Quote Originally Posted by GeoFisher View Post
I AGREE completely with what you're saying, but you are a little off. I don't think it is double taxed.

In my case I buy some stock on the open market.........not a crap ton of stocks but I probably spend 1k a year adding additional pieces to my stock portfolio..........WHENEVER I have some extra money and I want to add, I generally ADD it there.

That 1000 is after tax.....so yea, I was taxed on it, but only the GAIN, meaning the value I made off of the sold instrument is taxed, and that is taxed and different rates. Say that 1000 dollars was invested in something that tripled in value, making the value now 3000. I made 2000, so that 2000 is taxed.

If I choose to sell that in the FIRST year of ownership, that is considered a short term gain and is taxed at my regular income rate.

If I choose to hold it and ride it out and have it for 1 year or more, then that is a long term gain and is taxed at 15%.......this is where the 15% for Mitt Romney comes from.

This may not be exactly right...but it is pretty close.

I hope this helps.

Later,

Geo
I apologize if I wasn't clear, but that is not what I meant. Let me try again and see if I can better make my point.

Dividends are paid by a corporation from after tax dollars. In other words dividends are not a tax right off for the company, but instead that money was already taxed once for that calendar year at the corporate level and then when paid out to the individual in the form of a dividend it is then taxed again for a second time.

My entire point is that if we are not talking about resentment of the "rich" but instead having an honest discussion about general tax revenue then dividends are a big win for the government because they will most often generate an even higher overall rate of tax return. Most large corporations that people invest in for dividend income will often be at the corporate rate of 35%. So using that as an example here are the numbers.

Let us use a $1000 of profit. It is taxed at the corporate level at 35% and the corporation pays the IRS $350 on those earnings. Then those same profit dollars are distributed to share holders in the form of dividends. The individual will also be charged a tax on that same money at the 15% rate and pay the IRS and additional $150 on the same money. That is how it is double taxed by the IRS. The same money is taxed twice. They are collecting a total of $500 or 50% in taxes for that $1000 of profit which ends up paid out in dividends.

IMO it is a win/win situation. It generates higher tax revenue, while at the same time encourages investment from individuals in our countries economy. If the IRS instead taxed it as an ordinary earned income, there would be much less incentive for individuals to risk their money, and the results would drastically hurt our economy.

Remember a dividend is paid out to shareholders who are part owners in the company. It is a way of distributing profits. It is entirely different than earned income.