Subject: Re: a stocks and dividends question
From: "Jerry Dwyer" <gdwyer@dwyerecon.com>
Date: Fri, 10 Jan 2003 11:23:33 -0500

---------- Original Message ----------------------------------
From: Seth Gordon <sethg@ropine.com>
Date: 10 Jan 2003 10:56:51 -0500

>I don't want to get into an argument here about what levels or kinds of
>taxes are appropriate, but I do want to object to the phrase "double
>taxation".
>
>(1) If I receive a wage, pay income tax, and then buy something with the
>remainder of the money, and pay a sales tax, this is just as much
>"double taxation" as taxing dividend payments is, but there doesn't seem
>to be much of a movement to eliminate it.  Funny, that.

I think that "double taxation" mostly is a pejorative term to say that "I don't like
it." Even so, there are two taxes on dividend income _before it is spent_. Following
your argument, dividend income is subject to "triple taxation."

The reality is that the combined income tax on dividend income is high relative to other
forms of income.

On the last point, some (a fair number of?) economists would eliminate the "double taxation"
that you mention. It is easy to argue that a value-added tax (a sales tax that's cheaper
to collect) with no personal or corporate income tax would be preferable to the current
system. If one wants to make the system progressive, a wealth tax could be added (ignoring
enforcement costs). Alternatively, one could have an income tax and no sales taxes.

Sales taxes tend to be state taxes in the U.S., with exceptions such as telephones,
etc. Some states have an income tax or a sales tax, but not both.

Jerry