In response to:
Part 1
Point of note on Dividends and Capital Gains.
When a sole proprietor owns a business he realizes a profit which is considered his personal income. After the expenses (the cost fo doing business) are established, what is left over is his income for his personal livelyhood.
In a corporation the Stock Holder is the Owner, and the Profits are distributed to the owners in the form of Dividends which are taxed as Capital Gains. This is because the Corporation's profits have already been taxed as Corporate Profits and therefor the distribution of such is the distribution of already Taxed Money, making taxation of “Qualified Dividends” a Double Taxation.
“Bottom line…would raising taxes on the wealthiest Americans have a chilling effect on hiring?”
It was Matt Lauer’s final interview question for his guest, on last Tuesday’s episode of NBC-TV’s “Today” show.
“No,” the guest adamantly replied. “No… and I think it would have a great effect in terms of the morale of the middle class..”
The guest was famed investor Warren Buffett, CEO of the Berkshire Hathaway holding company and a personal friend of President Obama (and by the way, did you know that Obama calls him, and not the other way around? Mr. Buffett would...
However, the way it happens now is that the money will first be taxed as Corporate Profit at a rate of 35% thus making the distribution to the owners not $10,000.00 each but $6,500.00 each. That money is then added to their personal income as a Qualified Divident and taxed at the rate of 15% or $975.00 (with no personal deductions or exemptions)
So the effective tax rate paid by a Shareholder of a corporation under Qualifying Dividends is 44.75%.
That's higher than the rest of us pay. But because people only see the $975.00 everyone thinks they are getting away with a dodge.
When in fact they are paying more than the rest of us.
P.S. Buffet's Secretary makes over $400,000.00 a year.
Example: A corporation with 100 Stockholders each owning 100 shares of stock (that is 10,000 shares of common stock.)
The Corporation announces a Profit (after all expenses) of $1,000,000.00 to be distributed to the Shareholders.
In a proper situation, each stockholder would receive from the corporation $10,000.00 to be added to their personal income and it would be taxed at the Marginal Rate of 35% or $3,500.00 in taxes would be paid on the Dividend. (subject to personal Deductions etc.)