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Author: gracepeace Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8880  
Subject: Dividend Tax Increase Date: 11/15/2012 7:26 AM
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Here is an interesting perspective on the potential dividend tax increase.
Gracepeace

http://seekingalpha.com/article/1007741-putting-a-potential-...
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Author: Donna405 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7624 of 8880
Subject: Re: Dividend Tax Increase Date: 11/15/2012 8:54 PM
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I did not go broke before the Bush tax cuts and will not go broke if they expire. Quite frankly, I was against the cuts, knowing they could possibly "bankrupt" the country.

I still do not understand the great concern.

Donna

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Author: PuddinHead42 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7625 of 8880
Subject: Re: Dividend Tax Increase Date: 11/15/2012 11:39 PM
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I still do not understand the great concern.

Well, if you make $100,000 in dividend and the tax rate doubles you are certainly bummed a bit. So then you start looking around and say, hmmm, I can invest in tax free munis and get a better return on my money. So you sell you divys, thus driving down the stock price.

Now, if you are a div growth reinvestor, then maybe you are actually happy. All your stocks go down in price, but since you never sell, you are now buying back at a lower price with a higher return.


He is a tax change I would like to consider: The first $5000 (or $10k) of dividend, interest and cap gains are tax free. Then you tax the rest at a higher rate: 20% or maybe marginal rate. (or next $5k is 20%, the rest at margin) For most people this is a great benefit and encourages savings and investing in dividend stocks. For the extremely rich, it is just a drop in the bucket, so they end up paying more taxes...until they figure out where to invest with less tax pain, then the Gov does not get the income they expect.

When rates were reduced, didn't the revenue from those sources actually go up? And didn't corporations increase dividend payouts (which are double taxed so that helps gov revenues).

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7626 of 8880
Subject: Re: Dividend Tax Increase Date: 11/16/2012 12:04 PM
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Everyone seems to like the govt services provided, but wants someone else to make up the deficits.

But it still comes down to this: either we pay our share (or accept the necessary cuts) or we pass it on to our grandkids and let them worry about it.

We have known about the Social Security and Medicare problems for decades, but no one wants to address them until they absolutely must.

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7627 of 8880
Subject: Re: Dividend Tax Increase Date: 11/16/2012 2:36 PM
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I still do not understand the great concern.

It depends on how and where you invest.

If all your investments are in tax deferred accounts, more than likely its no big deal. So you lose a little money from your savings dividends.

Someone like myself (and many others), are able to max out our retirement accounts and save for retirement in a taxable account. So you increase/double, whatever the dividend and cap gains rate, you delay my retirement.

Besides, I've never seen a government (local, state, nor federal) that has wisely spent a tax increase. If it all went to the debt, I'll squeal a little less. But more often than not it goes to some pet program.

JLC

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Author: desertdaveataol Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7628 of 8880
Subject: Re: Dividend Tax Increase Date: 11/16/2012 7:02 PM
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So then you start looking around and say, hmmm, I can invest in tax free munis and get a better return on my money.

Munis huh?

Me thinks your money would be safer at the craps tables of Las Vegas.

Have you looked into opening a savings/checking/CD in the local currency in Canada or Australia?

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Author: alstroemeria Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7629 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 7:40 AM
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So you increase/double, whatever the dividend and cap gains rate, you delay my retirement.

It may help to think of the lower tax rate as the aberration and a return to the former rate as normal.

I agree with having the first, say, $6,000 or $12,000 ($500 or $1,000/month) in divvies either taxed at a very low rate (say 10%) or not at all. In fact, I'd include interest--lots of retirees invest more in fixed income than stocks, and encouraging people to save during their working years is so important. Maybe restrict the tax break to age 60+, but I think too many people aren't sufficiently future-oriented for that to work as inventive to invest in one's 20s-50s. Otherwise, tax divvies/interest at one's marginal rate.

