I get taxed on what I make from work just like everyone else, right? Then, when I choose to invest my money instead of spend it, I get taxed again on my dividends and capital gains. Why are we getting taxed right up our *butts* :) ?! I'm outraged.
2007-06-05 13:55:29 · 5 answers · asked by trancevanbuuren 3 in Business & Finance ➔ Taxes ➔ United States
Actually, you are not double-taxed as an individual. The dividends and capital gains are new income, just as if you earned it from your work.
Example: You earn $100, keep $70 after taxes. You invest the $70 in a stock which grows to $100, then you sell. Assuming long-term rates apply (you held the investment for more than a year) you are taxed on the $30 gain at a 15% flat rate...not the entire $100.
That said, given the pitiful savings rate in the United States, we need a better tax code to encourage savings.
If it makes you feel better, those who spend may actually end up paying more in tax overall. Keep in mind that when counting sales taxes, and the cadre of other "baked in" taxes you pay when buying anything (think over $.55 in Federal Fuel Tax per gallon), you actually may pay a higher percentage of your income in taxes when spending.
2007-06-05 14:16:39 · answer #1 · answered by Financeguy 1 · 0⤊ 0⤋
As others have mentioned, it's not double taxation to you. There was a time when everyone got to earn a little dividend money tax free. That was repealed at least 20 years ago, but part of the reasoning was that corporations are already paying taxes on dividends, so the stockholders shouldn't have to pay it again when it is paid to them...double taxation.
However, your taxes on long-term capital gains and most stock dividends are lower than your taxes on wages. Depending on your total income, you are taxed 5% or 15% on these investments. Maybe that cheers you up a bit.
2007-06-06 07:25:42 · answer #2 · answered by ninasgramma 7 · 0⤊ 0⤋
That's not double taxation. The dividends are new money to you that have not previously been taxed to you. (If tax were levied on the principal amount of your investmets as well as the dividends, THAT would be double taxation.)
If you think taxes are high in the US, move to Europe. Gasoline taxes of $4.00 per gallon and sales taxes (called VAT) of 20% along with income taxes as high as 70% are the rule. Most Americans don't know how good we have it!
2007-06-06 04:44:05 · answer #3 · answered by Bostonian In MO 7 · 2⤊ 0⤋
Your dividends and capital gains are new money to you. You don't get taxed on the money that you invest, but on what you make on it, so your argument falls apart there.
There are a variety of ways in which we're double-taxed, but your examples aren't.
2007-06-05 21:14:06 · answer #4 · answered by Judy 7 · 3⤊ 0⤋
You are not double taxed on the same money.
You are only taxed on the gains.
So you are taxed on the original money,and then taxed
only on the gains.
Instead why not ask why we dont have a flat tax?
Why married couples get taxed higher?
Or why we pay so much in sales taxes, property taxes, gas
taxes, license tabs, etc.
2007-06-05 21:14:58 · answer #5 · answered by jeffpa 2 · 0⤊ 0⤋