Romney: "Obama supporters are dependent on the government"

[Rucker61]

Your dividends are taxed when you claim them (as you should) as income. The company does not pay taxes on the money they send to you, only the monies they show as profit on their balance sheet at the end of the year, so I am not sure where you are getting double taxation from.

Corporations pay taxes on the profits they show at the end of the year. Those profits can either be retained by the company or distributed to stockholders, or a mix thereof. The dividends distributed to shareholders are then taxed on the individual as short or long term capital gains.

Example:

Acme Corporation has revenues of $10M at the end of the year (that's a lot of anvils). After all the accounting is done, they show $500k in profit. They pay taxes on that profit, say 30%, leaving them net earnings after taxes of $350k.

They decide to pay a dividend of $1 per share, with 100k shares outstanding. They send out $100,000 in cash to the shareholders. The sole long term stockholder, R. Runner, will then pay capital gains tax of 15% on that $100k income.

That's where the double taxation comes from. What am I missing? Dividends do not count as expenses and cannot be use as a deduction to income to reduce taxable income. That's why most profit is held as retained earnings rather than dispursed to the shareholders, as a tax avoidance.

[FastMan]

That will never happen. They COULD drop prices, but historically that doesnt happen.

Not true. If a company over charges for their product it leaves room for a competitor to come in and undercut them. It's the beauty of a capitalism. Consumers get the best prices, while businesses still can make a fair profit.

[Rucker61]

Do you mean on the materials they are using to produce their products? And do you mean in the system I'm proposing? If so, I would think not, regardless of the source of those materials. Consumption tax only gets applied at the end user point. And the domestic advantage would still exist.

No, I was referring to companies that would import cheap consumer goods from abroad rather than produce them here.

I see what you're thinking, Rucker, but read my answer above. It should address your question/concern. The advantage the consumption tax system provides to the American producer when selling their products domestically would be very helpful to them in competing with producers who have the advantage of lower labor costs.

That depends sales tax rates vs cost of foreign goods. Without numbers we're just guessing which is better. A larger flaw is that higher consumption tax rates will drive consumption revenues down, through fewer purchases or through purchasing cheaper goods with a lower total cost.

[FastMan]

it baffles me that people think increasing taxes on anyone is the answer. why would you give more money to a child that has shown for year they cannot spend it wisely? spending has to get under control and kept accountable before you can raise taxes and provide any benefit. otherwise its just more money to over spend.

Bingo!

Make the kid contribute to raising the money they're spending. Suddenly they become more careful with it. Works the same way on the national level. Currently we're just giving money to kids (citizens) many of which aren't really concerned where it's coming from, because they're not contributing to the raising of it.

[dwalker460]

Not true. If a company over charges for their product it leaves room for a competitor to come in and undercut them. It's the beauty of a capitalism. Consumers get the best prices, while businesses still can make a fair profit.

Again, doesnt happen. A seller sells for what the market will bear. That is capitalism. Yeah, there might be a price war or two, but lets look at an example-

three years-ish ago a stripped lower reciever was $60-80 bucks, with premium ones in the $115-ish range. Currently prices are in the $115 range for a standard, and in the 200-300 range for a "premium" receiver. Hiuh, well there are more manufacturers now, and lots of competition. Labor costs are minorly down due to a large pool of trained workers out there. Material costs are up slightly as metal prices are at an all time high, but again, thats minor in the grand scheme. Hmmmm.....

Wait- I know.... the market will bear the cost increase because the demand is there. I will pay the increased (almost double) cost because I want a lower receiver. Now, using your logic, SAA or PSA or similar COULD sell thier stripped lowers at $65 apeaice and corner the market, BUT they do not, because they can sell for $115 and sell every single one they make, and thats what they are going to do.

Example 2-
Troy rails are $180-200 or more, YHM are $150-180, sometimes less. Daniel Defense are a lot more. They all do the same job and are IMHO about the same "quality", however the DD ones will always bring more because of the percieved value. Could all these companies charge less? Possibly, but why would they? They are in business to make a profit, and they do, so unless something changes they will not alter thier pricing structure.

Thats capitalism my boy, pure and simple. Your competiton model only works in theory, never in practice.

