Updated Numbers on the Cap Gains/Dividends
Tax Hike in the House Dem Health Bill
By Ryan Ellis
•
Wednesday, July 15, 2009 4:35 pm
Yesterday, we reported on how the "surtaxes" in the House Democrat health care plan would affect capital gains and dividends.
It turns out the numbers are worse than expected.
With a "surtax" of 5.4% on AGI, the tax rate on capital gains and dividends is now set to reach levels not seen in a generation.
Capital Gains
The capital gains rate is currently 15 percent. In 2011, this will rise to 20 percent. The surtax is 5.4 percent, which is bad enough. However, it's on adjusted gross income (AGI). You have to multiply that by the assumed deductions and exemptions, which are about 20 percent of AGI.
Running all those numbers, you come out with a new capital gains tax rate of 26.5 percent. That's much higher than today's 15 percent, and nearly as high as the 28 percent level seen from 1987-1997.
Dividends
The dividends rate is currently 15 percent. In 2011, this will rise all the way to 39.6 percent.
Applying the same surtax math as above, the new 2011 rate would be a whopping 46 percent!
That would be the highest level since just before the Tax Reform Act of 1986
Other Considerations
Since about two-tenths of corporate profits are distributed as dividends, and the rest are retained and eventually become capital gains, we can also see what the integrated tax rate would be for the average stock.
Right now, it's easy. It's a flat 15 percent tax rate on after-tax corporate profits.
Under the new regime, it would be equal to two parts 46 percent, and eight parts 26.5 percent. That comes out to a new integrated rate of 30.4 percent--double the current levels.
Expressed as integrated with the 35 percent corporate income tax rate, that raises the all-in, integrated rate from 44.8 percent today all the way to 54.8 percent, an increase of about 10 percentage points.
What will this do to market capitalization? Every one percent hit the market takes will reduce shareholder wealth by over $100 billion. So even if it's only a percentage point or two, that's $200 billion poorer we are overnight.
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OMG! Obama scares me to death! The values our hard working parents instilled in us, to largely include being an honest person, working hard, going to college, and getting a good job, so we would have the ability to live a decent life, save and invest in our future and our family's future, are being used against us almost as a punishment! The harder we work to make a better life, the more money Obama wants to take away from us. Where's the motivation for a young person today, or the rest of us, to work hard and continue to better ourselves, invest and save, when it justs creates a bigger pile of money that we'll never see again because Obama has spent it away!!! PLEASE WHAT ADVICE CAN YOU GIVE SO THAT WE CAN HELP FIGHT THIS!
>> Jenny July 16, 2009 10:21 am
We are finished as a so called free society. We are all to be slaves of the almighty federal government, because we refuse to be responsible for ourselves.
>> William Benedict July 16, 2009 12:09 pm
See the DVD "THE OBAMA DECEPTION", it will help you understand what's going on.
>> Jeff July 16, 2009 2:24 pm
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