It is a lot of nonsense though. If a politician wants to say taxes are too high, they quote the base rate as if anyone actually pays that. It is same with corporate taxation overall. You constantly hear people say the US corporations are taxed higher than anywhere in the world... but the fact is that no companies actually pay that rate because there are so many tax breaks and ways to reduce your earned income. Most of the companies I have really looked at ( for investment purposes) pay between 10% and 15%.... not even close to the base corporate tax rate. If a company ever paid the base corporate tax rate, their CFO would be fired instantly. Don´t get me wrong, dividends are double-taxed... but you have to actually look at an invdividual company to see what tax rate they are paying. Going by numbers in the tax code is pretty meaningless. Also, like in the link JR used, it scales based on income.. the higher rate is for households over $250,000. Which again is silly, because it is pretty easy for people in the $250,00 to $1,000,000 range to easily get their taxable income below $250,000. So almost everyone is paying less than the ´shock´ tax rate that is published.
The big corps who can invert or at least write off all sorts of expenses will be the ones who often pay a relatively small % of taxes. I own a small business with minimal expenses and pay a relatively high % in taxes. The business earns money primarily based upon a % of assets managed, and also a performance % on a small portion of those assets. I pay myself a cut of both of those and the rest is reinvested. I also reinvest some of that income I pay myself personally - more in a good year, less in a not-so-good year on both the business and personal sides. The assets I manage increased nearly 30% in '13, and there were a few bucks worth of realized gains here and there in there that were taxed. The management fee and any performance fees are always taxed for both the business and myself, with minimal writeoffs. I use a very reputable CPA, as I am not a tax expert myself. 2 other employees, I own my office, have minimal office expenses, and things like accounting, legal, and printing are contracted out as needed. I stay well below $150 mil in assets managed to avoid the extra regulatory headaches that occur at that level that will necessitate far more expenses.
Move to the Bahamas, it is what Mylan did But you nailed it, the problem with our tax code is that it greatly favors large companies. They are the ones that can hire lobbiests who get loopholes inserted into the tax code that only favor their clients. Large companies are the ones that can easily absorb the expenses of jumping overseas and forming subsidiaries to avoid paying taxes.... and all of this is done by high priced lawyers.. who also happen to be the same profession as most congressmen.
The tax system does need to be completely overhauled and made simpler, but in what way that would happen I'm not so sure. Whatever way it gets changes, I think there will always be somebody that won't be happy so if it does ever get looked at, it still won't suit everybody. You can't please all of the people, all of the time, as the saying goes.
I completely agree. I have family that is basically going to lose everything because of increasing taxes on dividends.
Rand Paul´s new plan is that everyone pays 14.5%, individuals, corporations... and the only tax deductions would be for mortgage interest and charitable contributions. The problem of course is that 1 day after he created that law, congress would begin adding other tax deductions for small farmers (any farm under 5 trillion dollars), renewable energy ( coal industry).. and they would just whittle their way right back to the mess we have.
So Obamas plan actually lowers the tax rate on dividends from 43 to 23 and brings dividend tax rates to the the same as capital gains tax ( which makes sense) but that still doesn´t address the issue of it already being taxed on the company.
No, Obama's plan raises the taxes. He merely allowed some of the Bush tax cuts to continue for now. Dividends have gone from 15% to 23%. Had he discontinued the Bush tax cuts, dividends would be taxed at 43.4% now. Besides realized capital gains, dividend and bond interest taxes are taxes I must also pay a little of here and there, and that also my clients (most of whom are retired) must pay. Any dividends and bond interest I earn personally are reinvested. But most of my clients live off of these things. I don't know of any one tax Obama has actually lowered or repealed.
