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The difference here is that it's the same kind of income. If Warren Buffett personally owned a soft-drink company earning $1 billion each year, he'd pay ~40% of
by byrneseyeview 17y ago
The difference here is that it's the same kind of income. If Warren Buffett personally owned a soft-drink company earning $1 billion each year, he'd pay ~40% of that in income taxes. If Coca-Cola earns $1 billion, it pays 35%, and then he pays 15% to see any of it.
It's essentially a tax on liquidity. Another way to look at that is that it's a big subsidy for people with enough concentrated wealth to take something private.
- bwh2 17y agoI just wanted to point out that neither dividends nor share price require taxable income. Corporations with zero taxable income can both pay dividends and have share price go up. In that case, the investor is only paying 15%, not 35% x 15%.
- byrneseyeview 17y agoThey can only pay dividends out of money they've raised or money they've earned. If it's the former case, they're just shuffling money from all investors to equity investors, and giving the government a 15% cut (so investors lose). In the latter case, the general taxable-income argument applies.
- bwh2 17y agoActually, the general taxable income argument may still not apply depending on how previous loses are carried forward. Which really ties into another point I was going to make that companies are quite adept at minimizing tax exposure. The GAO reports the average corporation pays an effective tax rate of 25.2%. http://en.wikipedia.org/wiki/Corporate_tax_in_the_United_States http://en.wikipedia.org/wiki/Corporate_tax_in_the_United_Sta... But obviously, mileage may vary: http://www.bloomberg.com/apps/news?pid=20601110&sid=a6bQVsZS2_18 http://www.bloomberg.com/apps/news?pid=20601110&sid=a6bQ...