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Author: alstroemeria Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7630 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 9:05 AM
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inventive to invest

what an inventive way to spell 'incentive' ;-)

At least it beats "incentive to incest" =8~0

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Author: Rayvt Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7631 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 10:32 AM
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Otherwise, tax divvies/interest at one's marginal rate.

1) Dividends are already taxed once, at the corporate level. What you are suggesting would mean that dividends would be double and triple taxed.
2) Incentives matter. People (and corporations) would change their behavior to negate the increased tax.
3) Incentives matter. Investments are the driver of economic growth. Punishing investments & investors will result in reduced growth.

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Author: alstroemeria Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7633 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 12:49 PM
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1) Dividends are already taxed once, at the corporate level. What you are suggesting would mean that dividends would be double and triple taxed.

Per individual, they are taxed once. Like every dollar that passes through a variety of hands, it is taxed by the hand, not in some single absolute sense. Perhaps it's the anti-collective hangup that prevetns you from seeing this?

2) Incentives matter. People (and corporations) would change their behavior to negate the increased tax.

Not an increase, just a return to normalcy after W screwed it up. Incentives DO matter, though, which is why we need to incentivize business owners to invest in their business rather than pay themselves beyond the dreams of avarice.

3) Incentives matter. Investments are the driver of economic growth. Punishing investments & investors will result in reduced growth.

Good-paying, more secure middle class jobs are the biggest driver of economic growth. In aggregate, we are the big spenders. And Social Security, which keeps the elderly not only out of poverty, but spending. Most seniors live on at least 50% Social Security. Ask any senior below the top 5-10% how their spending would be affected without it. As an example, my mother lives on $3k/month, about half investments (mostly bond interest) and half Social Security. Without SS, she'd move from the middle class to the lower middle class or even the poor.

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7634 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 2:42 PM
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No one seems to mention that dividends in your 410k or IRA are not taxed until you withdraw them, and then they are taxed as income. If you invest in REITs, the company pays no tax so long as they pay out 90% of their taxable income as dividends. This avoids the double tax problem. But the dividends are taxed as income. Lastly dividends from most preferred stock are unqualified and are taxed as income. We do all of this, are very happy with our dividends, and wonder what tall the fuss is.

I strongly believe that unearned income should be taxed at the income tax level, and this includes almost all "long term" capital gains from stocks. After the IPO or Secondary Offering, investing in the stocks does nothing for the company and is just another form of gambling. I don't understand why they shouldn't be taxed as income. To tax these at less than income, is just a gift from the government - welfare for the wealthy.

IPOs and Secondary offerings are another case as companies might be able to benefit from these. Such stock might be taxed as a lower rate, IMHO.

brucedoe

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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7635 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 4:48 PM
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Good-paying, more secure middle class jobs are the biggest driver of economic growth

That has been quoted by every candidate I managed to hear prior to the last election. I didn't hear anyone say they wanted fewer jobs.

But where do 'secure middle class' jobs come from? Listening to our current leadership, most come from the Government, or directly from Government largess. No....they come from corporations making things or providing services that consumers and businesses, domestic and overseas, are willing to buy. To do this will require companies to plan carefully, raise capital, and manufacture/provide services profitably. The investors who provide this capital, individuals and institiutions, will expect a return on their investment. For many mid cap and most large companies, at least half of the long term return will come from dividends. Corporate dividend policy is a complex dynamic, but is crucial to stock price stability to investors and the ability to use company stock as an incentive/reward to key employees, who are ultimately the ones whose decisions will make the company profitable or not. Corporate dividend policy is one of the most important decisions a company will make in its life cycle.

A change in the taxation of dividends must be thought through very carefully.

BruceM

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Author: MadCapitalist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7637 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 5:35 PM
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I strongly believe that unearned income should be taxed at the income tax level, and this includes almost all "long term" capital gains from stocks. After the IPO or Secondary Offering, investing in the stocks does nothing for the company and is just another form of gambling. I don't understand why they shouldn't be taxed as income. To tax these at less than income, is just a gift from the government - welfare for the wealthy.

