f******d
发帖数: 2394 | 1 The Common Misconception about the Lower Rate on Capital Gains and Dividends
June 02, 2014
By Andrew Lundeen .
“In a strong rejection of the current tax code, 90 percent of respondents
believe income from investments should be taxed at least as much as wages.”
That was a finding from a recent survey from Wallet Hub.
Fortunately for that 90 percent of respondents, their wish is a reality.
Warren Buffett and His Secretary
Wallet Hub explains the tax code’s treatment of investment income in this
way: “Current policy taxes income from investments at a lower rate than
income from wages; which results in someone like Warren Buffett paying a
lower effective tax rate than his secretary.”
On the face of it, it makes sense. With federal tax policy, that should be
your first hint that something is amiss.
Income from capital gains and dividends is subject to a top federal rate of
23.8 percent. This is less than the top marginal income tax rate of 39.6
percent for ordinary income. Let’s say both Warren Buffett and his
secretary earn $100 (and for simplicities sake, let’s assume that Warren
Buffett’s secretary is well paid and pays the top marginal tax rate on
every additional dollar), but Mr. Buffett’s $100 is from dividends and his
secretary’s income is from salary.
The billionaire Mr. Buffett would pay $23.80 in taxes and takes home $76.20,
while his secretary, who is probably not a billionaire, pays $39.60 in
taxes and only gets to take home $60.40.
How is that fair? It’s almost twice the amount in taxes.
There is More than Meets the Eye
What is not easily seen is that the $100 that Mr. Buffett earns in dividends
has already been taxed at the corporate level. In fact, Mr. Buffett’s $100
didn’t start at $100, it started as $153.85.
To receive his $100 dividend payment, Mr. Buffett must own shares in a
corporation, which we will call Company A. Company A earned $153.85 in
profits on Mr. Buffett’s behalf. This $153.85 is then subject to the
federal corporate tax of 35 percent, or $53.85.
The corporation pays the $53.85 to the federal government on behalf of Mr.
Buffett and then passes the remaining $100 to him in the form of a dividend.
This is the $100 we discussed earlier, on which, Mr. Buffett pays $23.80 in
dividend taxes.
Mr. Buffett’s Actual Tax Rate
Now that we know this, what would Warren Buffett actually pay in taxes and
what would his tax rate be?
In the situation described above, Mr. Buffett pays $77.65 ($53.85 in
corporate taxes and $23.80 in dividend taxes) on $153.85 in income.
This is a tax rate of 50.47 percent. Or, as 90 percent of respondents had
hoped, 10 percentage points higher than the top marginal tax rate on wages. | s******8
发帖数: 7105 | 2 But capital gain still at 23.8%, people rich enough will "convert"
dividend to capital gain.
he average corporate tax rate in 2011 dipped to 12.1%, In addition,
they have more way to deduct their income.
also employee also have to pay pay 15.x% pay roll tax, it is completely not
deductible. | L*********4
发帖数: 883 | 3 This is false. Capital gains is not only dividends. Stock price increases
are not taxed at all.
Dividends
【在 f******d 的大作中提到】
: The Common Misconception about the Lower Rate on Capital Gains and Dividends
: June 02, 2014
: By Andrew Lundeen .
: “In a strong rejection of the current tax code, 90 percent of respondents
: believe income from investments should be taxed at least as much as wages.”
: That was a finding from a recent survey from Wallet Hub.
: Fortunately for that 90 percent of respondents, their wish is a reality.
: Warren Buffett and His Secretary
: Wallet Hub explains the tax code’s treatment of investment income in this
: way: “Current policy taxes income from investments at a lower rate than
| f*********1
发帖数: 2518 | | L*********4
发帖数: 883 | 5 Right. Note SS tax only counts for the first 117,000 of salary. For people
in 39.4% bracket, payroll tax is about 8-9% (medicare 4.8% + SS).
not
【在 s******8 的大作中提到】
: But capital gain still at 23.8%, people rich enough will "convert"
: dividend to capital gain.
: he average corporate tax rate in 2011 dipped to 12.1%, In addition,
: they have more way to deduct their income.
: also employee also have to pay pay 15.x% pay roll tax, it is completely not
: deductible.
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