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.

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.

There are doctors and companies that should be sued. There was a plastic surgeon here who used hardware store materials, nails and such, for in-office surgical procedures. He caused no end of problems for patients, but it’s hard to sue in Oklahoma, either doctors or companies. And companies do bad things, too, don’t they? I can think of a few in Oklahoma that should have been sued big time, including one that knew it was on the ropes and still had the company president swanning about, on TV and radio stations, “pumping” the stock. People invested. People got hurt! And, hey, Oklahoma is not the only “business-friendly” state. Ask yourself if the politicians care about you…or about the lobbyists who cause huge sums to be paid for political campaigns, fancy lunches and junkets?

Have a wonderful week and remember that our country is great, even though yours truly gets a little negative about politicians from time to time. There does not seem to be much greatness in the current crop, on both sides of the aisle. However, every once in a while, someone comes along who surprises us and actually is a terrific leader. We need a few of those pretty quickly, so please pray that they come along, okay?

 

For more from Richard Hoe, see:

April Fools

Three Gs: Greece, Greed & Greatness

High Gas Prices: More Than One Way to Cope