I assume you mean taxed at the "ordinary income" tax rate. If so, you should be aware that the empirical evidence makes a compelling case that different types of taxes have different impacts on economic growth, and taxes on capital income are extremely damaging to economic growth. Highly progressive personal income taxes are also very destructive to growth.

For more on the relationship between taxes and economic growth, see this post:

http://boards.fool.com/taxes-and-economic-growth-30045166.as...

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Author: PuddinHead42 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7639 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 5:54 PM
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Well this has turned into quite the political thread, so I will go with it and hope to not offend.

Paulekler: Everyone seems to like the govt services provided, but wants someone else to make up the deficits.

Agree completely, it is always easier to have someone else take care of it.

But it still comes down to this: either we pay our share (or accept the necessary cuts) or we pass it on to our grandkids and let them worry about it.

As I recall, in Iraq, the US wanted all oil revenues to be distributed to the people then be taxed by the Gov. That way, everyone had a real stake and could see the cost of the Gov. If they just got a "post-tax" payout they would never know what they are missing. For that same reason, I would like to see all people pay an INCOME tax (at some rate) so they can see their taxes rising as "services" rise. Maybe there would be a little more care about what the gov is spending.

For me, I don't like all the services, even ones I get. Way too many "services", so many of which are inefficient, possibly archaic. Here is a list of all agencies and departments.
http://www.usa.gov/directory/federal/index.shtml

. How about we freeze the budgets for some agencies at today's level for 5-10 years (and I don't mean freeze the rate of increase, freeze the actual so that they even decline with deflation). I would freeze Dept of Ed (what is the most important thing they do?), Dept of Ag (Food prices are high, farmers doing just fine), Administration on Aging (huh?), Agricultural Marketing Service (is there an Oil marketing service?), (Sell Amtrak), Arctic Research Commission, Arthritis and Musculoskeletal Interagency Coordinating Committee (really?), Barry M. Goldwater Scholarship and Excellence in Education Program (is that important), Bonneville Power Administration (let that go commercial and regulate it), Citizens' Stamp Advisory Committee, Commission on International Religious Freedom (is that our job), Congress—U.S. House of Representatives and Senate (Freeze benefits and salaries 5 years, including staffing budgets, all they do is fight anyway, no pensions, only 401k), Freeze DOE 5 years, commercialize TSA inspectors, they will be more efficient like they are in the San Francisco demo project, Economic Analysis, Bureau of (they are always wrong, rely on common consensus), English Language Acquisition Office...

Too tired to choose any beyond the "E" category. Note, I am not saying eliminate these, just freeze budgets, but I bet there are a few we would never miss.

But the big stuff is in Social Security and Welfare, Medicare/Medicaid as you said. Spineless Pols on both sides need to put on their man pants and fix them. Start increasing (full eligibility) retirement age, increase the tax base way above the current $113K salary, means test. Signal to people that they better save more too.

Welfare: maybe the payments should not get any COLA adjustment so they become less valuable and there is more incentive to fend for yourself. Plenty of people have snuck across our border and worked their butts off in dirty jobs, no reason a lot others could not work just as hard. How about a transition where you can pay someone less then min wage for 6 months while you train them for full min-wage jobs and beyond. welfare can subsidize the make up to equal minimum wage.

Medicare: you have 50 states, try 50 experiments to see what might be more efficient. Allow some block grants and see what states do. Allow inventive changes to rules by states and see what works better.

Everyone seems to like the govt services provided, but wants someone else to make up the deficits.

the really sad thing is everyone seems to hate congress (approval 10%??) but they keep electing their guys! Go figure.

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Author: PuddinHead42 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7640 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 6:26 PM
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Alstroemeria:
Per individual, they are taxed once. Like every dollar that passes through a variety of hands, it is taxed by the hand, not in some single absolute sense. Perhaps it's the anti-collective hangup that prevetns you from seeing this?

