On the topic of dividends....

[Malachi151]

http://online.wsj.com/article/0,,SB1063372891450200,00.html?mod=home%5Fwhats%5Fn ews%5Fus

The November dividend will provide a windfall to Microsoft's top executives, who are among the company's biggest owners. Mr. Gates, the company's chairman, stands to receive $186 million, while Chief Executive Steve Ballmer would get a $66 million payment.

Now, tell me again that the dividend tax elimination is not a tax cut for the rich? That money is now untaxed so they will be getting that money free and clear without paying any taxes on it whatsoever. Of course you will still be paying about 30% to 50% in income taxes on the money that you actually go to work and perform labor for when federal, state, and FICA taxes are factored in.... But money you don't work for... that's tax free...

[Suddenly]

The argument is double taxation. Those profits were taxed when earned, so it is unfair to tax them again.

Don't ask me why it's unfair ...

[Tormac]

I am definitely not rich, and am very happy to be allowed to keep more of the money from my shares in stocks.

While I am sure I am only getting a drop compared to the "rich", it only makes sense, as I only own a drop of any major company in the form of stocks.

As suddenly pointed out this is not "tax free money", it has already been taxed.

And I say I certainly worked to earn and save the money that I used to invest in stocks and mutual funds.

[Malachi151]

Originally posted by Suddenly
The argument is double taxation. Those profits were taxed when earned, so it is unfair to tax them again.

Don't ask me why it's unfair ...

The double taxation argument is totally bogus, I can't believe that ANYONE falls for that.

[Tormac]

I fall for it Malachi, what is bogus about the double taxation argument?

[Suddenly]

My problem with the "double taxation" argument is it that dividends really aren't taxed twice to the same person. They are taxed once to the Corp, once to the shareholder. I can see taxing the same person twice, but that isn't the case here.

As Tormac pointed out, we invest with earned money (which is taxed). However, one is not taxed on the return of capital. If those stocks increase in value tax is only paid on profit (be it capital gain or dividend).

[Tormac]

Well I can understand the argument Suddenly, but if I own say 10 shares out of 10,000, doesn't that make me 1/1,000th the owner of a corporation?

I know that it is a gross simplification in practice to look at a corporation as a fluid "partnership" of shareholders, but in theory is that not the case?

[Tmy]

what isnt double taxed. My used car was taxed 2x. My income is taxed then when I buy stuff theres more tax. If you win a state lottery, the state taxes your winnings.

[Tormac]

Well it is certainly true that people are taxed left and right, up and down. I doubt much will change that.

But I have never understood the notion that the dividend tax was a progressive tax that only "hurt" the rich. It is a punitive tax on stockholders, not the rich. The assumption, I assume, is that only the rich invest in the stock market. Even given the stock market bubble’s "popping" I have a feeling that I am not the only non-rich person left in the stock market.

[Malachi151]

Originally posted by Tmy
what isnt double taxed. My used car was taxed 2x. My income is taxed then when I buy stuff theres more tax. If you win a state lottery, the state taxes your winnings.

Well exactly, everything is taxed multiple times in the first place. Secondly the money that you receive as payment is not taxes at all, you are not being double taxed. How hard is this to understand. You put $20,000 into an account and it draws 8% interest let's say. All of that interest that you receive in the form of payments is income to you, and furthermore its income that you don't even have to work for.

Sure this works out great for people who have large sums of money to invest, but its obviously going to create larger and larger gaps in class as people who make of their income by working fall further and further behind the people who do nothing at all and collect interest for a living.

And of course who makes those profits possible that allow for dividend payments in the first place? The workers of course.

Its a sick system. Of course I play by it because I have to if I expect to get ahead. Obviously working for a living is a stupid thing to do, thats what our system tells me. I'm making a decent amount by day trading now I can almost not work at all and get by only on day tradingand investing. That's really pathetic IMO. I give it a few more years and I should be able to retire to a life of only investing, which is totally stupid, but hey, that si how the system works. Why the hell shoudl I work for a living and pay higher taxes instead of investing for a living and paying almost no taxes?

Plus, jobs are going overseas, I can just invest over seas, buy euros and yen and bots, I mean why work, its a suckers game. This country is retarded. Work is punished and doing nothing is rewarded.

[Suddenly]

Originally posted by Tormac

I know that it is a gross simplification in practice to look at a corporation as a fluid "partnership" of shareholders, but in theory is that not the case?

It is not the case in theory. A Corporation is a legal entity completely seperate from the owners. Partnerships are in theory just a group of owners.

This distinction has been blurred in the last 15 years or so by the onset of limited partnerships, limited liability partnerships, limited liablilty limited partnerships, and limited liablity companies. In theory, however, none of these create an independant entity like a corporation.

[swellman]

Originally posted by Tmy
what isnt double taxed.

401(k) programs

[Tormac]

Malachi wrote

You put $20,000 into an account and it draws 8% interest let's say. All of that interest that you receive in the form of payments is income to you, and furthermore its income that you don't even have to work for.

It is my money. I worked and sacrificed to save that money. I put the money at risk in the stock market. I send a fair amount of effort researching companies mutual funds. Sometimes I lost money. I do not see how the dividends from the money I have invested equates to money "that you [I] don't even have to work for".

Malachi also noted

And of course who makes those profits possible that allow for dividend payments in the first place? The workers of course.

Well I half agree with you. Part of the profit of a company comes from the value added to the product by the worker. Part of the profit comes from the organization provided by management. Part of any profit comes from any infrastructure needed to create a product, infrastructure most likely purchased through the use of the capital of investors (such as my self).

If the worker does not need management, or the capital from an investor, why does the worker work? Why do they not start their own business somewhere else?

Malachi, you asked why you should work, when you can make enough to live of from your investments? Why should you not?

[Tormac]

Suddenly noted (to my post about corperations being like large fluid partnerships)

It is not the case in theory. A Corporation is a legal entity completely seperate from the owners. Partnerships are in theory just a group of owners.

True, legally there is a difference between a partnership and a corporation. I do not dispute the legal difference.

Still in the common sense a stockholders own X% of a corporation.

The notion that it is not a case of double taxation because the tax the company paid is from a different legal entity than the tax that the shareholder pays is not a very satisfying one.

At least not to me. :)

edited to make an unwieldy sentence a little better

[Segnosaur]

Originally posted by Malachi151

Work is punished and doing nothing is rewarded.

Work is punished?

Then how come I get a pay check when I go to work, and don't get one when I don't go? How come they aren't punishing me for going into the office like you seem to be?