In the fight about income tax, payroll tax, and corporate gains tax people often fail to recognize all the other taxes an individual is faced with. Everything from food (in some states) to gasoline is taxed. Some localities have their own special taxes like Minneapolis and its additional taxes on lodging and entertainment [PDF]. Obviously our tax burden isn’t enough so Obama is trying to raise the tax on dividends received by those holding stocks that actually pay dividends:
President Obama’s 2013 budget is the gift that keeps on giving—to government. One buried surprise is his proposal to triple the tax rate on corporate dividends, which believe it or not is higher than in his previous budgets.
Mr. Obama is proposing to raise the dividend tax rate to the higher personal income tax rate of 39.6% that will kick in next year. Add in the planned phase-out of deductions and exemptions, and the rate hits 41%. Then add the 3.8% investment tax surcharge in ObamaCare, and the new dividend tax rate in 2013 would be 44.8%—nearly three times today’s 15% rate.
What laughable is the fact that dividends are taxed differently from income yet most logical people would agree that receiving dividends is a form of income. Another interesting quirk with dividend taxes is that it’s a tax on something that’s already been taxed:
Keep in mind that dividends are paid to shareholders only after the corporation pays taxes on its profits. So assuming a maximum 35% corporate tax rate and a 44.8% dividend tax, the total tax on corporate earnings passed through as dividends would be 64.1%.
The state isn’t happy until it has a big chunk of every dollar that trades hands. You would think entities that have this many different ways of stealing money from people could manage to run profitably instead of at a deficit so staggering that no private entity could ever hope to mirror it.
Dividends are taxed differently precisely because they are double taxed. Though if you take dividends off of some reits it is taxed as ordinary income as it passes through untaxed by the corporation. It only makes sense to tax dividends as ordinary income if we got rid of the corporate income tax (which I would be fine with).
I’ll never understand the whole idea behind double taxing something. It seems to be once something has been taxed, once the government has claimed its pound of flesh, that should be the end of it. This is probably why I don’t work for the IRS.
I see we think alike.
Actually dividends are triple taxed, you pay tax on the income you purchase the stock with, the corporation pays tax on the profits and then you pay tax again on the money when you get something out of it.