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and the seniors.......401k and other retirement plans will benefit not one iota from the Bush plan as I understand it.
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I've not read the text of the proposal, but any reduction of dividend tax should aid 401k's, shouldnt it? To me, it's more or less irrelevant who it helps.

From my perspective, it's more a matter of fairness. Double taxation seems to me to be wrong, and currently dividends does experience double taxations; first the corporate earnings are taxed, then the dividends (which come out of those earnings) are taxed.

Doesn't really matter to me if we give corporations a dividend exemption or if dividends are no longer treated as income, both would eliminate the double taxation.

>>
and the seniors.......401k and other retirement plans will benefit not one iota from the Bush plan as I understand it.
<<
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tiocsti........any and all withdrawls from a 401k,IRA(excluding Roth)or qualified retirement plan are taxed as ordinary income, no matter if the assets grew through capital gains or dividends.
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Let's talk fairness:

I suppose it's fair that a CEO, with the board of directors in his pockets, gets a huge compensation package with bonuses for doing a job at a level of incompetence for which an ordinary employee would be fired.

I suppose it's fair to exempt stock dividends from taxes, while still taxing ordinary savings, even though only the wealthy can afford to put a disproptionate % of "savings" into stocks, because the only risk to them is becoming less wealthy, while the rest of us risk destitution from a collapsing stock market.

I suppose it's fair that a lazy dolt gets into prep school, despite his grades, because he comes from a big doner family, then gets into Yale, despite his grades in prep school, because he comes from a big doner family, then business school, then a series of lucrative business ventures, despite a history of alcoholism, drug abuse, partying, and failure, all because he comes from a well connected family, while many hard-working, smart, never-in-trouble, children of the middle class must acccumulate huge levels of debt to become educated professionals.

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I suppose it's fair to exempt stock dividends from taxes, while still taxing ordinary savings, even though only the wealthy can afford to put a disproptionate % of "savings" into stocks, because the only risk to them is becoming less wealthy, while the rest of us risk destitution from a collapsing stock market.

The fairness comes from avoiding double taxation of income, not from any perceived disparity between the wealthy and the poor.

Suppose for a moment that you support your aging mother-in-law by paying her $100 a month. Do you believe it is fair that this payment be taxed by the IRS? I would answer no, since you have already paid taxes on that money: you had to have earned perhaps $130, before taxes, in order to be able to give your MIL $100, with $30 going to the taxman. It is not fair to tax payments of money if they are simply the movement of money between owners.

The same situation holds for corporate dividends: for years, companies have paid taxes on their incomes, and the simple act of redistributing the after-tax money to the companies' rightful owners would trigger taxation yet again.

One can question the timing of this push to give dividend tax credits as a tactic to curry favor with the voting population, and one can question the overall effectiveness of the measure, as indeed tax-deferred accounts will gain no benefits, but one should recognize that such a measure does make at least a step in correcting the wrongful taxation that has been going on for years.
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>> Doesn't really matter to me if we give corporations a dividend exemption or if dividends are no longer treated as income, both would eliminate the double taxation. <<

I think it's better to exempt the corporations and leave it taxable to the recipient, for various reasons:

* Dividends can still be taxed at the recipient's marginal tax rate, so the rich pay more. (Isn't that what the opposition wants?)

* If desired, you could create a small per-year exemption for dividends (say, the first $1,000 a year is tax-free). That would provide real tax relief for folks with modest portfolios while preventing the mega-wealthy from having an unlimited tax-free income.

* It would add a greater incentive for corporations to actually pay out dividends. If a company earns $1 per share and it pays out 50 cents in dividends, it currently only has about 15 cents left to reinvest in the business (about 35 cents is lost to taxes, plus the 50 cents paid out). By taxing it dividends at the corporate -- rather than the recipient -- level, the corporation would still have its full 50 cents to reinvest, and the shareholder would pay taxes on the dividend.

* It would not make the usage of IRAs and 401(k) plans useless or even worse than useless. (For example, it's already *worse* than useless to put muni bonds in a traditional IRA or 401(k) plan, because tax-free income becomes taxable eventually.) Eliminating the taxation on the recipient side would make it a horrible idea to include high-dividend stocks in a retirement account, and I think that's a really bad idea.