Warren Buffet refuses to pay dividends with BRK because they are double taxed. He also refused to pay the estate tax, instead giving it all away to more efficient charities.

Not an increase, just a return to normalcy after W screwed it up

Din't revenues from dividends increase when that happened? Lots of companies increased their dividends (so now the gov gets to double tax more money). A good number of companies also instituted new dividends. Nothing is static, people will change behavior as necessary. Maybe a lot of companies will stop increasing dividends.

Incentives DO matter, though, which is why we need to incentivize business owners to invest in their business rather than pay themselves beyond the dreams of avarice.

Let's just have to government stay out of the incentive game as much as possible, because they are not good at making decisions for other people. And so what if a business owner wants to pay themselves "too much money"? If another business can undersell them, their "avarice" will have put them out of business. Bill Gates always had a small salary, but is super rich because he kept his ownership in the company. Is he greedy, is Buffett? A lot or people despised Gates, not for anything he did, but just for how much wealth he had, regardless of how much productivity he added to the world economy. His productivity products created thousands of direct and tens of thousands more of indirect jobs and helped raise the standard of living for a lot of people. Only once he gave away all his money (to his foundation) and started saving lives though charity did those hates start to soften up. And so what if a rich person pays people to build a $50 million dollar mansion, or pays people to sell him overpriced shoes or an overpriced boat or car? So what if he stays in 5 start hotels where he pays to have 5-10 people cater to his needs. Those are jobs - maybe as good as the jobs she could have created by expanding her business instead of paying herself an extra $200k per year.


BruceDoe
No one seems to mention that dividends in your 410k or IRA are not taxed until you withdraw them, and then they are taxed as income

But people adjust to that. If you diversify and have some income from dividend and some from interest (bonds, CDs, preferred stock), then the interest stream should be IN your 401k and the dividend stream should be OUTSIDE of your 401k.

I strongly believe that unearned income should be taxed at the income tax level, and this includes almost all "long term" capital gains from stocks

I will buy this if all other aspects of the tax system get fixed at the same time. Why should a renter help subsidize my mortgage? Why should an atheist subsidize my tithing to a church? Implement the PuddinHead 3-tier "flat" tax and get rid of all deductions and credits. If you want to provide government assistance to people, don't do it with the tax code, do it through the Department Of Government Assistance.

(Oh, that carried-interest loophole seems particularly easy to abuse)


Anyway, everyone stay cool, hang loose and enjoy life. We can't solve any problems here other than our own investment ones.

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Author: MadCapitalist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7641 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 7:10 PM
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As I recall, in Iraq, the US wanted all oil revenues to be distributed to the people then be taxed by the Gov. That way, everyone had a real stake and could see the cost of the Gov. If they just got a "post-tax" payout they would never know what they are missing. For that same reason, I would like to see all people pay an INCOME tax (at some rate) so they can see their taxes rising as "services" rise. Maybe there would be a little more care about what the gov is spending.

I agree with this completely. I once proposed a *true* flat tax, meaning that there are *no* exemptions, personal deductions, or tax-free income, and *all* income would be subject to one low flat rate. Everyone would have the exact same marginal and effective tax rates. The tax rate would be pretty low because the tax base would be maximized by eliminating exemptions, deductions, and tax-free income.

http://boards.fool.com/ot-the-madcapitalist-tax-reform-act-o...

This wouldn't fly with a lot of people though, so we could subsidize the exact same things as we do now through the tax code, except do it *explicitly* through spending.

For example, the tax code currently subsidizes home ownership through mortgage interest and real estate tax deductions for those who itemize deductions (i.e. mainly taxpayers with higher incomes). We could still subsidize this by forcing citizens to go to a different government department and filing a separate form to collect their goodies. Then the government could send them a check, making the spending completely explicit.

Of course, this wouldn't fly with our politicians, because if it's one thing that they hate, it's making things explicit and transparent.

