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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: limtex who wrote (98065)	7/27/2002 1:39:34 PM
From: Zeev Hed	Read Replies (2) \| Respond to of 99280

I don't think that is a good idea. If at all you want to change the corporate tax code, make dividends tax deductible to corporations (like interest is) and don't tax dividends to individuals (nor interest). That will cause balance sheets to be weighed more toward equities, and less debt and reduce the tax evasion process of companies buying back their stock, and make the tax rate of corporations exactly equal to the top rate for individuals. It used to be that the Tax receipts from corporations were about 30% or more of total IRS receipts, now they are less than 18%. I believe the reason might have been that in the early sixties the marginal tax rate of individual was punitive at some 70% or so, while corporate taxes were roughly at the 40% level. Many wealthy individuals simply chose to get taxed as "corporations". Now that the marginal tax rates are closer ($35% and 39.6%) the impact is smaller and more individual income might be taxed as individual income. Still, many of the super wealthy will fight for that marginal 10% difference in differential marginal tax rate. There is no rational reason to put the tax rate at the same level particularly if dividends not be taxed and be expensed by corporations (that should be revenue neutral), however, the capital structure of corporate America will become much more rational and more relying on dividend paying equity rather than interest paying debt. More companies would then be paying dividends than doing those stock buy backs. Zeev

To: limtex who wrote (98065)	7/27/2002 8:55:21 PM
From: bacchus_ii	Respond to of 99280

*RE:"ZH -How about abolishing capital gains tax?"* Depend if you are making money or losing some... Extract from my post #reply-15783290 : I don't know well how other Canadian fellow on this board did in 2000 but I guess many really suffered tax-wise in 2000. With the year starting at 75% gain taxable, then 66% in spring, and finally 50% in summer, the big problem for "silicon-investor" is that big profit were taxed at 75% and big loss at second half of 2000 could cover gain at only 50%. For example, an early gain of 1 million in AMD at the beginning of 2000 followed by a 1 million lost in Autumn would result in having to pay income tax on 250,000 even if you didn’t make any money in the year. It's not unlike ATM in USA except that ATM apply to a minority while the Canadian case apply to about any "Silicon-Investor" (save LT buy and hold investor). Personally I didn’t lose all my early 2000 gain, only 1/3 of them, but this unusual situation in rapid decreasing taxable gain did affect my tax bill quite a lot. Gottfried_II