I believe it is MUCH easier to avoid the class-envy arguments by exempting the dividends from taxation on the corporate side, because it's easier to target the less-than-affluent shareholder for the tax relief and therefore eliminate some of the class-warfare resistance.

#29
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>>
I suppose it's fair that a CEO, with the board of directors in his pockets, gets a huge compensation package with bonuses for doing a job at a level of incompetence for which an ordinary employee would be fired.
<<

That's a board of directors not doing their job, nothing more or less.

>>
I suppose it's fair to exempt stock dividends from taxes, while still taxing ordinary savings, even though only the wealthy can afford to put a disproptionate % of "savings" into stocks, because the only risk to them is becoming less wealthy, while the rest of us risk destitution from a collapsing stock market.
<<

Savings are only taxed once, not twice. I'd rather savings not be taxed either, but your comment about the rest of us risking destilution from a collapsing stock market is silly, if you invest for the long term, your average return will be around 8%. That's hardly destitution. If you need the assets to be liquid, then they should not be in the market, regardless of tax implications.

I don't think there is anyone, at any income level, who can not afford to invest for the long term. This might mean giving up some things, but americans of all classes consume much more than they are able to afford.

>>
I suppose it's fair that a lazy dolt gets into prep school, despite his grades, because he comes from a big doner family, then gets into Yale, despite his grades in prep school, because he comes from a big doner family, then business school, then a series of lucrative business ventures, despite a history of alcoholism, drug abuse, partying, and failure, all because he comes from a well connected family, while many hard-working, smart, never-in-trouble, children of the middle class must acccumulate huge levels of debt to become educated professionals.
<<

Here, you totally politicise your argument, and make it totally irrelevant.

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Yes, that makes some sense. Additionally, moving the tax break to the corporate side would encourage more corporations to pay dividends. There are some that are sitting on mountains of cash, MSFT comes to mind. The argument here would be that microsoft can invest the money better than I can, and perhaps that's true; however, I am doubtful that microsoft's worst idea is better than my best idea. That's an entirely seperate matter, though.

>>
>> Doesn't really matter to me if we give corporations a dividend exemption or if dividends are no longer treated as income, both would eliminate the double taxation. <<

I think it's better to exempt the corporations and leave it taxable to the recipient, for various reasons:

<reasons ommited, see post # 6018>
<<
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"Here, you totally politicise your argument, and make it totally irrelevant." (Re: the children of the rich by Lok..one in particular)

Even though it may be politicized, I don't think it's totally irrelevant. It's a perfect illustration of the way things happen to teh privileged in both parties.

The truth is, the whole system is set up to keep each caste in this country where it belongs. The few who can think or work their way out of it are not the norm. Most of the middle class spends their whole working life trying to put up enough to provide a decent lifestyle in their later years when they can no longer work. And the government seems to do everything it can to make sure that won't happen. It's 'us' against them...always having to figure out how to invest pennies wisely and pinch and scrimp, having 7 trillion sucked away from the middle classes by rich stock brokers/ages, while the example Lok gaves shows how the privileged have it handed to them on a silver platter, no matter how much they screw up.

The new Bush plan won't do much one way or the other to any of the classes. Nothing will ever change.

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With the exception of the very poor (ie: no disposable income, can only afford the barest of essential -- a class i've been in myself), most people can easily move from middle class to upper class. It merely involves sacrificing now for a better class later in life. Someone middle class who owns a home less ornate than he can afford and who saves a large percentage of his income, perhaps indexing, will move up the classes in time.

Of course, to me rich and poor have nothing to do with income, and everything to do with net worth. A lot of the 'rich' (that is, individuals making over 100k per year) don't have a significant net worth at all. Are they really rich? Many of them have no assets, and are only rich in the sense that they live a wealthy lifestyle, but have accumulated no real wealth.

