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> either when Tesla shareholders sell appreciated stock, when the company makes distributions or when they liquidate. Feels like a fatal flaw in the law if you
by nicce 2y ago
> either when Tesla shareholders sell appreciated stock, when the company makes distributions or when they liquidate.
Feels like a fatal flaw in the law if you can bypass paying the corporate taxes in that way.
That is individual tax - not the tax payed by the corporation. Normally the tax is payed twice. Tax from the corporation profits and then the individual employee/shareholder tax based on their income.
- JumpCrisscross 2y ago> Normally the tax is payed twice. Tax from the corporation profits and then the individual employee tax based on their income. Payroll tax is the second check you're looking for. Tesla is almost certainly fucking around. But the concept of taxing corporate profits--versus earnings--is solid. You massively favour high-margin (tech) over low-margin (manufacturing, service, anything with physical assets) and incumbents over new entrants if you tax the top line.
- Ekaros 2y agoIt really comes to simple process lot of companies operate. They buy some materials, they spend some labour to refine it, sell it, ship it. And what is above all these costs is profit. Taxing them on what they sold for, is not really sensible say with fuel, a low margin product. Now what can be called cost is very reasonable question. Clearly dividends or stock buybacks should not be costs. And thus such spending should only come from post tax money...
- JumpCrisscross 2y ago> Clearly dividends or stock buybacks should not be costs. And thus such spending should only come from post tax money It does. Dividends and stock buybacks are not tax deductiable [1][2]. [1] https://www.thetaxadviser.com/issues/2022/sep/paying-dividends-tax-planning-strategy.html https://www.thetaxadviser.com/issues/2022/sep/paying-dividen... [2] https://www.grantthornton.com/insights/alerts/tax/2024/flash/irs-issues-robust-guidance-on-stock-buyback-tax https://www.grantthornton.com/insights/alerts/tax/2024/flash...
- arcticbull 2y ago> Taxing them on what they sold for, is not really sensible say with fuel, a low margin product. That's what SF instituted with Prop C -- only to see an exodus of low margin tech companies.
- arcticbull 2y agoAt least today the corporate tax rate is 21%. Individual tax rates in California are as high as like 52%. In almost every scenario you'll see a higher rate on the distributions and buybacks than you would carrying it forward to the following year. I guess you could make a case for double-taxation but... why?
- throwaway2037 2y ago> Individual tax rates in California are as high as like 52%. Is that a marginal tax rate (not very useful for comparison) or an effective tax rate? Also, can you explain why income level is required to achieve 52% "individual tax rate"?
- arcticbull 2y agoYes, the top marginal rate is 37% federal + 13.3% state + 0.9% surtax -- and note the state tax is generally double-taxed at this income level thanks to the SLPT cap. Can it also be an effective rate, yes, pretty close anyways.
- throwaway2037 2y agoAt what personal income level does this top marginal rate apply? 250K? 500K? 1M?
- s1artibartfast 2y agoIncome from a corporate entity is taxed twice by the time it gets to an individual. If I own a corporation and live in California, first I pay 21% on the profits and then 52% on what is left before it gets to my bank account. At these rates, This means the government takes 72 cents out of every dollar of profit.