Economics for Dummies or Presidents (But I Repeat Myself)
The Wall Street Journal has uncovered yet more madness in the President's tardy budget plan:
Mr. Obama is proposing to raise the dividend tax rate to the higher personal income tax rate of 39.6% that will kick in next year. Add in the planned phase-out of deductions and exemptions, and the rate hits 41%. Then add the 3.8% investment tax surcharge in ObamaCare, and the new dividend tax rate in 2013 would be 44.8%—nearly three times today's 15% rate.
Keep in mind that dividends are paid to shareholders only after the corporation pays taxes on its profits. So assuming a maximum 35% corporate tax rate and a 44.8% dividend tax, the total tax on corporate earnings passed through as dividends would be 64.1%.
That's nearly two-thirds going straight into Uncle Sam's pocket, just for sitting there and promising to maybe "go easy on you" next year. Nice work if you can get it. Way to sock it to those mean old corporations, too, Mr. President. And to which I'd like to add: Herp-derp-derp.
The problem is, corporations don't pay taxes. Not one red cent. They never have and they never will, even if you jack up the corporate rate to infinity-percent-plus-one.
I got this fantastic notion this morning, when I remembered an Econ 101 lecture given by Prof. Walter Johnson at Mizzou twenty-mumble years ago. He was an institution at the university, and punctuated his lectures with, "Money, money, money -- I love it!" in his gravelly voice. See, Johnson was something of a Kennedy Democrat, back when Democrats still honestly cared about a growing economy.
During one class he told us the story of the Columbia, Missouri city council getting the idea that there were all these students in town -- and those lazy good-for-nothings weren't paying any property taxes. Why, true and sturdy full-time residents pay property taxes on their homes, but these meddling kids are here most of the year, and all they do is rent. We've got to make them pay!
So Johnson gave the council a good talking to. He told them -- and I think this is an exact quote -- that, "just because someone doesn't have a receipt, doesn't mean they aren't paying taxes." And then he gave the council his proof.