Replies to post #108154 on Intel Corp (INTC)

[wbmw]

It is shared when the corporation pays the tax. Don't you think the best measure is how much net tax is paid on the earnings? How much of our wealth is the government entitled to?

What difference does it make if the corporation is paying the bill before the dividend is handed out, or you are paying the bill after the dividend is handed out - other than perception?

The only difference I can think of is that it might affect that kinds of companies you choose to invest in, and how long you stay as an investor. You'll be more likely to choose companies with better pre-tax earnings, as opposed to companies with special tax-breaks and/or subsidies. I think that could be a good thing.

Let's face it, if the government wants to boost the dividend tax, companies will stop paying them and buy back shares instead.

Not if by raising the tax to individuals, they credit the tax of corporations by the same amount. It would actually incentivize companies to invest cash in dividends, in order to get the tax credit.

Intel paid 27.2% tax last year. Shareholders paid an additional 15% tax when those earnings were distributed in the form of dividends. That's 42%+ sucked up by the government, even for those with minimal income. You may think that's "fair". I don't.

I think I'm changing my position on this one, now that you put it that way. On the other hand, I haven't heard any good ideas from you on how to raise revenues. If austerity is your only answer, it will only go so far.

[fastpathguru]

Seems like the tax burden ought to be shared between the corporation and the share owners.

It is shared when the corporation pays the tax. Don't you think the best measure is how much net tax is paid on the earnings? How much of our wealth is the government entitled to?

Q) How much of a corporation's income are you "entitled" to in the form of dividends?

A) Whatever the corporation feels like.

"Entitled", indeed.

Intel paid 27.2% tax last year. Shareholders paid an additional 15% tax when those earnings were distributed in the form of dividends.

Q) Does that 15% apply to the same number of dollars as the 27.2% did?

A) Only if Intel paid out every dollar of corporate-taxable income in the form of dividends.

In fact, Intel EPS was .65 while dividend was just .21/sh...

So the dividend portion of your "net taxes" is more like 5%, for a 32.2% total "net taxes".

fpg

[willco]

There is another issue here that we haven't touched on yet. When the tax on dividends is high there is a bias toward raising funds using debt rather than equity. If a company borrows in today's world it pays out a rate of interest that is surely in most cases less than the rate it would pay through a dividend. Further, the corporation gets to deduct the interest expense on their tax return but they do not get to deduct the dividend payment.

Another great debate in the tax policy world is over whether the two should be treated differently for tax purposes. In the policy realm economic thought has been informing the notion that they should not.