Posted on 09/24/2012 4:07:57 PM PDT by justlittleoleme
Today has been incredibly disturbing for anyone who understands on a basic level how taxes work. The NY Post, Marketwatch, The NY Times, and even the Wall-Street Journal have posted news stories about how Romney the evil robber baron has only paid 14% in taxes. This is leading to outrage in the middle class, as people realize thats a lower number than what they pay.
Its also misleading. Romneys overall tax rate is over 50%. The lower-sounding number is being used because it makes a great story even if it only tells part of it. Its surreal.
Fine. If no one else will respond to this media manipulation, I will. This is not an endorsement of Romney Capitalism Institute will not endorse any candidate this year. But this absolutely is a defense of the notion that Romney is paying very high and overbearing taxes, just like everyone else. We hate all taxes, and support abolishing all income taxes.
(Excerpt) Read more at capitalisminstitute.org ...
Doesn’t matter to the ‘Progressives’ and their zero sum mentality. It will never be enough and when they kill the goose that laid the golden eggs, they will promise their followers a ‘recovery’.
Shaun Connell is a brilliant, up and coming leader in the conservative/libertarian movement. His analysis is generally spot-on and he presents his arguments in a clear, well written style. I suspect that his numbers are quite accurate. He is not a huge Romney supporter but he is a strong advocate for people being allowed to keep the fruits of their own labor. More power to him!
Mitt could have easily invested in buildings or land, sold them and made a profit taxable at the capital gains rate. For all we know he's also an inventory buyer ~ a rather obscure occupation where a small investor buys excess inventory specifically for resale to third parties only he knows about. Good game if you have a nice list.
The problem for the rest of us is simply that Romney didn't provide us with enough detail to understand WHERE and HOW he was making his money!
Without more detail I'd put this story in the category of CAMPAIGN PROPAGANDA
I don't know anything about shareholder taxes? Can a smart Freeper explain this tax to me and to some of the other Freepers?
Apparently, they didn't teach this in Kenya or Indonesia.
Corporations pay income tax and the corporations are owned by the shareholders, hence the shareholders are being taxed. One problem with this is that unless you are in a high bracket you are being taxed at a greater rate by this method than if the corporate income was not taxed and passed on through to you to be taxed. Remember corporations don’t really pay taxes they just collect them and the shareholders are being taxed.
Dividends come out of profit. They aren't an expense. Simple example: I sell $1,000,000 in widgets, but it costs me $900,000 to build them. Vastly simplified, I made a $100,000 profit, or 10%.
If I declare a dividend and pay $50,000 to the stockholders, I still have to pay corporate income taxes on all $100,000. I can't expense the dividends. So, that $50,000 is taxed at up to 39.5%.
Then, the stockholder has to pay income tax on the dividend income. At Romney's income level, that's 15%. So, those profits were taxed at up to 54.5%.
See the problem?
Long-term capital gains have another problem: If I buy a stock for $100.00 a share in 1992, then sell it for $180.00/share in 2012, I have a gain of $80.00, or 80%. I pay a long-term capital gain tax of 20%, leaving me only $64.00.
But, how much did I really make? I didn't look up the exact change in the CPI during that period, but if inflation was 3%/year, compounded for 20 years, then 80% of that gain is due to inflation alone. If I had sold the stock for $180.00, I really just broke even. Yet, I had to pay taxes on the $80.00 gain.
There are more considerations, but just those two examples demonstrate why investment income deserves special consideration. It's not a tax "loophole". In fact, the government is actually still getting more revenue that it "should".
He means corporate income taxes. Dividends come out of profit, after income taxes have already been assessed.
Put another way: If Acme Manufacturing pays an employee $50,000 in wages/salary/benefits, that's an expense. It is subtracted from revenue, to calculate profit.
However, if Acme Manufacturing declares a $50,000 dividend, that is not an expense. It comes out of profit, and was taxed at the corporate income rate -- up to 39.6%.
I forgot to add: and then the dividend distribution is taxed at up to a 15% rate on the individual shareholder's return.
Regular corporations are taxed on their profits as I explained above and then any dividends that they pay (usually based on profits) are taxed again on the shareholders tax return.
There is a special type of corporation called a S- corp that the profits are not taxed and are all passed through and taxed on the shareholders return. These are usually small family owned businesses.
Regular corporations are taxed on their profits as I explained above and then any dividends that they pay (usually based on profits) are taxed again on the shareholders tax return.
There is a special type of corporation called a S- corp that the profits are not taxed and are all passed through and taxed on the shareholders return. These are usually small family owned businesses.
Or to put it another way — Saying Romney paid 14% in taxes, would be like taking your “after-tax” income and asking how much of THAT do you pay in taxes. Which would be zero for most of us.
Also, most people don’t pay 14% in income taxes. The media and the democrats keep comparing Romney’s total percentage, and comparing it to the marginal rate for the average person.
If I look at my gross income, I pay about 9% in tax, once I get to take all my deductions.
Lastly, it is absurd to include in someone’s “income” the money they gave away to charity. That’s why we let people deduct charity.
You might as well ask why people don’t pay taxes on the time they volunteer. As an analogy. Two people. The first goes to a soup kitchen, and works 40 hours for free, at a job that fair market value might put at $10 an hour; they don’t pay tax on that $400.
Another person works at a normal job, and then donates $400 to the soup kitchen so they can pay someone to cook. They essentially donated the labor that earned that $400. Why should they pay tax on it?
If you eliminate the money Romney gave away from his “earnings”, his tax rate is much higher.
Some even claim you should add his charity to his taxes, but I wouldn’t go that far.
>>>Apparently, they didn’t teach this in Kenya or Indonesia.<<<
Hell, they haven’t taught it in America in years, not in public schools anyway, up to and including the universities.
They aren’t zero summers. They own the printing presses and are have them working overtime.
The total percentage each year will be small, but if you hold property for ten years, then sell it for a profit, you must compound the yearly tax payments out ten years, also.
Also important to note that purchasing stock shares in a corporation means you have purchased a “share” of future profits, and nothing else.
If the price of a stock moves up, that means investors believe the profit of that company will move up.
Since corporate profits are clearly taxed, at the state, local, and federal level, that means capital gains on your stock have been taxed BEFORE they get to your bank, and will be taxed AGAIN after they get to your bank.
Lurk,
Long term cap gains on stocks are DIRECTLY related to profits.
A “share” of stock is not a share of ownership in a company.
It is a contract to “share” in the profits of that company.
Since corporate profits are clearly taxed, capital gains are clearly taxed BEFORE they get to the person who sold the stock.
Yes, I know that capital gains are also taxed at the corporate level. But, that’s a more abstract concept to explain.
I use the two examples I posted, because most people with at least a high school application can grasp it. It’s not difficult to understand what profit is, and relate that to dividends. And almost everyone understands how inflation reduces the value of a dollar over time.
Remember, though, that when you buy that stock you bought it in expectation of making some money somehow. Not one dime of those future earnings will affect your future taxes at time of sale.
Wayne, just tax me on my profits and that will be OK
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