Author Topic: WSJ: Buffett's Latest Tax Break  (Read 8366 times)

dcollon

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WSJ: Buffett's Latest Tax Break
« on: August 30, 2011, 04:27:51 AM »
From WSJ Op-ed


claphands22

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Re: WSJ: Buffett's Latest Tax Break
« Reply #1 on: August 30, 2011, 05:40:06 AM »
Was the WSJ always this Fox-Newsie or did they get like this after they were bought by News Corp?

I believe the taxation policy on preferreds has been like this for ages. (Where the tax on preferred dividends is much less than the tax on bond dividends)




scorpioncapital

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Re: WSJ: Buffett's Latest Tax Break
« Reply #2 on: August 30, 2011, 07:15:05 AM »
It's a good argument. If not taxing dividends one corporation receives from another is standard policy, why is taxing dividends a corporation pays out to an individual taxpayer any different? After all, this is what Buffett argued in his op-ed, that he should be taxed more on the dividends he receives. But then, why not tax intra-corporate dividends too?

ERICOPOLY

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Re: WSJ: Buffett's Latest Tax Break
« Reply #3 on: August 30, 2011, 07:46:48 AM »
But then, why not tax intra-corporate dividends too?

+1 
 
I have yet to see him advocate a tax that would materially impact him.

txlaw

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Re: WSJ: Buffett's Latest Tax Break
« Reply #4 on: August 30, 2011, 07:52:21 AM »
But then, why not tax intra-corporate dividends too?

+1 
 
I have yet to see him advocate a tax that would materially impact him.

Because dividends received by natural persons, as opposed to legal persons, are realized income that is immediately usable for consumption. 

But I don't want to get into this debate again . . .

Partner24

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Re: WSJ: Buffett's Latest Tax Break
« Reply #5 on: August 30, 2011, 08:22:26 AM »
Because it would put an unfair additional layer of taxes.

If I own shares of a business directly and I receive a dividend, there is two layers of taxes (the operating company and me).

If I own shares of a business that own a business, there is three layers. The holding company, the operating company and me. The actual way of not taxing the intercorporation dividends keep neutrality in the system. One tax of the corporation, one tax for the ultimate owner.  If I tax the holding company for the operating company dividends, as the ultimate shareholder, I would get unfairly penalized because of that legitimate additional layer of ownership. You could then nearly say "bye bye" to all conglomerates and holding companies and that wouldn't make sense.


txlaw

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Re: WSJ: Buffett's Latest Tax Break
« Reply #6 on: August 30, 2011, 08:27:34 AM »
Because it would put an unfair additional layer of taxes.

If I own shares of a business directly and I receive a dividend, there is two layers of taxes (the operating company and me).

If I own shares of a business that own a business, there is three layers. The holding company, the operating company and me. The actual way of not taxing the intercorporation dividends keep neutrality in the system. One tax of the corporation, one tax for the ultimate owner.  If I tax the holding company for the operating company dividends, as the ultimate shareholder, I would get unfairly penalized because of that legitimate additional layer of ownership. You could then nearly say "bye bye" to all conglomerates and holding companies and that wouldn't make sense.

And what Partner24 said.

ERICOPOLY

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Re: WSJ: Buffett's Latest Tax Break
« Reply #7 on: August 30, 2011, 08:34:54 AM »
You could then nearly say "bye bye" to all conglomerates and holding companies and that wouldn't make sense.

Not the way I would structure it.

I'd give an exemption based on ownership.

In the case of BAC, they own 0% so I'd tax all dividends as normal corporate income.  Berkshire does not own BAC, so it's not double-taxation.  They are separate companies.

However, if Berkshire held a 10% stake in the common, then I'd exempt 10% of the dividend from taxation.  And if they owned 100% (takeover), then the dividends could be enjoyed without any taxation.


ERICOPOLY

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Re: WSJ: Buffett's Latest Tax Break
« Reply #8 on: August 30, 2011, 10:08:36 AM »
Because dividends received by natural persons, as opposed to legal persons, are realized income that is immediately usable for consumption. 

A consumption tax would most elegantly address that, not an income tax.

I don't see the connection between income taxes and consumption.  Especially when the conversation turns towards coddling the billionaires, who are the least likely to consume their entire income.  One could justify a lower tax rate for them on these grounds.

AZ_Value

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Re: WSJ: Buffett's Latest Tax Break
« Reply #9 on: August 30, 2011, 10:09:45 AM »
But then, why not tax intra-corporate dividends too?

+1 
 
I have yet to see him advocate a tax that would materially impact him.

I also think this debate will lead nowhere as generally speaking people have their mind made up on this subject and I am yet to see, on this board or elsewhere, a person engaging in this debate for hours (or days) with this sight set on "Government stay away from my money and don't tax me" and walk away convinced otherwise; or vice versa.

However, I'll say that I find it a bit disingenuous to say that WEB has never advocated a tax that would materially impact him when in his latest Oped he told us that he paid $7M in taxes which represented 17.4% of his taxable income so about $40M and he was giving as an example how the top earners used to pay about 29% on average a couple of decades ago, so we'll safely assume that he is OK paying that much, that would have meant him paying ~$11.6M. All this math is very high level but take into account how many years he's been advocating for fairness and you'll get to some pretty material numbers in my opinion.

Ron