[dwalker460]

Corporations pay taxes on the profits they show at the end of the year. Those profits can either be retained by the company or distributed to stockholders, or a mix thereof. The dividends distributed to shareholders are then taxed on the individual as short or long term capital gains.

Example:

Acme Corporation has revenues of $10M at the end of the year (that's a lot of anvils). After all the accounting is done, they show $500k in profit. They pay taxes on that profit, say 30%, leaving them net earnings after taxes of $350k.

They decide to pay a dividend of $1 per share, with 100k shares outstanding. They send out $100,000 in cash to the shareholders. The sole long term stockholder, R. Runner, will then pay capital gains tax of 15% on that $100k income.

That's where the double taxation comes from. What am I missing? Dividends do not count as expenses and cannot be use as a deduction to income to reduce taxable income. That's why most profit is held as retained earnings rather than dispursed to the shareholders, as a tax avoidance.

Dividends are disbursed as pre-taxable income, unless the corporation has some specific reason for doing so (a more favorable tax advantage) NEVER as post tax income. Thats what your missing.

Actually I am wrong, dividends are taxed as Corporate profits the disbursed. I will have to suck it up and go ask my wife how the shareholders are paid pre-tax, as I have screwed up my understanding somewhere.

[Teufelhund]

EVEN WHEN THEY WORK FOR THE COMPANY, many citizens hate the fact thier company succeeds because they believe they "deserve" a larger "peice of the pie" and that the company is getting rich on their backs.

This statement above is simply not true of anyone smart enough to think beyond themselves. I think you may be just a tad too emotional about this subject and it is causing you to not be able to see the forest for the trees.

I admittedly do not have the knowledge of tax code to be able to debate you on the level you're attempting; if I did, I would not have to pay a CPA to do my taxes every year. I should add that I really have no desire to learn the tax code to that level.

I'll stop using the word "loophole" since everyone seems to be getting their panties in a twist over it; it really is unimportant to the argument. What you folks who are throwing out all these percentages and acronyms seem to be failing to see is the net result of our current system: I (middle class) pay a higher percentage in taxes than the rich, the business entities, and the poor. I don't care how you spin it or try to defend it, the breaks, incentives, credits, etc. are causing the middle class to be burdened with financially supporting the entire country, and it isn't working.

[FastMan]

No, I was referring to companies that would import cheap consumer goods from abroad rather than produce them here.

The same advantage would exist. Say I'm making lawnmowers. I need to buy the parts to do it: wheels, engines, etc. The guys making those parts here in the US do not have to pay taxes on their profits, so they can now drop their price in competing with the parts makers overseas who are still getting taxed at home.

That depends sales tax rates vs cost of foreign goods. Without numbers we're just guessing which is better.

Corporate tax rates do indeed vary around the world, but 0 will always represent an advantage to anything greater.

A larger flaw is that higher consumption tax rates will drive consumption revenues down, through fewer purchases or through purchasing cheaper goods with a lower total cost.

That is a popular concern with the idea of a consumption tax. It would be true if the price of goods went up by the amount of the tax. But as I explained, that would not necessarily happen, because the producer would be able to drop the price of their product, and market place competition would force him/her to do so.

[HoneyBadger]

Thats capitalism my boy, pure and simple.

You forgot the part where there are numerous other companies that produce quality products that meet the needs of consumers. That, my boy, is capitalism.

Also, for your lower receiver example, you failed to account for inflation, rising manufacturing costs, rising raw material costs, etc. You acknowledged that metal prices are at an all time high, but failed to account for it.

Same story for gasoline. The cost of gas has been actually rising LESS than the estimated actual inflation, which means that whether it agrees with the point you're trying to make or not, gas has gotten cheaper over the past decade.

[FastMan]

Thats capitalism my boy, pure and simple. Your competiton model only works in theory, never in practice.

The competition model doesn't work, aye? I

It's the reason China and others have been kicking our ass in manufacturing. They can sell the same products for cheaper prices. Our domestic producers have been struggling to compete, and jobs have been disappearing because of it. It's about time we gave them a hand, instead of attacking and punishing them, like Obama revels in doing. Everyone would benefit.