I was trying to come up with a good name for the new department to distribute the goodies. The one that I came up with was:

Department of Government Goodies that I Didn't Earn but Still Feel that I'm Entitled to Just for Being Alive

It just rolls off the tongue. :-)

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Author: culcha Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7642 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 10:34 PM
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Warren Buffet refuses to pay dividends with BRK because they are double taxed.

Is that his reason? I thought he reasoned that he could make more money himself with the $$ than others could.

Actually, the "double taxed" thing sounds kind of strange to me, whereas Buffett always sounds sensible. Imagine if I bought things at a store, paying for the things with the money I had saved from my job, and then refused to pay any sales tax because my money had already been taxed once -- when I received it as income. My already-been-taxed-money is fine just as it is, I say. I don't need to add some additional tax percentage to it.

culcha

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Author: MadCapitalist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7643 of 8880
Subject: Re: Dividend Tax Increase Date: 11/17/2012 11:51 PM
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Warren Buffet refuses to pay dividends with BRK because they are double taxed.

Is that his reason? I thought he reasoned that he could make more money himself with the $$ than others could.


Buffett wrote about dividend policy in the 1984 letter to shareholders. I don't recall Buffett ever mentioning double taxation as the reason that Berkshire doesn't pay dividends.

“Unrestricted earnings should be retained only when there is a reasonable prospect - backed preferably by historical evidence or, when appropriate, by a thoughtful analysis of the future - that for every dollar retained by the corporation, at least one dollar of market value will be created for owners. This will happen only if the capital retained produces incremental earnings equal to, or above, those generally available to investors.”
1984 Letter to Berkshire Hathaway shareholders
http://www.berkshirehathaway.com/letters/1984.html

Can Buffett produce incremental earnings equal to, or above, those generally available to investors? It's open to debate, but I would say yes.

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Author: alstroemeria Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7645 of 8880
Subject: Re: Dividend Tax Increase Date: 11/18/2012 8:42 AM
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But the big stuff is in Social Security and Welfare, Medicare/Medicaid as you said.

Social Security pays its own way--one of the few govt programs that hasn't added to the deficit, so it should be off the table for dealing with the deficit.

We should, however, raise the income cap faster to handle the future, similar to how we increased the FICA tax rate and made SS income taxable during the Reagan Administration to cover the future shortfall of baby boomer retirement. I've read that if we followed the Greenspan Commission's full recommendations, the income cap today would be $180k, not $110.

Start increasing (full eligibility) retirement age

Already done as far as it should go IMO. Employers generally do not want employees over 60 (or in many cases over 55 or even over 50!), let alone over 65. Over half the population over 60 has experienced a significant decrease in cognitive powers and energy levels that interfere with high performance on the job. This is even more true of people with physically demanding jobs.

increase the tax base way above the current $113K salary

Yes!

means test

In what way? We already means test by taxing 50% and 85% of SS income over certain income levels. And we will lose even more support for SS from the top 20% if we greatly reduce or eliminate their SS income.

A better way to reduce SS outgo might be to phase out the non-earning/lower-earning spouses's automatic 50% benefit while both spouses are still living. I know many wives of high-earning men who never worked for pay (eg, Ann Romney) but get a much higher SS benefit than women who worked hard for decades--IMO this isn't right. These days the vast majority of women work for pay, unlike the 30s when SS was designed and few women worked outside the home (except for poor women who often took in washing, did babysitting, laundry and house cleaning and so forth--but they didn't know about setting up to pay SS).

Signal to people that they better save more too.

We do this already, but can do better. But it's kind of cruel when the paychecks of the first 3 income quintiles are stagnant while expenses rise. But many people, including some who post elsewhere on TMF, live on incomes of $30k or less. As an RVer I read numerous full-timer RV blogs, and some of those folks live on $24k or even $12k.

Welfare: maybe the payments should not get any COLA adjustment so they become less valuable and there is more incentive to fend for yourself.

