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Could you break down how you get to "easily" 60%?

by lexs 8y ago

why_only_15 8y ago
If the money is passed back in dividends instead of share buybacks, it's taxed as income. The people who are receiving this income are probably quite wealthy. Let's lowball it and say that they were making $200,000 per year before receiving the dividends. I live in Louisiana, so I'll use a Louisiana income tax calculator [0]. At $200,000 per year, the marginal tax rate is 39.4%. The whole income is not taxed at this level, but any income you earn past $200,000 (e.g. dividends) is. Uniqlo is a Japanese retailer, so they would be paying Japanese corporate tax rates. I can't pretend to be an expert in Japanese corporate tax, so my estimate of their marginal tax rate is just going to be their profit divided by their tax paid for the latest financial year I can find. We can find these data from their 2017 financial statements [1]. In 2017 they paid $584,025,000 in income taxes out of a total of $1,751,484,000 income before taxes. This gives us almost exactly a 1/3 marginal rate (33.345%). Combining the personal and corporate tax rates gives us 1 - (2/3 * (1-.394)) = 59.6% tax rate. I may have underestimated the easily part, but in most states income tax would be slightly higher than in Louisiana, which would push us over the 60% threshold. For comparison, an average worker in a warehouse might be making $30,000 per year. At that income, the total tax burden is $5,578 = 18.59%. [0]: https://smartasset.com/taxes/louisiana-paycheck-calculator https://smartasset.com/taxes/louisiana-paycheck-calculator [1]: https://www.fastretailing.com/eng/ir/library/pdf/ar2017_en_17.pdf https://www.fastretailing.com/eng/ir/library/pdf/ar2017_en_1...
- lexs 8y ago
  That's a very close eyeball to 60% actually! I was more surprised that it would be taxed as normal income not at the lower capital gains tax (in your example 15% instead of 39.4%), you seem more knowledgable though.
  - why_only_15 8y ago
    It turns out that you are right most of the time on the dividends and as it turns out I was wrong. The distinction seems to be that if you hold the stock for a long time, then dividends count as capital gains. If you hold it for a short time, it's taxed as income [0]. [0]: https://smartasset.com/taxes/dividend-tax-rate https://smartasset.com/taxes/dividend-tax-rate

Could you break down how you get to "easily" 60%?

by lexs 8y ago

Could you break down how you get to "easily" 60%?

If the money is passed back in dividends instead of share buybacks, it's taxed as income. The people who are receiving this income are probably quite wealthy. Let's lowball it and say that they were making $200,000 per year before receiving the dividends. I live in Louisiana, so I'll use a Louisiana income tax calculator [0]. At $200,000 per year, the marginal tax rate is 39.4%. The whole income is not taxed at this level, but any income you earn past $200,000 (e.g. dividends) is. Uniqlo is a Japanese retailer, so they would be paying Japanese corporate tax rates. I can't pretend to be an expert in Japanese corporate tax, so my estimate of their marginal tax rate is just going to be their profit divided by their tax paid for the latest financial year I can find. We can find these data from their 2017 financial statements [1]. In 2017 they paid $584,025,000 in income taxes out of a total of $1,751,484,000 income before taxes. This gives us almost exactly a 1/3 marginal rate (33.345%). Combining the personal and corporate tax rates gives us 1 - (2/3 * (1-.394)) = 59.6% tax rate. I may have underestimated the easily part, but in most states income tax would be slightly higher than in Louisiana, which would push us over the 60% threshold. For comparison, an average worker in a warehouse might be making $30,000 per year. At that income, the total tax burden is $5,578 = 18.59%. [0]: https://smartasset.com/taxes/louisiana-paycheck-calculator https://smartasset.com/taxes/louisiana-paycheck-calculator [1]: https://www.fastretailing.com/eng/ir/library/pdf/ar2017_en_17.pdf https://www.fastretailing.com/eng/ir/library/pdf/ar2017_en_1...

lexs 8y ago
That's a very close eyeball to 60% actually! I was more surprised that it would be taxed as normal income not at the lower capital gains tax (in your example 15% instead of 39.4%), you seem more knowledgable though.
- why_only_15 8y ago
  It turns out that you are right most of the time on the dividends and as it turns out I was wrong. The distinction seems to be that if you hold the stock for a long time, then dividends count as capital gains. If you hold it for a short time, it's taxed as income [0]. [0]: https://smartasset.com/taxes/dividend-tax-rate https://smartasset.com/taxes/dividend-tax-rate