Posted in the Sauquoit Forum
#1 Mar 9, 2013
Borrowing money to issue dividends bad policy
Before the Bush tax cuts the capital gains tax was 20 percent and the tax on dividends was based on incomes (tax rates up to 39.6 percent).
The Bush tax cuts reduced the top income tax rate to 35 percent but lowered the capital gains tax to 15 percent and most importantly the tax on all dividends to 15 percent. Equity Funds, or as Gov. Perry from Texas called them,vulture capitalists, would now borrow money to take over a vibrant company. Interest on such loans is deductible. Then when these investors own the company, they have that company issue special dividends by having their new purchase, borrow more money.
These special dividends allow the investors to get back their investment immediately with high interest taxable at the low rate of 15 percent. The Equity Fund could then dismantle the company eliminating pensions having taxpayers take over the private pensions by federal law.(Federal Pension Guaranty Corp.); then, as a bonus, sell the company without the burden of pensions at 15 percent capital gains tax.
I say forget about the tax rates and pass a law making it illegal for a company to borrow money to issue dividends. Dividends should be issued from profits of a company. The tax law should not reward investors who destroy the company by loading it with debt.
Since: Jun 10
#2 Mar 9, 2013
Not to mention the people whose retirement was stolen.
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