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And for the individuals who receive the interest, they have to pay regular income tax rates on that income. With dividends they get a different, lower rate.
by kspaans 10y ago
And for the individuals who receive the interest, they have to pay regular income tax rates on that income. With dividends they get a different, lower rate.
- SilasX 10y agoYes, because the corporation is already paying 35% tax on the profits that the dividend was paid out of, while interest payments are deducted from taxable (corporate) income. Nothing is avoiding a tax.
- ComradeTaco 10y agoUS Corporations pay an effective tax rate of 12.6%.[1] http://money.cnn.com/2013/07/01/news/economy/corporate-tax-rate/ http://money.cnn.com/2013/07/01/news/economy/corporate-tax-r...
- SilasX 10y agoYes, through an unrelated tax dodge that wouldn't make the combined dividend + profit tax any more sensible. They're still paying 35% on any profit that hasn't been expensed away somehow, and the dubious ways to expense corporate income are a separate issue from whether this "low" dividend tax is a loophole.
- Scoundreller 10y agoFor a pension fund, its beneficiaries will eventually pay regular income tax rates on the fund's earnings, regardless of whether it was dividend/capgain/interest. Life insurance and disability payouts are typically tax-free because they're paid into with after-tax dollars, but the insureco will invest the funds as it sees fit.