Tax Lawyer's Blog

JLP of All Financial Matters tells us why it makes sense that dividends are taxed at lower rates:

BG left the following comment on one of my previous posts:

“JLP won’t like me saying it, but even the ultra-rich play this game where their “income” (dividends & investments make up the majority of their income) is only taxed at 15%, whereas I’m in the 25% bracket. That is their gain, my loss.”

The reasoning for this is simple: dividends are taxed at the corporate level and again at the individual level. That’s why they are taxed at a lower percentage at the recipient level. If the “ultra rich” are getting all of their income from dividends and investments, that tells me that they probably already paid their fair share into the system in the first place.

Right on JLP.

That the public doesn’t grasp the concept of double taxation is not surprising. Left-wing demogogues and soak-the-rich egalitarians have done everything in their power to make sure the electorate remains ignorant.

Let me add the following to JLP’s explanation of double taxation:

If a publicly traded corporation has to pay taxes on the dividends it ultimately pays to its shareholders, the amount of profits available for distribution to shareholders is less than it would be had it not had to pay those taxes. Thus, the shareholder in effect pays taxes on the dividend twice: First at the corporate level and then again at the individual level.

Double taxation is wrong and immoral, unless of course you’re dead.

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