If corporate America hadn't off-shored so many jobs, if govt hadn't gotten rid of so many jobs (esp state & local govt), if the middle class weren't so poorly paid, which causes fewer small businesses to succeed, this might be a reasonable plan. I note that it's almost impossible to get welfare unless you have children in the home.

Plenty of people have snuck across our border and worked their butts off in dirty jobs, no reason a lot others could not work just as hard.

They tried that when Alabama pushed out its Mexican agricultural workforce. Black and white Americans alike could not stand up to the physical strain of harvesting crops for a living. Don't know why.

How about a transition where you can pay someone less then min wage for 6 months while you train them for full min-wage jobs and beyond.

I strongly disagree with this. If businesses can;t afford to pay someone minimum wage, how will they afford it 6 months later? Anyway, minimum wage has not kept up with inflation so it's already been cut severely. You used to be able to support yourself on a full-time minimum wage job (I know this because I did it myself in the 70s).

Medicare: you have 50 states, try 50 experiments to see what might be more efficient.

Medicare is already highly efficient, much more so than any private plan, with one exception: it should be able to negotiate drug prices like the VA does. W adding the huge drug benefit without this parameter (along with huge payouts to keep dying old people alive for an additional month or two) are what's causing Medicare to fall short. Also, the tax rate funding the program has been grossly inadequate for decades.

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Author: Ga1Dawg Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7646 of 8880
Subject: Re: Dividend Tax Increase Date: 11/18/2012 11:35 AM
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Start increasing (full eligibility) retirement age
**************************
How many of you guys want to fly on an airline with 70 year old pilots?

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7647 of 8880
Subject: Re: Dividend Tax Increase Date: 11/18/2012 2:29 PM
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Dept of Ag (Food prices are high, farmers doing just fine)

Let's not forget that the USDA meat inspection program is the world standard which nations everywhere seek to emulate.

Although subject to criticism from time to time (from people who think we need more inspections, not fewer) it serves us quite well. Our meat may not be as healthy as some would like, but major disasters are rare.

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Author: Rayvt Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7652 of 8880
Subject: Re: Dividend Tax Increase Date: 11/18/2012 7:48 PM
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Alstroemeria, are you under the impression that debates about tax policy on TMF message boards have any bearing on anything? Even if all of us come to an agreement it doesn't mean squat and it won't have any effect on the tax laws or the IRS.

Too, as evidenced by your naive and incorrect opinions minimum wage, Medicare, and dividend taxation, your policy ideas are feather-weight.

Let's get back to the topic of this board.

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Author: MadCapitalist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7653 of 8880
Subject: Re: Dividend Tax Increase Date: 11/18/2012 8:10 PM
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Otherwise, tax divvies/interest at one's marginal rate.

1) Dividends are already taxed once, at the corporate level. What you are suggesting would mean that dividends would be double and triple taxed.
2) Incentives matter. People (and corporations) would change their behavior to negate the increased tax.
3) Incentives matter. Investments are the driver of economic growth. Punishing investments & investors will result in reduced growth.



4) Dividends aren't income, so don't tax them.

http://boards.fool.com/dividends-arent-income-so-dont-tax-th...

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Author: TerryMcK Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7655 of 8880
Subject: Re: Dividend Tax Increase Date: 11/18/2012 9:21 PM
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How many of you guys want to fly on an airline with 70 year old pilots?

Then they would be in line with the flight attendants.

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Author: alstroemeria Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7656 of 8880
Subject: Re: Dividend Tax Increase Date: 11/18/2012 10:24 PM
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I didn't raise the subject, just responding to it. Like everyone else here, I like to express myself. Feel free to make me a greyling if you don't care to hear it. I prefer to read what everyone has to say. And yes, I, too, prefer to read about good dividend-paying stocks on this board. Particularly since we'll be living mostly on dividends and interest when my husband retires at the end of the year, until we decide to apply for SS. We're sitting on too much cash and need to put it back to work. I'm a kind of nervous investor. Not nervous about dividend tax rates, but about corporate management (too few good stewards around these days it seems) and global economic forces.

