Dividend Tax Rant for DGI

[800peace]

I wish dividend tax (which is double taxation) would either be completely eliminated after a certain number of years of holding, or become progressively less as the holding period increases. For example:

- Years 1-5 are taxed at 15%
- Years 6-10 be are taxed at 10%
- After the 10th year, taxes are only 5%

It would provide an incentive to invest for the long haul, instead of just a quarter by quarter basis. I argue that providing a long-term incentive in equity markets will have a positive effect on the overall economy.

Another positive effect on the overall economy would be the supply-side effect. Although, I don't draw any political lines, I believe there is some truth to the supply-side argument in reducing capital gains and dividend taxes. When JFK cut capital gains taxes, tax revenues increased. When Bill Clinton cut capital gains taxes, tax revenues increased. When G.W. Bush cut capital gains taxes, tax revenues increased. Noticing a trend? When you supply an incentive to invest, people really do invest more, and the more investment, the more return, and the more return the more taxes collected.

This policy may increase income inequality, but it will also eliminate barriers to wealth for the poor and middle class. Speaking personally, this would help me move into a better financial condition, but not make me rich by any means.

Lastly, it is a lucrative policy for dgi folks.

Booyah! Flame away.

[crimsonghost747]

Certain countries use this method. I don't think it's a bad idea because as you said it does encourage people to buy for the long term. On the negative side of things, it would make the tax laws yet again more complicated. And when it comes to taxes (and most other things), simple is good.

What I would really like to see is capital gains & dividend taxed together with income. Once again, most countries have a progressive system when it comes to taxing your salary but no progression (or very little) when it comes to capital gains. Seems a bit silly that someone living off a regular job and earning say 30k per year will pay much less tax than someone who earns that 30k through dividends & capital gains. And on the other end of the scale, a lot of the rich people can create companies and pay themselves in capital gains to get sometimes tens of percentages off their tax %.

[rayray]

Taxes, everywhere we turn we're taxed at so many levels. When it's all said and done we have to be pushing 40% of our income, maybe more? I never sat down to figure it out, but I know it's disturbing. I wonder where the United States falls compared to other countries?

[800peace]

Of the major industrial countries, USA and Japan tend to have the highest corporate taxes. There's mixed-economies that lean towards socialism that have lower corporate tax rates.

Some European countries are allowed to deduct dividend payments for tax purposes... If we're gonna do the double tax thing, we should at least let our companies deduct dividends for taxes.

The Federal Reserve cannot be the only player trying to stimulate the economy. Washington DC needs to start stimulating with tax incentives in order to optimize our prosperity.

[800peace]

I gotta continue ranting... Anybody that isn't in the "alternative minimum tax" zone should be allowed to have a certain sum of dividends tax free. For example, we could benchmark the tax free amount to the poverty level... So, if anything under $11,770 is considered a poverty threshold, we should not have to pay taxes on the first $11,770 of dividends received. The so-called "rich" will not be granted this exclusion for taxes, but the non-rich will not have the rigid barriers to entering richness. I argue this would increase income equality and overall economic prosperity simultaneously.

[rayray]

I don't want to sound like I'm bashing the United States but our government at all levels need to take budgeting more serious, the waste is undeniably horrible. Instead of raising taxes or reallocating taxes they just need to budget the books properly. If any of us followed in the footsteps of our government with managing our daily lives, we'd be all broke and homeless.



I wonder if this thread should be in the "Off Topic" section? lol


Thanks 800! My blood is starting to boil lol.

[800peace]

(06-23-2015, 12:04 PM)rayray Wrote: I don't want to sound like I'm bashing the United States but our government at all levels need to take budgeting more serious, the waste is undeniably horrible. Instead of raising taxes or reallocating taxes they just need to budget the books properly. If any of us followed in the footsteps of our government with managing our daily lives, we'd be all broke and homeless.



I wonder if this thread should be in the "Off Topic" section? lol


Thanks 800! My blood is starting to boil lol.

Well... It started as tax ideas that will benefit DGI, but I may have got carried-away. Usually I keep my politics in the voting booth, but this is so freakin obvious, and it irritates me that nothing ever gets done. Greenspan, Bernanke, and Yellen have all said something to the effect of, "We have accommodating policy." The Fed is accommodating un-stimulative fiscal policy and if you watch the Chairmen/woman in Congressional meetings they suggest Congress attempt stimulative fiscal policy. The closest thing we get to fiscal stimulus is the Bailout, which didn't represent justice in any way.

So, back to your frustrations on government spending... I agree that a lot of it is a waste, and I don't think anybody would disagree, (Dems & Rep both agree on it). It definitely needs to be cleaned-up, but just because I have supply-side tendencies, doesn't mean I don't believe in Keynes. Government spending can and does have a stimulative effect too. I don't think everything in supply-side is mutually exclusive from everything in Keynes.

