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ikicker
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Joined: June 8th, 2011, 12:19 am

Do you see the tail risk in tax reform repeal?

January 25th, 2021, 2:59 pm

Thoughts?

Once the pandemic is no longer depressing the economy, Yellen said, the administration would propose repealing parts of the tax act “that benefitted the highest-income Americans and large companies.”
The Strategas research team thinks the current corporate tax rate of 21% could be lifted to 28%, halfway back to the 35% that prevailed prior to the Tax Cut and Jobs Act of 2017... But, they add, it doesn’t seem that a future corporate tax hike has been discounted by the market, based on the relative price action of stocks of more highly taxed companies.

Very high-income investors could also face increased levies on dividends and capital gains, the Strategas team points out. Under the Biden plan, capital gains and dividends could be taxed at a total federal rate of 43.4% for those earning more than $1 million a year. The capital-gains rate hasn’t been over 30% since 1978. Cap-gains rate increases also result in fewer investors cashing in realized gains, they add.

The Biden proposal also would lift the effective tax rate on dividends to 60% from 40% (after taking into account the double taxation of payouts at the corporate and personal levels). Since the 2003 tax cut, which effectively lowered the effective federal rate to 45% from 60%, a 25-year decline in the total of companies paying dividends has reversed.
Source: https://www-barrons-com.cdn.ampproject.org/c/s/www.barrons.com/amp/articles/stocks-ignore-tax-hikes-that-are-likely-after-pandemic-ends-51611333358
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Undergraduate: accounting, finance, information systems; Graduate: MBA/finance; Graduate certificates: data science, applied statistics, advanced valuation; PhD candidate - data science

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Cuchulainn
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Re: Do you see the tail risk in tax reform repeal?

January 26th, 2021, 8:20 pm

Dividend tax of 60% seems steep. 
"Compatibility means deliberately repeating other people's mistakes."
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ikicker
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Joined: June 8th, 2011, 12:19 am

Re: Do you see the tail risk in tax reform repeal?

January 26th, 2021, 10:34 pm

Dividend tax of 60% seems steep. 
the 60% is the total amount taxed on the earnings of the corporation and includes the double taxation... it's not just a dividend tax...

(1-(1-corporate_rate)(1-dividend_rate) = aggregate rate
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Undergraduate: accounting, finance, information systems; Graduate: MBA/finance; Graduate certificates: data science, applied statistics, advanced valuation; PhD candidate - data science

Blog: Www.ThinkerTinkerSolutions.com