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rusty baker 06-08-2011 02:01 PM

Taxes
 
Suppose two American couples file their 2010 tax returns. Each couple is under 65 with no dependents taking the standard deduction.
The first couple are well-to-do and don’t have to work because they own $3 million in dividend-paying stock. They had total income of $100,000, consisting of dividends only. Their federal income tax for 2010 was $1,995.
The second couple are working people and had total income of $100,000, consisting of wages and salaries. Their federal income tax for 2010 was $11,894.
Yes, that is correct. The wage-earners paid six times as much income tax as the wealthy taxpayers living on dividend income, using figures confirmed by H&R Block.

The wonderful American tax system.

hyunelan2 06-08-2011 02:22 PM

Not completely accurate - or at least incomplete. Ordinary dividends are taxed at the same rate as any other income. Qualified dividends receive a break above the 15% tax bracket at a fixed 15% - the same as capital gains. This will change after 2012, and qualified dividends will be taxed the same as regular income. Rules on qualified dividends:

(wikipedia copy-paste, keep that in mind)
Quote:

In order to be taxed at the qualified dividend rate, the dividend must:
  • be paid between January 1, 2003 and December 31, 2012,
  • be paid by a U.S. corporation, by a corporation incorporated in a U.S. possession, by a foreign corporation located in a country that is eligible for benefits under a U.S. tax treaty that meets certain criteria, or on a foreign corporation’s stock that can be readily traded on an established U.S. stock market (e.g., an American Depositary Receipt or ADR), and
  • meet holding period requirements: You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. The ex-dividend date is the first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment. When counting the number of days you held the stock, include the day you disposed of the stock, but not the day you acquired it.[1]

In your example, the "rich" couple filing taxes would owe 15% of that $100,000 of dividend income, assuming it was qualified dividends. That's $15,000. Subtract the 2010 Standard deduction of 11,400 (married, filing joint) and you get $3,600 in taxes. If they were holding dividends that were not qualified, the taxes would be at the same rate as their income bracket, and taxes would be identical to anyone else earning $100,000 that year.


What this should say more than anything is the smart play is to take the money you make and buy stocks issuing qualified dividends.

hyunelan2 06-08-2011 02:45 PM

Further, any tax on dividends is a double-taxation on the stock holder, and to be truly fair dividends should be taxed at 0%. A corporation (owned by the shareholders, owners of stock) is taxed on all corporate income first. Then, dividends are issued out of the remaining amount after taxes. Taxing the receiver of the dividend again is taxing the same earnings twice.

The wonderful American tax system.

amyevans 06-17-2011 09:57 AM

Quote:

Originally Posted by rusty baker (Post 663441)


The wonderful American tax system.

It's not just you; the UK tax system is no better. Ever heard of council tax? The most bizarre and mismanaged tax system I have ever come across.

Plus I love recieving a monthly bill for 130 when I have apparently recieved nothing in return. It's the highlight of my month.

Willie T 06-17-2011 12:48 PM

Seems like they tax money any time it moves. So if a said amount of money changes hands ten times, then it is most likely all gone, right?

operagost 06-24-2011 12:47 PM

Didn't Reagan say something like this about government's strategy?
- If it moves, tax it.
- If it keeps moving, regulate it.
- If it stops moving, subsidize it.

STL B. 06-24-2011 01:07 PM

Quote:


Suppose two American couples file their 2010 tax returns. Each couple is under 65 with no dependents taking the standard deduction.
The first couple are well-to-do and don’t have to work because they own $3 million in dividend-paying stock. They had total income of $100,000, consisting of dividends only. Their federal income tax for 2010 was $1,995.
The second couple are working people and had total income of $100,000, consisting of wages and salaries. Their federal income tax for 2010 was $11,894.
Yes, that is correct. The wage-earners paid six times as much income tax as the wealthy taxpayers living on dividend income, using figures confirmed by H&R Block.




Of these two couples who do you think has spent more on carpet/hardwood or tile in the past decade?



Quote:

Seems like they tax money any time it moves. So if a said amount of money changes hands ten times, then it is most likely all gone, right?
No joke there.

Quote:


Didn't Reagan say something like this about government's strategy?
- If it moves, tax it.
- If it keeps moving, regulate it.
- If it stops moving, subsidize it.
It's for the greater good, half of the folks know it, you just dont get it yet.............that means your A. racist B. rich C. still clinging to guns/bibles or D. still not a union member

WirelessG 06-24-2011 01:27 PM

Quote:

Originally Posted by operagost (Post 673295)
Didn't Reagan say something like this about government's strategy?
- If it moves, tax it.
- If it keeps moving, regulate it.
- If it stops moving, subsidize it.


I don't recall that quote, but it seems to be about right.


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