StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Dividend Tax Cut - Essay Example

Comments (0) Cite this document
Summary
In 2003 United States President George W. Bush asserted that it would be beneficial to stop the double taxation of dividend payments made by companies to their shareholders. This idea argued that "while it's fair to tax a company's profits, it's not fair to double-tax by taxing the shareholder on the same profits (Lacoude 18)…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93% of users find it useful
Dividend Tax Cut
Read TextPreview

Extract of sample "Dividend Tax Cut"

Download file to see previous pages It was believed that in doing this, the overall U.S. economy would profit because investors would be encouraged and more open to invest in companies.
"The tax-cut package enacted in 2003 reduced to 15 percent the top tax rate on long-term capital gains and corporate dividends" (Mintz 108). While this is a significant decrease, many citizens were led astray as to who would actually be benefiting from the package because the Bush administration pointed out that almost half of all American households held some form of stock. "What this statistic ignores, however, is that nearly two-fifths of this stock is held in retirement accounts, such as 401(k)s and IRAs. This distinction is crucial, because capital gains and dividend income accruing inside these retirement accounts is not subject to taxation, and thus would not receive a tax benefit from the reduction in the tax rates on capital gains and dividend income" (Amromin 38). Therefore, the actual amount of citizens benefiting from this plan is significantly lower than what the American public was led to believe. Only the wealthiest of stock holders benefit from dividend income. According to the Tax Policy Center fifty four percent of all dividend income goes to households who make over one million dollars per year and the remaining goes to households that make over two hundred thousand. When looking at the big picture, these households only make up three percent of the country's population. "In contrast, only 11 percent of capital gains and dividend income goes to the 86 percent of households with incomes of less than $100,000. Only 4 percent of this income flows to the 64 percent of households that have income of less than $50,000" (Amromin 39). While this information proves that the wealthy are benefiting from the dividend tax cuts, the remaining majority if the population continues to pay a tax on their dividends.
Another negative side affect to the passing of this tax cut package are the affects it will have on different private bond companies and charity organizations. "The stock dividend exclusion will hurt municipal and state bonds, it will reduce the attractiveness of the Low Income Housing Tax Credit amounting to 40,000 affordable housing units lost, and it will harm the marketability of the Historic Preservation Tax Credit, the New Markets Tax Credit and mortgage revenue bonds" (Cohen). In financially strapped cities throughout the country, many are turning to philanthropic foundations to substitute for the loss of government funds. "Many charities believe that the plan for the stock dividend exclusion is bad public policy in terms of equity and fairness in our tax system, and bad for charity and philanthropy" (Cohen).
As for the corporations themselves, economic studies have shown that a decrease in taxes does not ultimately play any kind of role in whether corporations decide to pay out higher dividends. Many citizens are concerned that instead of issuing dividends to their shareholders, corporations will substitute "dividend payments for share repurchases, an alternative method of payout that boosts the price of the company's stock for shareholders" (Friedman). Like these "share repurchases", many companies who say they have undertaken the dividend policies have morphed them into one time offers, or special dividends ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Dividend Tax Cut Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Retrieved from https://studentshare.org/miscellaneous/1534753-dividend-tax-cut
(Dividend Tax Cut Essay Example | Topics and Well Written Essays - 1000 Words)
https://studentshare.org/miscellaneous/1534753-dividend-tax-cut.
“Dividend Tax Cut Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/miscellaneous/1534753-dividend-tax-cut.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Dividend Tax Cut

DIVIDEND POLICY

The management increased both the interim and final dividend throughout the four-year period. In 2007 the company paid an interim dividend of 6.5p which increased to 6.75p in 2008, 6.9p in 2009,7.6p in 2010 and finally 7.9p in 2011. For the case of the final dividend, the amount paid in 2008 was 13.5p, which was increased to 14.1p, 16.2p, 16.85p in 2009,200 and 2011 respectively (Associated British food, 2011). This is attributed to the increasing performance and profitability together with the increase in the performance of the general economy. Since the economy recovered from the recession and the inflation rates reduced, the company realized a reduction in the cost that made it post positive performance. The improving global e...
3 Pages(750 words)Essay

