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This seems to be a good place for my own take on taxes... 1. Abolish corporate income tax. 2. Tax capital gains (and dividends) as ordinary income. The corpo

by beat 8y ago

This seems to be a good place for my own take on taxes... 1. Abolish corporate income tax. 2. Tax capital gains (and dividends) as ordinary income. The corporate income tax is absurd. It doesn't generate a lot of revenue, but it has a bazillion highly specific loopholes, supporting a whole cottage industry of lobbyists and accountants. It's an unfair advantage to large corporations that can afford the tax-cutting power (like Netflix). The capital gains rate is the source of our most gruesome wealth inequality. It's absurd that Mitt Romney pays half my effective tax rate on 200 times my income. The justification for low capital gains rates is "double taxation" due to corporate income tax. Abolishing corporate income tax eliminates that. If the rich don't want to pay taxes, then they need to not liquify their investments. If corporations don't want to pay taxes, they need to reinvest their profits in growth.

sabalaba 8y ago
"Double taxation" refers to taxation at the corporate income tax level and then again at the personal income tax level when dividends are paid out to shareholders. "Double taxation" and capital gains don't have anything to do with each other.
- beat 8y ago
  About a million internet commenters would disagree with you. Double taxation has been a stock justification for the lower capital gains rate as long as I can remember.
airstrike 8y ago
Good luck taxing all the foreign citizen who happen to own US stocks
CharlesColeman 8y ago
I agree with you on #2, but not on #1. I think the correct reform of the corporate income tax is to abolish the "bazillion highly specific loopholes." If it was abolished entirely, I think you'd very quickly see corporations being set up and used purely to evade individual income tax, especially among the extremely wealthy. That said, I do think it makes sense to not tax money at the corporate level that's remitted as dividends that would be taxed individually.
- beat 8y ago
  No one pays dividends these days anyway. It's all shifted to capital gains, to pumping the stock price rather than delivering profits.
  - CharlesColeman 8y ago
    If the tax treatment of dividends and capital gains changed, corporate practices would change to follow suit.
mikeyouse 8y ago
This has problems with Capital Gains being equally easy to evade for the wealthy (look at Mitt's $100M IRA[0] or the stepped up basis in estates] and many equity holders being in tax-free jurisdictions. Eliminating the corporate tax would supercharge equity prices and since many corps don't pay dividends any more, it would be a very long time before any of the tax revenue is realized. You're better off just taxing revenue based on company size if your goal is to collect reasonable amount of income and to limit the chicanery that goes along with corporate tax planning. [0] - https://www.reuters.com/article/us-usa-campaign-romney-ira/how-did-romneys-ira-grow-so-big-idUSTRE80N04E20120124 https://www.reuters.com/article/us-usa-campaign-romney-ira/h... [1] - https://en.wikipedia.org/wiki/Stepped-up_basis https://en.wikipedia.org/wiki/Stepped-up_basis
clairity 8y ago
your reasoning doesn't quite follow your assertions. abolishing corporate taxes would be counterproductive to your goal of leveling the playing field. corporations would become even greater bastions of wealth shielding, not less. rather, equalizing corporate, capital gains, and individual income tax rates would go a long way to making things more fair. however, you have many other inequalities, like the corporate tax shield and carry-forward (-back) deductions. and the capital gains rate is but one brick in the wealth accumulation firewall. the justification for lower capital gains rate is to encourage putting capital to productive use, not double taxation (as sibling commenter mentions), but it's a poor justification. as long as one more dollar can be made, (some) folks will find a way to make that dollar, with or without any external incentive. it's just a giveaway to wealthy patrons by politicians.
usaar333 8y ago
> The capital gains rate is the source of our most gruesome wealth inequality. It's absurd that Mitt Romney pays half my effective tax rate on 200 times my income. The justification for low capital gains rates is "double taxation" due to corporate income tax. Abolishing corporate income tax eliminates that. The lower capital gains tax rate leads to income tax inequality, but I doubt it significantly changes wealth inequality. In CA, top long term bracket is 37%, top ordinary is 54%. That 17% jump will reduce dividend compounding a bit (by 17 bp or so) and require withdrawing 20% more portfolio [if at zero basis] to cover expenses -- but when you have $1B, neither change fundamentally changes your lifestyle. And don't forget that cap gains tax can be avoided or lowered in all sorts of ways (step-up on death, donations, gifts, tax advantaged accounts, etc.) You also have business owners subject to QSBS getting no federal cap gains taxes.

