3 ms·

Dividends aren’t capital gains, they’re taxed as income at the marginal rate. Unrealized wealth is exactly that, unrealized, which is why we don’t tax it. If y

• matwood 3y ago
  Qualified dividends are capped at 20%.
  • adolph 3y ago
    It seems like a reasonable system. https://en.wikipedia.org/wiki/Qualified_dividend https://en.wikipedia.org/wiki/Qualified_dividend
• koolba 3y ago
  > If you want to live a wealthy lifestyle and all you have is unrealized wealth, you will eventually have to realize some of it to pay for things, at which point you get taxed. If you really want to, you could defer it till after you’re dead. Just borrow against the principal rather than realizing a capital gain. Zero annual income (as no gain) and spend as much of it as you want. You will have to realize it at some point. Or at least your estate will. But it doesn’t have to be while you’re sipping tax deferred champagne.
  • ndriscoll 3y ago
    That really only works with zero interest rates. Otherwise, if you figure 10% growth and 20% capital gains, you're paying 2% tax on assets. It wouldn't make sense to take out a 5% loan to avoid a 2% tax (or for the wealthy, but not ultra wealthy, 1.5%)
  • pnutjam 3y ago
    so, you don't realize that capital gains resets when it's inherited? https://smartasset.com/financial-advisor/stepped-up-basis https://smartasset.com/financial-advisor/stepped-up-basis
• notahacker 3y ago
  I know dividends aren't capital gains. This is why I went to the trouble of explaining that taxes on dividends are trivially avoided (by firms choosing to pay low or no dividends) so shareholders only have to worry about CGT on share price appreciation which can be deferred for a very long time (and is often at a lower rate) Its open to question whether the more important aspect of dynastic wealth is quantity of bling consumed per annum rather than the proportion of the economy controlled. But what isn't debatable is that if corporate profits aren't taxed much of it stays out of the taxman's hands for a long time, which is a matter of interest when we're talking about governments not realising as much tax revenue as they hope for.
  • codexb 3y ago
    If a corporation has profit, and doesn't pay dividends, then the income is taxed at the corporate rate, so they're not avoiding the tax. And even if you got rid of corporate income tax, this income would be better captured as a VAT, which negates any of the antics used to move corporate income around after the fact. Also, share prices are typically higher when a corporation pays dividends and lower when they don't. You see this all the time when stocks suspend or re-instate dividends.
    • notahacker 3y ago
      Corporate profits are taxed the same with or without dividends, so obviously it's untrue to suggest that a company decision not to pay dividends doesn't reduce tax take. Share prices are typically lower when firms suspend dividend payments due to financial issues. But ceteris paribus, a firm with a $100b pile of cash has a higher share price than one that disbursed that cash to shareholders. It's now quite fashionable to not pay dividends at all (even though the company is valued based entirely on the net present value of the future dividends investors believe it could pay) and to use alternatives like buybacks if they to return money to shareholders. Why do this? Because the different tax treatment generally favours shareholders.