The majority of the > 1m net worth individuals gained it in a single generation, by investing in themselves, atleast that's what the millionaire next door implies. The number of people with the proverbial silver spoon in their mouth is not all that large, it certainly does not make up the majority of the so-called rich the democrats talk about.

As for having 7 trillion sucked away by the rich brokerages, i'm not sure I agree with that. We've had three negative years, in the larger scheme of things, it's not important. We had many years of above average returns as well, where people grew used to 20-30% per year. If you are an indexer, these trillions 'lost' mean nothing, as the market always moves in cycles.

People need to take responsibility for their own investment decisions.

>>
"Here, you totally politicise your argument, and make it totally irrelevant." (Re: the children of the rich by Lok..one in particular)

Even though it may be politicized, I don't think it's totally irrelevant. It's a perfect illustration of the way things happen to teh privileged in both parties.

The truth is, the whole system is set up to keep each caste in this country where it belongs. The few who can think or work their way out of it are not the norm. Most of the middle class spends their whole working life trying to put up enough to provide a decent lifestyle in their later years when they can no longer work. And the government seems to do everything it can to make sure that won't happen. It's 'us' against them...always having to figure out how to invest pennies wisely and pinch and scrimp, having 7 trillion sucked away from the middle classes by rich stock brokers/ages, while the example Lok gaves shows how the privileged have it handed to them on a silver platter, no matter how much they screw up.
<<
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"Here, you totally politicise your argument, and make it totally irrelevant.

You're darn right I politicize all arguments. You don't think Shrub's spinsters are politicizing with their "news releases."

And, yes, I hate privilege,a nd the children of the rich have privilege. We are supposed to live in a democracy, and achievement is what is supposed to be rewarded for our system to work. But the reality is, we live in an aristocracy, and what is rewarded, more often than not, is inheritance and connections, not achievement. As Luv says, this has long been true, but the powers in this country are doing their best to make privilege more and more entrenched, and limit "equal opportunity."

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The fairness comes from avoiding double taxation of income, not from any perceived disparity between the wealthy and the poor.

Foobar,


If "double taxation" were ended at the corporate, not individual taxpayer level, that would allow for a fairer approach to taxation of savings (there would still be long term capital gains, but that's less of a difference than marginal rate vs. zero). The Shrub plan does nothing for dividends in tax deferred plans, which is where most non-wealthy investors have most of their stock holdings, and it privileges buying stocks, which are riskier, which means those who cannot afford to take risks (this isn't psychological fear of risk taking, it has to do with consequences of risk taking, which can be dire for those with less money) get stuck paying the taxes.

If they want to end "double taxation," it should be at the corporate level, as all the credible economists I've read suggest, but this way is better politics.
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I like it.

Looks to me like I'l buy some MO, which has ~ 6.5% yield.

Looks to me like I'll buy some REITs, which have fat yields.

Looks to me like I'll save more in taxable accts, and less in my 401k. This allows me to retire before age 59 and 1/2, since I cant draw on 401k assets until after 59 and 1/2.

Why do you guys have your panties in such a wad? As an old-line consevative, *any* tax reduction is a good thing. As long as gov't spending is commensurately reduced. Otherwise, any kinda tax cut is a ruse, 'cause another tax will hafta increase.
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>> Looks to me like I'll buy some REITs, which have fat yields.
<<

Though there is talk that REITs will not be included in such a dividend tax cut.

Which is fair, since the idea is to eliminate double taxation, and unlike most corporations, REIT earnings are not taxed at the corporate level provided that their distributions are in accordance with appropriate law.

So if REIT "dividends" (some of which is return of original capital anyway) were also made exempt, then there would be NO taxation of REIT income anywhere, and then the foes of the dividend tax cut ideas would have a legitimate case for unfairness.

#29
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There just are not enough children of privledge to worry about. The majority of those with more than a 1M net worth did so in a single generation through hard work and savings.

I think politics of jealousy are perhaps the ugliest politics of all, but to each their own.



>>
And, yes, I hate privilege,a nd the children of the rich have privilege. We are supposed to live in a democracy, and achievement is what is supposed to be rewarded for our system to work. But the reality is, we live in an aristocracy, and what is rewarded, more often than not, is inheritance and connections, not achievement. As Luv says, this has long been true, but the powers in this country are doing their best to make privilege more and more entrenched, and limit "equal opportunity."