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7663 of 8880
Subject: Re: Dividend Tax Increase Date: 11/21/2012 2:09 PM
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alstroemeria

I do not get Social Security, but let me express my opinion. A person is silly not to start taking SS at age 62. After all, you might not make it to 67, and, even if you do, how many more years will you have to live before the increase payments at 67 equal the total of the five years to get there? If you don't need the money, then save it, invest it in something. Just my opinion.

brucedoe

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Author: MadCapitalist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7664 of 8880
Subject: Re: Dividend Tax Increase Date: 11/21/2012 2:58 PM
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alstroemeria

I do not get Social Security, but let me express my opinion. A person is silly not to start taking SS at age 62. After all, you might not make it to 67, and, even if you do, how many more years will you have to live before the increase payments at 67 equal the total of the five years to get there? If you don't need the money, then save it, invest it in something. Just my opinion.

brucedoe


I think it is silly to generalize like that. People have widely varying levels of health or life expectancy at retirement age. What if you are healthy at retirement age and have a family with a history of long life expectancy?

Also, according to the Social Security Administration:

"Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most."

http://www.ssa.gov/pubs/10070.html

Since most people earn their highest incomes right before they retire, this could boost their benefits.

That said, I anticipate taking benefits as soon as I'm eligible but for a different reason. I don't trust the government, and I think we will be forced to cut benefits (I'm 43 now). If I don't need the money, I will just invest it, like you suggested.

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Author: gdett2 Big red star, 1000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7665 of 8880
Subject: Re: Dividend Tax Increase Date: 11/21/2012 4:53 PM
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MadCapitalist,

Since most people earn their highest incomes right before they retire, this could boost their benefits.

This presumes the person is working. Also, previous year earnings are adjusted for inflation so an earlier $15K year may be worth more than a current $25K year for the calculations.

I started SSA for myself at 62 after being retired 7 years. DW became 62 a short time ago but we are not going to start hers probably until 66 or later.

The considerations for us:

1. My SSA closed the gap for normal expenses so we do not hit savings for normal expenses now.
2. Her survivor benefit from me was about 4% higher than her own 62 SSA amount. Her 63 amount is higher.
3. At 66, her benefit will be well ahead of my benefit so if I go first, her SSA will completely replace my contribution.
4. DW is not an investor so I don't want to saddle her with additional distractions on my demise.

While this is not a perfect solution or necessarily the one that makes the most money over time, it is what we deemed the most important factors(Ok, mostly me) to insure DW is in the smoothest and best financial shape in the long term.

Gene

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Author: MadCapitalist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7666 of 8880
Subject: Re: Dividend Tax Increase Date: 11/21/2012 5:11 PM
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MadCapitalist,

Since most people earn their highest incomes right before they retire, this could boost their benefits.

This presumes the person is working. Also, previous year earnings are adjusted for inflation so an earlier $15K year may be worth more than a current $25K year for the calculations.


My point was simply that situations differ, so one size does not fit all.

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Author: desertdaveataol Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7667 of 8880
Subject: Re: Dividend Tax Increase Date: 11/21/2012 6:39 PM
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Thank you for recommending this post to our Best of feature.

I do not get Social Security, but let me express my opinion. A person is silly not to start taking SS at age 62. After all, you might not make it to 67, and, even if you do, how many more years will you have to live before the increase payments at 67 equal the total of the five years to get there? If you don't need the money, then save it, invest it in something.

Truer words were never written. Both my wife and I started taking Social Security right after turning 62.

In addition to the possibility of not living to 67 or very long after that there's the fact that the Social Security Administration is urging you to do so. Talk about a conflict of interest!

If someone wants to "take one for the team" I've no objection to their doing so, but that money was taken from me by force of law and I intend to get every cent back plus interest!

