> I simplified it to emphasize that taxing money away from someone leaves them with less money to invest. The issue of tax rates being marginal is irrelevant to

> I simplified it to emphasize that taxing money away from someone leaves them with less money to invest. The issue of tax rates being marginal is irrelevant to that point. Also, for a high income person which is what we are talking about, the marginal tax rate is his overall tax rate. This isn't generally true. I'm in the top 5% of income earners in my country, and my marginal and effective tax rates differ by a significant amount (35 effective vs 52 marginal). > As I said, stock buybacks are a method of distributing profits to shareholders without the high tax rate on dividends. That's why it's done, though another reason is to invest in one's own company, which is done in the belief that one's own company is a better investment than investing in others. That's certainly one rationale. Personally, I dislike them in most cases (they make sense for companies that provide a bunch of compensation in stock). I personally think that dividends encourage market behaviour that is better (I'd never have sold my FB stock if they'd paid me a dividend), as well as reducing number go up as the only way to gain money from investing. > though another reason is to invest in one's own company, which is done in the belief that one's own company is a better investment than investing in others. This is really dodgy from my perspective as by definition, a company has more information about their future earnings than another investor does. I realise that this ship has sailed, but personally I'd prefer to reduce dividend taxes for re-investments and ban most buybacks (but again, this is probably a niche position).