All the Bush Tax Cuts

[Gary2]

Let's not forget the corporation paying the dividend is likely paying 35% Federal tax already. Add to that a state corporate tax of ~5+%, Federal individual income tax of 15% and state individual tax of, say, another 5+% and the government is now getting 60%.

I don't really want to get into the debate, but I will check your math: The individual taxes are only paid on the dividend received, not the entire corporate net profit.

For simplicity, assuming combined federal + state corporate tax rate of 40%, and combined individual tax rate of 20%, and assuming that all net profits after taxes are distributed, then $100 of net profit before taxes results in $40 of taxes at the corporate level, and $12 at the individual level, for a total of 52%, not 60%.

For the pre-Bush numbers, assuming 44% for each (again for simplicity), then it's $44 at the corporate level and $25 at the individual level, for a total of 69%, not 90%.

Feel free to correct me if this is wrong, as I don't claim any experience with C-Corp taxation.

[Kram BergGold]

Answer to original question

The tax loss casued by the Bush tax cuts is about 2.15 trillion. Then by Obama allowing tthe cuts to continue there will be a loss of about .65 trillion. So total is 2.8 trillion. Coincidently, the talk of how much to reduce the debt by is like 3 trillion. So the clowns in DC are basically trying to undo the harm of the Bush/Obama tax cuts. Shame on all of them.

[ttbtaxes]

I don't really want to get into the debate, but I will check your math: The individual taxes are only paid on the dividend received, not the entire corporate net profit.

For simplicity, assuming combined federal + state corporate tax rate of 40%, and combined individual tax rate of 20%, and assuming that all net profits after taxes are distributed, then $100 of net profit before taxes results in $40 of taxes at the corporate level, and $12 at the individual level, for a total of 52%, not 60%.

For the pre-Bush numbers, assuming 44% for each (again for simplicity), then it's $44 at the corporate level and $25 at the individual level, for a total of 69%, not 90%.

Feel free to correct me if this is wrong, as I don't claim any experience with C-Corp taxation.

Gary .....

1) The dividend from a a C corporation is double taxed. In your example, the C corporation paid a dividend of $100 and also paid $40 in tax. The shareholder reported $100 in dividend income and paid $20 tax for a total tax of 60%.

2) Pre-Bush dividends were taxed as ordinary income and thus could be taxed at 39.6% at BOTH the individual and corporate levels. That's 80% Federal. Add NYS corporate tax rate of ~7% and individual income tax rate of ~9% tax rate and NYC rate of ~4%.

That combines for a Federal/state/city tax rate of 100%. Return to Pre-Bush tax law and that's exactly what happens to some. In 2013, you add the Obama 3.8% surtax on investment income and end up with a 104% tax rate.

Does anyone on this board think the government is entitled to a 100% -104% tax?

[Kram BergGold]

Answer to Original ?

The Bush tax cuts atributable to years up to 12/31/10 are about 2.15 trillion. The cuts Obama allowed to continue will amount to about .65 trillion. So the total is 2.8 trillion. Isn't this about the amount the fools in DC are trying to cut from the deficit.

[Gary2]

1) The dividend from a a C corporation is double taxed. In your example, the C corporation paid a dividend of $100 and also paid $40 in tax. The shareholder reported $100 in dividend income and paid $20 tax for a total tax of 60%.

If the corporation paid $40 in taxes and $100 to the shareholder, they must have had $140 from somewhere - presumably profits. So the tax rate on that is 60/140, or about 43%. I assume most companies retain some earnings for growth, so the effective tax rate would be even less.

Yes, the dividends are double taxed, but they don't represent the entire profit. I suppose one might look at the combined marginal tax rate on dividends as 60%, but the effective tax rate is less than the marginal rate.

Or turn it around: Do you suppose that if a company chooses not to pay any dividends, does that mean their tax rate is 0%?

[Burke]

Bush was no longer the president when the current extension of the cuts was signed, so whoever is sitting in the seat when pen is put to paper gets the credit.

And I believe that because Obama felt he had to accept those extensions in order to get the rest of what he wanted in that legislation, it is a big part of why he seems to be intransigent now on the matter. It's political gamesmanship. I expect the Bush administration only sunsetted the cuts to make the numbers work under the rules in effect, all along expecting Congress to extend; and Obama accepted them to get what he wanted, all along figuring he would get another chance to shoot them down. And round and round we go, ........

[joanmcq]

I agree. And the rest of the world is literally shaking their heads and wondering what type of system we have where the 'leaders' of our country would risk voluntary default on our debts just to make a frikkin political point.

This is really sad.

[ttbtaxes]

If the corporation paid $40 in taxes and $100 to the shareholder, they must have had $140 from somewhere - presumably profits. So the tax rate on that is 60/140, or about 43%. I assume most companies retain some earnings for growth, so the effective tax rate would be even less.

Yes, the dividends are double taxed, but they don't represent the entire profit. I suppose one might look at the combined marginal tax rate on dividends as 60%, but the effective tax rate is less than the marginal rate.

Or turn it around: Do you suppose that if a company chooses not to pay any dividends, does that mean their tax rate is 0%?

I'm not going to argue the point any longer. Using my example, the answer to your second question is 47%.