How a 35% Tax Takes Away a 54% Opportunity
The U.S. corporate income tax is imposed at a 35% rate. So, for $100 of pretax earnings, a corporation will pay tax of $35, leaving $65 to pay to its shareholders.
To see the real impact of removing this burden through a dividends paid deduction, however, you need to turn these numbers around and look at them from the point of view of the shareholder currently receiving $65, or from the point of view of the corporation currently earning $65 after tax from its U.S. operations. If you receive $65 after tax now, removing the U.S. corporate tax burden will allow you to receive $100. That is an increase of $35 over the $65 you had before. That's a 54% increase - the amount of money you receive will increase by more than half.
If that is money flowing into your pension fund or tax free college fund, your earnings will grow much faster.
From the point of view of a corporation today, it means that it can boost its profits by 54% just by firing its American workers and moving the operations abroad. Trying to address this problem by repealing deferral, as some have suggested, would not work, because then we would have a situation where a foreign corporation would be able to earn an automatic 54% profit by buying a U.S. corporation, firing the old U.S. headquarters staff, and making it a foreign owned corporation. Only Shared Economic Growth will reverse this insane incentive and encourage companies to create good jobs here in America.
Wouldn't that be best?
The U.S. corporate income tax is imposed at a 35% rate. So, for $100 of pretax earnings, a corporation will pay tax of $35, leaving $65 to pay to its shareholders.
To see the real impact of removing this burden through a dividends paid deduction, however, you need to turn these numbers around and look at them from the point of view of the shareholder currently receiving $65, or from the point of view of the corporation currently earning $65 after tax from its U.S. operations. If you receive $65 after tax now, removing the U.S. corporate tax burden will allow you to receive $100. That is an increase of $35 over the $65 you had before. That's a 54% increase - the amount of money you receive will increase by more than half.
If that is money flowing into your pension fund or tax free college fund, your earnings will grow much faster.
From the point of view of a corporation today, it means that it can boost its profits by 54% just by firing its American workers and moving the operations abroad. Trying to address this problem by repealing deferral, as some have suggested, would not work, because then we would have a situation where a foreign corporation would be able to earn an automatic 54% profit by buying a U.S. corporation, firing the old U.S. headquarters staff, and making it a foreign owned corporation. Only Shared Economic Growth will reverse this insane incentive and encourage companies to create good jobs here in America.
Wouldn't that be best?
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