[navyasw02]

Just wait until Bernie Sanders taxes the "rich"/Wall Street/whoever else in his Financial Transactions Tax plan. I hate Robin Hood taxes.

http://www.huffingtonpost.com/dean-baker...38808.html

[rayray]

(06-30-2015, 01:11 AM)navyasw02 Wrote: Just wait until Bernie Sanders taxes the "rich"/Wall Street/whoever else in his Financial Transactions Tax plan. I hate Robin Hood taxes.

http://www.huffingtonpost.com/dean-baker...38808.html

I wasn't the best student nor was I the hardest working student, but I proudly worked all the way through my college years. Nothing is wrong with a little blood, sweat and tears, especially, at a young age. I don't know what is the mindset of these politicians who think they have a right to take what is not there's to take in the first place. If this is what this Bernie Sanders wants to do, then he should step up to the plate and give 75% of his net worth to charity before imposing this Robin Hood Tax on others.

[cannew]

In Canada we get a Dividend Tax Credit which offsets the tax on dividends. Another way for us to almost eliminate any possible tax on dividends, especially if one has DRIP's (as well as eliminating all fees), is to do an In-Kind transfer of shares, annually, into a Tax Free Savings Account (TFSA). TFSA allows one to invest tax free on growth, dividends, income and even when funds are withdrawn. Max contributions into TFSA is $10,000 per year.

[Concasto]

If one is ONLY living off dividends/cap gains, would they have to pay any taxes? I thought if you made under 10k or so in income, you didn't have to pay any taxes on your dividends or cap gains.

And I fully agree with the sentiment here. We are taxed in every possible way by our government. Our founding fathers are rolling in their graves as they revolted over a 3% tea tax.

[Dividend Watcher]

(07-18-2015, 12:58 PM)Concasto Wrote: If one is ONLY living off dividends/cap gains, would they have to pay any taxes? I thought if you made under 10k or so in income, you didn't have to pay any taxes on your dividends or cap gains.

Disregarding the accounting for long-term vs. short-term capital gains and also qualified vs. non-qualified dividends, in 2014 you were entitled (at a minimum) to take the standard deduction of:

• Single or married filing separately: $6,200
  
• Married filing jointly or a qualified widow(er): $12,400
  
• Head of household: $9,100
  

plus exemptions of $3,900 for yourself and for each dependent if your total income was less than approximately $152,00 before you have any taxable income.

So, a married couple entering retirement with just their dividends, interest and capital gains would have to have taxable income greater than $20,300 before they would owe any federal income tax.

(07-18-2015, 12:58 PM)Concasto Wrote: And I fully agree with the sentiment here. We are taxed in every possible way by our government. Our founding fathers are rolling in their graves as they revolted over a 3% tea tax.

This is waaaaaay too simplistic to describe the sentiment that led up to the Declaration of Independence and the war that led to the founding of "a new nation, conceived in Liberty, and dedicated to the proposition that all men are created equal."

It started with the Stamp act which, amongst other things, taxed certain financial transactions and trading that took place in the colonies. The tea tax was a result of the objections and resistance to the Townshend Acts which taxed numerous goods imported from around the world by British merchants and trading companies; principally the East India Company. All of these taxes were imposed on the Colonies by Parliament without any feedback or participation of those subject to the tax. In other words, they had no "representation" when the taxes were instituted. The tea tax was especially repugnant because it was intended to help a private company, the East India Company, recover from financial losses in the 7 Year War and also as a result of the Townshend Acts. The biggest troubling point was the tax was meant to be remitted to the British home government and not used for administering the colonial governments and improve conditions in the Colonies.

But these taxes were only a cog in the growing discontent. The British government forced colonial households to house and support British troops in their own homes, at their own expense, to control the population of those same colonies. The Parliament used foreign mercenaries, frequently Hessians, also to control those objecting to Parliament's actions with respect to the Colonies. The King, with ultimate "veto power", refused to allow some laws enacted in Colonial legislatures to go into effect. Additionally he & Parliament refused to enact such laws as Colonial legislatures deemed necessary for public order within the Colonies. The Colonial Governors & the King forced legislatures to move the location and times of the legislative sessions in order to stymie actions by those legislatures that the King didn't like. The King effected military superiority over Colonial assemblies when that legislature didn't agree with his own wishes. Numerous legal rights available to British subjects anywhere else in the world were suspended may times in the Colonies. Trade among the Colonies or amongst other countries was frequently seized or interrupted so that the British home government could extract monies from the transactions. All this, and much more, without any representation in Parliament to defend the British subjects in the new world.

This isn't to start an argument with you, Concasto. Volumes have been written about the circumstances and thought process that led up to our forefathers "revolting" against the British crown. Using the symbolism of the Boston Tea Party to stand for the reason 56 representatives drafted and signed a document declaring the 13 Colonies "free and independent states" is an indictment of our educational system's failure to instill a better understanding of why and how a wholly new way of governing a country came into effect. This isn't the forum to argue this topic either so I shan't continue this part of the dialog. However ...

I too think some taxes are getting a little out of hand but so is government spending which is what those taxes go to pay for. The answer, to me, is to use the opportunities to petition my Senators & Representative for change and when their goals and mine don't agree to vote against them. Most don't.