re: Dividends, Taxes and SWR
Old 10-02-2004, 09:42 PM   #32
 
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Re: Dividends, Taxes and SWR

The "C" corp. had a large NOL which would have been lost.

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Re: Dividends, Taxes and SWR
Old 10-02-2004, 11:41 PM   #33
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Re: Dividends, Taxes and SWR

I still hate having to pay taxes on interest/dividends on money I have already paid taxes on through my income taxes.... Whether rich or poor that sucks....
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Re: Dividends, Taxes and SWR
Old 10-03-2004, 02:51 AM   #34
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Re: Dividends, Taxes and SWR

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The "C" corp. had a large NOL which would have been lost.
So you bought a c-corp with a pre-existing NOL?
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Re: Dividends, Taxes and SWR
Old 10-03-2004, 03:35 AM   #35
 
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Re: Dividends, Taxes and SWR

Not exactly. I produced a lot of the NOL myself
through my creative and enlightened management

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Re: Dividends, Taxes and SWR
Old 10-05-2004, 10:20 PM   #36
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Re: Dividends, Taxes and SWR

There's a short article in the NY Times about overhauling the tax system. Interesting statistics relevant to the topic being discussed here:

Percentage of income from cap gains and dividends (by 2000 AGI):

<$50K: 3%
$50-100K: 4%
$100-500K: 11.5%
$500K-$1M: 24.7%
$1-10M: 37.6%
>$10M: 61.4%

50% of all dividends were paid to those in the top 3.8% incomes.
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Re: Dividends, Taxes and SWR
Old 10-05-2004, 10:29 PM   #37
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Re: Dividends, Taxes and SWR

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There's a short article in the NY Times about overhauling the tax system. * Interesting statistics relevant to the topic being discussed here:

Percentage of income from cap gains and dividends (by 2000 AGI):

<$50K: 3%
$50-100K: 4%
$100-500K: 11.5%
$500K-$1M: 24.7%
$1-10M: 37.6%
>$10M: 61.4%

50% of all dividends were paid to those in the top 3.8% incomes.
Thanks for the data, wab. I had seen this data years ago and tried to allude to it in my previous post on this thread, but I couldn't find the actual data.

The other data I alluded to that looks similar is the data on percentage of lifetime income from inheritance.

It is no coincidence that certain wealthy, elite political forces work so hard to elliminate tax on these two sources of income.
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Re: Dividends, Taxes and SWR
Old 10-06-2004, 06:25 AM   #38
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Re: Dividends, Taxes and SWR

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There's a short article in the NY Times about overhauling the tax system. * Interesting statistics relevant to the topic being discussed here:

Percentage of income from cap gains and dividends (by 2000 AGI):

<$50K: 3%
$50-100K: 4%
$100-500K: 11.5%
$500K-$1M: 24.7%
$1-10M: 37.6%
>$10M: 61.4%

50% of all dividends were paid to those in the top 3.8% incomes.
I'm trying to figure out what those % represent. It's not % by population because they add up to more than 100%. So is it % of AGI that represents dividends and cap gains? If so, the amounts look unreasonable to me. Are you saying that people with AGI of over $10 million make $6,140,000 of that $10 million in dividends and cap gains? That's an aweful lot of dividends and cap gain. Where does it come from?

I wonder how the Times arrived at these %. For example, did they take into account any tax free cap gains like the first $500,000 on the sale of a personal residence? There are a lot of middle class people making under $100K AGI that qualify for that every year. That alone would make the people in the $50K - $100K 500% instead of 4% Plus, what about all the hidden dividends and cap gains that many middle class people have in untouched 401(k) plans and IRAs? Was that factored in?
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Re: Dividends, Taxes and SWR
Old 10-06-2004, 10:19 AM   #39
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Re: Dividends, Taxes and SWR

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I'm trying to figure out what those % represent.
For each income bracket, it's the percentage of AGI that came from dividends and cap gains. I believe the data came from analysis of tax forms, so I assume it only reflects taxable gains, not exemptions.

If you're in the $10M bracket, chances are you didn't get there on salary. People in that bracket just sold a bunch of insider shares, stock options, etc. They are the ones who would benefit most from a reduction of taxes on investment gains/income.
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Re: Dividends, Taxes and SWR
Old 10-06-2004, 01:11 PM   #40
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Re: Dividends, Taxes and SWR

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For each income bracket, it's the percentage of AGI that came from dividends and cap gains. * I believe the data came from analysis of tax forms, so I assume it only reflects taxable gains, not exemptions.

If you're in the $10M bracket, chances are you didn't get there on salary. * *People in that bracket just sold a bunch of insider shares, stock options, etc. * They are the ones who would benefit most from a reduction of taxes on investment gains/income.
But are you looking at the whole picture? If what you say is true about these capital gains coming from stock options, the AMT for these people will be very high. They would pay lot higher tax than what you or I would pay even at the highest long-term capital gain rate. Eliminating or reducing the tax on dividends and capital gains would help me as a middle-class guy more than it would the guy getting rich on stock options. I can get richer a lot faster if the government didn't tax my reinvested dividends and capital gains.
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