Tax memorandum and dividend

She makes 16 to 17 hour trips for every trip and takes naps at suitable locations where she stops. While Mark captains a ferry boat that takes up to 15 to 17 hours journeys with 6 to 7 hour overlay. During the over lay Mark takes a four hour nap at the cot restored in the pilot house. The applicable law in these two cases is the overnight rule which is found in section 162(a) (2) of the internal revenue Code of 1954. Specific issues Is Tracy allowed to deduct the cost of meals purchased during the trip? And is Mark allowed to deduct the cost of meals purchased during the trip? The overnight rule only applies if the nature of the taxpayer’s employment is such that it requires him to sleep or rest when away from home. His expenditu...
5 Pages(1250 words)Essay

Child care should cut mothers tax

...Child care should cut mothers tax Scrap child-care concessions - cut taxes instead The Peter Saunders discusses the concern about how the child care should be address by the government. He identify that the main motive behind mothers going for work is their financial needs. With family to support single man's earning cant fully satisfy all money matters like housing rent, bills and other necessities. So mothers' takes a step forward and go out to support their family but this does cost them in the form of the childcare remittance which unreasonably takes large share from their earning and hence much of the effort goes in vain. So the government is force to take any steps to ease such burden from low-to-middle income families hence...
2 Pages(500 words)Essay

Dividend Policy

Arriva’s balance sheet of last 5 years (from 2004-2008) is densely populated with debt financing and it is obvious because Arriva is a servicing business. Its debt financing of last 5 years lies between (65% to 76%) and its equity financing lies between (24% to 35%). The summary of Arriva’s last 5 year dividend policy is summarized below:
It is an evident fact that the Arriva’s dividend policy is in stable condition and grows steadily in response with the revenue generation. From the investor’s standpoint, Arriva’s dividend growth rate is predictable and the investors show a positive response towards the company’s policies.
Arriva’s dividend policy is desirable for the investors. Investors do pay attention on those stocks...
3 Pages(750 words)Essay

Bellingham City budget cut

...Bellingham Budget Cut Bellingham is feeling the full implications of the financial crisis that has swept throughout the country. The sadministrators have been reducing the city’s annual budgets since 2008. This has affected the city’s economic activities. Many departments have had to reconsider their budgets so as to remain functional during this crisis. The police department in Bellingham City police is one of those departments that are facing a lot of challenges due to these budget cuts (Calvin, 2008). For the purposes of this paper, I will outline some of the services and duties carried out in the Bellingham City Police department and then determine which of these services and staff should be let go in order for the department...
5 Pages(1250 words)Research Paper

Effective Tax Cut: Who makes better use of tax cuts

... Effective Tax Cut: Who makes better use of tax cuts Introduction A tax cut is the reduction in tax that leads to an increase in the income of the person being taxed and a subsequent decrease in government revenue. The government may give a certain group of its citizens tax cuts aimed for various reasons. The government for instance, may give a tax cut so as to persuade a group of citizens with a certain range of income to start investing. The government may also cut taxes on certain commodities to entice people and corporations to invest in them. The tax cuts aiming at enticing corporations and people to invest in certain fields are calculated as risks since the government cannot guarantee which course the people will channel...
8 Pages(2000 words)Essay

Community college budget cut

Other than reducing student enrollment, some institutions have been forced to limit the number of programs they are offering due to the budget cuts. Laying-off of workers has been reported in some institutions because the institution can no longer sustain them. This phenomenon is evident in states that fund their institutions of higher learning. The paper will explore community college and state university budget cut, and how this political issue will affect the government and the people of the United States, now and in the future.
In her article, “State Colleges Forced to Limit Programs,” Laurie Beth Harris asserts that the state colleges will be forced to limit their programs due to the budget cuts. The author begins by stat...
10 Pages(2500 words)Research Paper