by beat 8y ago

sabalaba 8y ago

"Double taxation" refers to taxation at the corporate income tax level and then again at the personal income tax level when dividends are paid out to shareholders. "Double taxation" and capital gains don't have anything to do with each other.

beat 8y ago
About a million internet commenters would disagree with you. Double taxation has been a stock justification for the lower capital gains rate as long as I can remember.

airstrike 8y ago

Good luck taxing all the foreign citizen who happen to own US stocks

CharlesColeman 8y ago

I agree with you on #2, but not on #1. I think the correct reform of the corporate income tax is to abolish the "bazillion highly specific loopholes." If it was abolished entirely, I think you'd very quickly see corporations being set up and used purely to evade individual income tax, especially among the extremely wealthy. That said, I do think it makes sense to not tax money at the corporate level that's remitted as dividends that would be taxed individually.

beat 8y ago
No one pays dividends these days anyway. It's all shifted to capital gains, to pumping the stock price rather than delivering profits.
- CharlesColeman 8y ago
  If the tax treatment of dividends and capital gains changed, corporate practices would change to follow suit.

mikeyouse 8y ago

This has problems with Capital Gains being equally easy to evade for the wealthy (look at Mitt's $100M IRA[0] or the stepped up basis in estates] and many equity holders being in tax-free jurisdictions. Eliminating the corporate tax would supercharge equity prices and since many corps don't pay dividends any more, it would be a very long time before any of the tax revenue is realized. You're better off just taxing revenue based on company size if your goal is to collect reasonable amount of income and to limit the chicanery that goes along with corporate tax planning. [0] - https://www.reuters.com/article/us-usa-campaign-romney-ira/how-did-romneys-ira-grow-so-big-idUSTRE80N04E20120124 https://www.reuters.com/article/us-usa-campaign-romney-ira/h... [1] - https://en.wikipedia.org/wiki/Stepped-up_basis https://en.wikipedia.org/wiki/Stepped-up_basis

clairity 8y ago

your reasoning doesn't quite follow your assertions. abolishing corporate taxes would be counterproductive to your goal of leveling the playing field. corporations would become even greater bastions of wealth shielding, not less. rather, equalizing corporate, capital gains, and individual income tax rates would go a long way to making things more fair. however, you have many other inequalities, like the corporate tax shield and carry-forward (-back) deductions. and the capital gains rate is but one brick in the wealth accumulation firewall. the justification for lower capital gains rate is to encourage putting capital to productive use, not double taxation (as sibling commenter mentions), but it's a poor justification. as long as one more dollar can be made, (some) folks will find a way to make that dollar, with or without any external incentive. it's just a giveaway to wealthy patrons by politicians.

usaar333 8y ago

> The capital gains rate is the source of our most gruesome wealth inequality. It's absurd that Mitt Romney pays half my effective tax rate on 200 times my income. The justification for low capital gains rates is "double taxation" due to corporate income tax. Abolishing corporate income tax eliminates that. The lower capital gains tax rate leads to income tax inequality, but I doubt it significantly changes wealth inequality. In CA, top long term bracket is 37%, top ordinary is 54%. That 17% jump will reduce dividend compounding a bit (by 17 bp or so) and require withdrawing 20% more portfolio [if at zero basis] to cover expenses -- but when you have $1B, neither change fundamentally changes your lifestyle. And don't forget that cap gains tax can be avoided or lowered in all sorts of ways (step-up on death, donations, gifts, tax advantaged accounts, etc.) You also have business owners subject to QSBS getting no federal cap gains taxes.