[valuearb]

Yawn. If you look at why companies like Apple use debt for buybacks, it’s because the US corporate tax system traps earnings overseas. Sure the Trump tax cuts made things slightly better, but returning foreign profits still cedes about half of them to the tax man.

Buybacks are just dividends with a more tax efficient method of distribution.

I still don’t understand why we tax savings and investment, which is what corporate income taxes do. Make the corporate rate zero, and compensate by raising capital gains and dividend tax rates to individual income rates. That rewards reinvesting into American production and pulls back all those foreign profits.

[rmrfstar]

I'm not sure how taking the corporate rate to zero addresses any of the issues raised here.

The 16th amendment only authorizes an income tax. A tax on unrealized gains would likely be a "direct" tax, which makes it a non-starter.

So, if you take the corporate rate to zero and raise the capital gains rate, you will push any remaining dividends into buybacks. Because most equities are ultimately owned by households that don't need to sell shares to finance consumption, the result will be a dramatic reduction in tax revenues.

It is perfectly legitimate to argue that the US should collect less taxes, but if that's your point you should just come out and say it.

I agree with your broader point that buybacks are themselves neutral. Corporate leverage, however, is a serious problem that needs to be addressed.

[valuearb]

Sorry, confused. I didn’t propose any tax on unrealized gains.

Raising capital gains and dividend rates to ordinary income rates should favor neither, with one exception. Capital gains would need to be indexed against inflation, otherwise in any high inflationary period they could produce effective tax rates over 100%.

And investors require dividends and buybacks, or their is no reason to own stocks. So both will continue and most stock owners will pay significantly higher tax rates on them, partially offsetting their higher dividends and returns.

But you are correct that this will probably lower tax receipts in the near term, but it will also increase investment and R&D, which will help tax receipts catch up over time.

And of it does lower tax receipts it’s also evidence we have been eating our own seed corn, capital wise.

[dantheman]

Completely agree - the corporate tax rate should be way lower, ideally zero. The money is eventually taxed in dividends, employee pay, or when stock is sold. They also pay property tax, and consumption taxes.

Why don't companies have war chests of cash? Because they're taxed on it, better to give it to employees, reinvest in projects, etc.