We all know, financial professionals that we are, about dividends being taxed twice. Even so, the nonsense of the double trouble bears repeating, just so we don’t get to going all pruny and feeling sorry for that big and bloated government in Washington. As if any of us would, right? As if.
Company X makes a net profit, let’s say $100 million, and it decides to send 50% of that amount to shareholders in the form of dividends. (Let’s imagine we are some of those shareholders, okay?) Company X pays tax on the entire $100 million, including the $50 million it sends out in the form of dividends.
The net result in this three-way contest? Government: 2; Company: 0; Shareholder: 0. The government collects about 35% in tax from the company, even though the company didn’t “keep” those dividends, it sent them to us, its shareholders. That’s one point. And the government collects another 15% from the hapless shareholder. That’s another point. The federales collect up to 50% of the dividend. Say amen if you hear a giant ripping sound.
The tax code is needlessly complex, and the patchwork nature of the collection rules and processes that require some 70,000 pages of explanation and exposition are due to — guess what? — the efforts of lobbyists for special interests.
What Your Peers Are Reading
While I’m on the subject of special interests, the states that want to limit liability are not worried about liability. Instead, they want to be “friendly” to professionals who have expensive lobbyists providing care and feeding (and reelection help) for politicos. Here’s a big surprise: doctors don’t want to be sued when they screw up. Fortunately, screw-ups are a relatively small part of medical costs. (Last I looked, they were around 5% or less.) But the way the politicians tell it, you’d think doctors were leaving cities in droves because of liability problems.
Here’s another big surprise: companies that manufacture things don’t want to be sued, at least not for much, when products they make go bump and cause a problem. To hear the politicians tell it, no company will make anything ever again if liability is not limited.