Desert (don't get me started on "opportunity costs") Dave

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Author: desertdaveataol Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7668 of 8880
Subject: Re: Dividend Tax Increase Date: 11/21/2012 6:41 PM
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Also, previous year earnings are adjusted for inflation ...

This is the first I've heard of that.

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Author: MadCapitalist Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7669 of 8880
Subject: Re: Dividend Tax Increase Date: 11/21/2012 6:55 PM
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Also, previous year earnings are adjusted for inflation ...

This is the first I've heard of that.


That was new to me as well.

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Author: gdett2 Big red star, 1000 posts Old School Fool Ticker Guide Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7670 of 8880
Subject: Re: Dividend Tax Increase Date: 11/21/2012 7:03 PM
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Also, previous year earnings are adjusted for inflation ...

This is the first I've heard of that.

That was new to me as well.


Nothing new or ground breaking. SSA has been doing this for a while. Here is an example from their website that shows the indexing factors and adjusted earnings:

http://www.socialsecurity.gov/OACT/ProgData/retirebenefit1.h...

Gene

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Author: Ga1Dawg Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7671 of 8880
Subject: Re: Dividend Tax Increase Date: 11/22/2012 8:50 AM
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but that money was taken from me by force of law and I intend to get every cent back plus interest!

Desert (don't get me started on "opportunity costs") Dave
********************************
Most of us will not live long enough to get our interest, much less principal :-{

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7672 of 8880
Subject: Re: Dividend Tax Increase Date: 11/22/2012 10:33 AM
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There were two years when there was no cost of living increase in SS because of the recession (This was true for retired Federal employees as well, including those in congress.). Increases were assumed again last year and there will be a small increase this year as well.

brucedoe

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Author: wittgenstein Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7673 of 8880
Subject: Re: Dividend Tax Increase Date: 11/23/2012 1:50 PM
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Per individual, they are taxed once. Like every dollar that passes through a variety of hands, it is taxed by the hand, not in some single absolute sense. Perhaps it's the anti-collective hangup that prevetns you from seeing this?

Since I invest in many other countries, I find it interesting that only the US looks at dividend taxation this way. The non-US taxpayer members of my family whom I invest for have never been bothered by this and over the years have found ways to help me with my taxes as well.

However I subscribe to the view that it's folly to let prospective changes in tax laws dictate investment strategy. There are always plenty of opportunities.

jz

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Author: Ga1Dawg Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7675 of 8880
Subject: Re: Dividend Tax Increase Date: 11/24/2012 8:14 AM
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All of the companies that I own or have a beneficial interest in that pay dividends are owned inside IRAs...
Kahuna
******************************************
So you will be taxed on all your dividends and capitol gains as earned income as you make withdrawals from your IRA!

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7676 of 8880
Subject: Re: Dividend Tax Increase Date: 11/24/2012 11:03 AM
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I suppose that ideally one should have had all their non-qualified dividends in an IRA or equivalent and qualified dividends outside.

Non-qualified dividends are REITs and most preferred stocks and bond interest. Maybe I have forgotten something.

brucedoe

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Author: iamski Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7678 of 8880
Subject: Re: Dividend Tax Increase Date: 11/25/2012 12:30 PM
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So you will be taxed on all your dividends and capitol gains as earned income as you make withdrawals from your IRA!

Not if it's in a Roth IRA.

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Author: culcha Big gold star, 5000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7679 of 8880
Subject: Re: Dividend Tax Increase Date: 11/25/2012 12:48 PM
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<So you will be taxed on all your dividends and capitol gains as earned income as you make withdrawals from your IRA!>

Not if it's in a Roth IRA.

That's what I do. All my dividend-paying stocks are in my Roth IRA.

culcha

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Author: Ga1Dawg Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7682 of 8880
Subject: Re: Dividend Tax Increase Date: 11/26/2012 10:46 AM
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Not if it's in a Roth IRA.
**********

That's true, but that's not what he said.

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