Dividend Policy

...Dividend Policy This February Apple has doled out this quarter’s dividends. However, Greenlight Capital, one of its shareholders, slapped the companywith a lawsuit, demanding a modification of such policy. This was the subject of the news article written by Brett Molina for USA Today. The news reported Apple’s response on the lawsuit, which was filed earlier. In the interest of clarity, the news included contents of the lawsuit – particularly, why it was lodged and what it was asking – and how Apple addressed the issue. Greenlight Capital’s position according to the report is that there should be higher dividends considering the amount of money available in the company. The news report also cited a clause in the lawsuit, which states...
2 Pages(500 words)Essay

Dividend and Non-Dividend Stock Valuation

...Dividend and Non-dividend Stock Valuation Introduction According to Peris the discount growth model is a technique that is used to value dividend stocks and covers gains in both capital and dividends. A capital gain indicates the appreciation of price on stock price while dividends provide a regular investment on income. The stocks that do pay dividends are more attractive and profitable for conservative investors. Merits of using dividend growth model First, the model is essential due to its simplicity in performing calculations. Once the variables of the model are known, calculating the share of stock is forthright. Second, it is logical and sound given that it is built on the premise that investors purchase stock with a view of getting...
2 Pages(500 words)Research Paper

Dividend Policy

...Dividend Policy Introduction Dividend is the amount that a company pays annually or semi-annually to the shareholders out of its profit (Michaely and Roberts, 2012). However, there are certain guidelines which decide the payment of the earning to the shareholders, these set of guidelines is known as dividend policy (Deshmukh et al., 2013). In order to cope up with the competition in the current market as well as add value to the company, the managers go through tough decisions regarding maximization of shareholders’ wealth (Kieschnick et al., 2013). Shareholders’ wealth refers to the increase in the value of stocks that are being held by the shareholders (Hossain et al., 2013). Alternatively, it can also be considered as the payment...
10 Pages(2500 words)Essay

How to Minimize Capital Gains Tax

The inhabitants pay taxes to the government and in return receives benefits and protection from the State.
In this problem involving the sale of the house of Ms. Vaughan, considerations as to the taxability of the sales include whether or not the house sold was the primary residence of the seller. Under the Capital Gains Tax (CGT) law, sales of the primary residence of a person may not be taxed.
Residency is dependent on one's length of stay, number, and frequency of trips to the place (i.e. habitual stay) and the intention to stay in that particular place. There must be intent on the part of the seller to establish such property as a primary residence as evidenced by the frequency of her return to the place and the amou...
6 Pages(1500 words)Assignment

Tax Reform Situation in American

The tax process has been reformed, changed, developed, organized and is now one of the most complicates codes of law in the world. Some of the reforms underway are still being debated and they must be examined to show how the reform process takes place in America.

Overall, American taxation involves payments from individuals to four levels of government depending on where they reside. Taxes are due to the local government i.e. district or country, to the regional bodies like schools and utility providers, to the state government and finally, to the federal government. Other than general income tax on companies and private persons, the American government collects taxes and contributions for Social Security, Medicare and...
7 Pages(1750 words)Assignment

Personal Tax And Estate Planning

On income, yet, many are of the opinion that their tax system is too complicated for understanding, bringing out supporting evidence and some even saying from the outlook of the people comparing the U.K. with other European countries and making their own standing.

Before now, the scheduler system was and was used for ages though abolished, if asked, it will definitely be for the development of the country putting in mind factors like, people are the force of the economy, so taxes imposed must be fair and reasonable which will not be too demanding on the people. The abolishing of the scheduler system has definitely brought difficulties and confusion since it was based on a “Category of treatment” but now it i...
6 Pages(1500 words)Report

Rationale on Tax Reforms and Benefit System Undertaken since Labour Come to Power in 1997

... and making the labour force more flexible is one of UK’s strategies in balancing the government funds despite the new tax reform and benefit system the country is using. The unemployment benefits have been cut down as well while the pensions are being delayed until such time these people are much older to work. Financial deficit should be financed every day. In many cases, new government debt is the main cause of financial deficit. Sometimes, overseas investors can also be a factor of a deficit. It is inevitable for a country to not to have a budget deficit. Even the most highly developed country has a financial deficit. The only difference is how much the deficit is. It is a rule that a bigger government financial deficit would also...
11 Pages(2750 words)Research Paper