<<
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>> And, yes, I hate privilege,a nd the children of the rich have privilege. <<

The funny thing is, I thought the left often acts as if "hate" is the exclusive property of the political right...

#29
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<<and the children of the rich have privilege>>....so, I guess it's ok to pick your nose but not your parents? I guess I am old enough to know many families that are "priviliged" due to the hard work and achievement of one or both parents.....I think it is wrong to hold it against their children.
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"<<and the children of the rich have privilege>>....so, I guess it's ok to pick your nose but not your parents? I guess I am old enough to know many families that are "priviliged" due to the hard work and achievement of one or both parents.....I think it is wrong to hold it against their children"

Lok has seen the privileged children blow their time and their parent's money on a daily basis while kids not of privilege hold down jobs and work and study and try to make something of their lives. I think this is a pet peeve with him, though I can't speak for him.

Just my own very personal viewpoint. I have seen very, very few I personally know rise from humble beginnings to 'real' wealth..and I don't call 1 million 'real wealth' anymore, when you cannot purchase an upper middle class tract house in a Silicon Valley town like Cupertino for much under one million. Here, in a small town in So. Calif. where I am, the upper middle class tract homes are well over $300K, without any industry and long commutes. And we can't all move to the boondocks somewhere to find cheaper housing...for a number of obvious reasons.

Those who have risen to 'real wealth' did it through hard, hard work, big vision, persistence, and definitely some 'blessing' or as some people call it 'luck'. And more often than not, have sacrificed time with their spouses and children to do it, which they have regretted later. Again, not always, but often. Most of the real wealthy I know tend to be very unapproachable..not givers..focused on 'money'. That doesn't appeal as a goal to many people either. Again, my observations only.

I truly believe that the gov't is not to be trusted, whether Repub or Demo. It doesn't matter to me because neither of them is out for the interests of the 'average middle/upper middle class guy'. The Demo's are questionably on the side of the downtrodden and the Repubs have proven to be on the side of big business and the wealthy. So, to me it doesn't matter which one is in office insofar as how it will affect my finances. All I can see is that, as average/middle class types, we will have to focus on trying to 'legally outsmart' them every way and every time we can, write off everything possible, use all the same loopholes the rich do, and work our fannies off. Hopefully, that will bring us enough rewards to live a decent life when we can no longer work. Noticed more 'seniors' working? That's when we might call in marketing a 'trend', not a 'fad'.

Good 'luck' everybody!!
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Correct:

401k and other retirement plans will benefit not one iota from the Bush plan as I understand it.

All "Tax Defered Plans" of any design (or designation), already enjoy, tax "deferment"...as do, Muni's, and Govnmt sponsored retirement accounts, i.e. annuities.

KBM
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and the seniors.......401k and other retirement plans will benefit not one iota from the Bush plan as I understand it.

today's seniors never had 401's of ira's....those are benefits for boomers...at least my 80 year old dad will finally catch a break....he is taxed on capital gains every time he sells a stock (usually bought in about 1960, then gains computed without indexing the change, as if a 1960 dollar was the same as a 2002 dollar, and inflation never happened.)
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And, yes, I hate privilege,a nd the children of the rich have privilege. We are supposed to live in a democracy, and achievement is what is supposed to be rewarded for our system to work. But the reality is, we live in an aristocracy, and what is rewarded, more often than not, is inheritance and connections, not achievement.

ok, so you will never vote for a Kennedy, a Gore, a Bush, Taft, DuPont, Rockefeller, the next generation of Clintons,Hoffas, or other dynasty....good for you...add lawyers, and political consultants to the list, and we may come to an agreement
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If they want to end "double taxation," it should be at the corporate level, as all the credible economists I've read suggest, but this way is better politics.

FWIW, I agree (and I'm glad that credible economists are on my side), but I think that I've already sufficiently put forth my point of view on this board. No need to make you suffer through it again. ;)

DD
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