a reply to: CriticalStinker
It's not 15% in taxes. It's an additional
15% in taxes on unearned income for people.
A corporation is not a person. They have some of the same abilities legally as a person, like the ability to sign a contract, but a corporation is
actually a group of people who all contribute to it to earn money from it. It's a pretty simple idea in theory: each person who contributes something
of value (money) to a pool owns a part of that pool, based on how much they contributed. Stock is simply partial ownership.
Many different people own stock, not just hedge fund managers and power brokers. Most retirement accounts also are based in stock, since stock is a
good way to earn a passive income. Smaller retirement accounts may own a part of a stock fund, instead of actual stock, but they still own a part of a
So when a corporation is taxed on profit, that tax is above and beyond what the stockowners pay.
Let me give an example: United Thingamabobs (UT) is a corporation that makes thingamabobs. It was started by a group of, say, 100 people who pooled
their money to start it. Each person who helped start it received stock commensurate to what they put in to start it. Once UT started up, everyone
with stock voted for someone to run it, and the winners became the Board of Directors. They hired a CEO, who hired the employees and bought the
equipment, and the people who contributed to it just sat back to let their investment pay them back.
So UT spends a year making thingamabobs. At the end of that year, the accountant for UT figures up their profit. Say they made $1,000,000. Now,
there's 10,000 shares of stock on UT, spread among those who own it. Each share of stock entitles the stockholder to 1/10,000 of that million, or
$100. So let's say UT's Board of Directors decides to pay out all of that profit as dividends.
UT has to pay taxes first. 15%, say. So that's $150,000 they pay in taxes. Now the profit is less, only $850,000. That means that when UT pays out
dividends, each stock entitles the holder to only $85 instead of $100. The money is sent out, and now the stockholders pay their income tax on that
$85 per share. Let's say that's another 15%. Now each stock has netted them a return of $72.25.
Here's the problem, now. One of the stockholders makes $1,000,000 a year and lives well. Another one makes $15,000 a year and is barely able to make
ends meet eating cheap food. Yet, both of them just paid 15% on that part of their income. There is no allowance for this person who makes so little
they don't need to be taxed as heavy as the millionaire... the money is taxed before anyone knows whose it is.
The little old lady eating dog food is supposed to pay nothing in taxes, but in this case she still paid 15% The millionaire may be supposed to pay
40%, but he pays 49%. So instead of that tax schedule being from 0-40%, it is instead 15-49%. In short, the corporate tax hurts the little person more
than the wealthy. Worse, the little old lady with stock from way back when is depending on that stock, which was her retirement, for everything she
has. That's how she planned for her retirement. The millionaire makes money from all sorts of things... maybe he's a CEO of another company. So UT's
taxation is taxing the old retired woman's retirement, everything she has, but it is only taxing a small percentage of the millionaire's income at the
All corporate taxation is a tax on retirements.
At the same time, the corporate tax is keeping UT from expanding. Maybe they want to make sparkly green thingamabobs in addition to the colors they
already make. Well, that takes more equipment and employees. They make a profit, yes, and they could use it to get what they need to expand and hire
more people, but if they did that the stockholders wouldn't get enough in dividends that year. The little old lady wouldn't get any money to live on!
So they can't expand as rapidly.
Or maybe they decide to expand anyway. Remember, that millionaire is a CEO of another company, so UT's CEO probably has stock in other companies too.
He is the guy who makes that decision to pay out dividends. Now, is he going to look at the little old lady who needs that money to get by? Or is he
going to look at it like, if we do this this year, then next year we'll be able to pay out $150 a share! He doesn't even know the little old lady, but
he knows how to reinvest to increase profits.
So the result is the little old lady dies from exposure that year, but next year UT pays the millionaires $150 per share. Now, maybe if UT hadn't had
to cut that $15 per share from their dividends, they could have still paid more out and started making sparkly green thingamabobs. So the corporate
tax, in return for overtaxing the poor and undertaxing the wealthy, has also slowed the economy!
Now, if that's what you think we need to do, overtax the poor, undertax the wealthy, and slow the economy, then higher corporate taxes is the way to
go. I personally think we should abolish all corporate taxes and instead tax the individuals directly, so we can make the taxation more fair and not
slow the economy in the process.
(Oh, and the corporate tax rate is already something like 20%, plus or minus. We're taking about an additional