Calculation of Income Tax

The calculations for the capital gains tax are shown in the appendix. From the calculations, it may be observed that it is advisable to sell off the business building before 05th April 2008 as you can avail of the indexation allowance and taper relief which are no more available. It may be noted that the indexation and taper relief are the allowanced granted by the government to provide for the increase in the asset value due to inflation (Chris Horne). In case you decide to sell the property after 05th April 2008 you may have to pay a higher CGT of 18,000. However in the case of the personal paintings since they have been acquired only in the year 2005 they do not stand eligible for any allowances and the capital gains will simpl...
6 Pages(1500 words)Case Study

Corporation Income Tax

Since the beginning of the 20th century, Antitrust Acts have been There are instances, however, that the income or gain out of the said sale or exchange or distribution may not be recognized as such income or gain for purposes of income taxation. One such example is in the case of a controlling corporation acquiring or buying the properties of the corporation that it controls upon the liquidation of the controlled or subsidiary corporation. For the said parent-subsidiary sale or exchange therefore, the general rule is that the gain is not recognized as taxable income. There are requirements to comply with as there are some exceptions.

Parent Corporation owns sixty percent (60 %) of the single class of stock of Subsidiar...
19 Pages(4750 words)Case Study

Constraints Affecting Dividend Payouts

...Constraints Affecting Dividend Payouts Introduction Dividend policy of a company is an important matter in terms of establishing creditability of the company among stakeholders and investors as the goal of every management is to enhance the firm’s value. There are different views with regard dividend payout policy. Some say that dividend policy is irrelevant for raising the value of the firm under the assumptions of no transaction costs, no taxes, and no agency cost. Many believe that high dividend increase the stock value as dividend is more predictable than the capital gain; while others feel that low dividend policy increases the stock value as after tax returns are more than high dividend payout policy. Different dividend policies...
9 Pages(2250 words)Case Study

Attributes of a Tax System Which is Beneficial to the Economy

...Attributes of a tax system, which is beneficial to the economy: The present tax structure of the UK economy in the light of changes announced by the Chancellor of the Exchequer since October 2010. Introduction An efficient taxation policy meant for accounting the expenditures needed for producing government goods and services can be evaluated depending on some key parameters. These parameters like the revenue earning capacity of the tax structure created, efficiency of the tax structure, equal distribution of the tax burden and system of accountability not only help the government in formulating the tax structure but also in evaluating the efficiency of the same. In regards to the revenue earning capacity of the tax structure created...
8 Pages(2000 words)Case Study

Dividend Reinvestment Plan

...Question 1 i. Dividend Reinvestment Plan (DRIP) Definition “Dividend Reinvestment Plan/Program or DRIP refers to a plan that is offered by a company to its shareholders for reinvesting their cash dividends by buying additional number of shares on the date of dividend payment.” Explanation One of the biggest stumbling block standing in the way of investors to invest in shares is ‘money’. Nevertheless, a way has been found out to invest in shares and to expand a portfolio over the period without incurring large amounts of fees using Dividend Reinvestment Plan (DRIP). Dividend Reinvestment Plan (DRIP) is an admirable approach to increase the value of one’s investments. Most corporations allow a shareholder to purchase shares commission...
8 Pages(2000 words)Assignment

Tobacco and Alcohol Tax Increments for Medical Welfare

...Tobacco and Alcohol Tax Increments for Medical Welfare Introduction Research indicates tobacco and alcohol usage as a main cause to preventable deaths in the modern society. Various reviews from the professor and other students, assert evidence that the society engages in the production and use of the substances. They aim to create revenues towards economic development. They assert that products from the two categories contribute to a greater GDP measure compared to other manufactured products. The ill resolution for the massive production of the two commodities in order to fuel economic growth poses unbearable consequences to the users (Brisbin, 2008). Arguably, the massive production calls for massive users, thus; the population...
7 Pages(1750 words)Literature review
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Dividend Tax Cut for FREE!

Contact Us