Time to Ban Stock Repurchases

It is time to make dividends, rather than capital gains, tax advantaged. They should be deductible against the companies income (akin to LLCs) and shouldn't incur payroll taxes but otherwise should be taxed as income. This would make them more valuable for lower income citizens who suffer under the payroll tax setup, and less valuable for the wealthy since they would be paying a high marginal tax rate on them. It would distribute capital ownership more widely and make planning a retirement income stream much easier to accomplish.

Capital gains should be taxed at windfall rates, say income + 10%.

Prioritize repeatable, stable profits over swing-for-the-fences highly-leveraged moonshots, and watch how many of these problems disappear.

> It is time to make dividends, rather than capital gains, tax advantaged.

So this is another example of the US being unable to find solutions to problems only it has.

This came up with the whole passthrough preferential treatment. The argument for it was that dividends were essentially double-taxed. So you end up creating a whole new set of complexity (eg what qualifies for it) when the solution is remarkable simple.

In Australia, dividends issued by companies come with franking credits. That means you get credit for any taxes already paid. The vast majority of dividends are fully-franked, meaning all funds have paid the 30% tax rate. Much less common are unfranked (no taxes paid) or partially-franked.

To give you an example. Say a company makes a profit of $10,000 and wants to pay it as a dividend. It pays 30% tax on it ($3000) and disburses $7000. Alice owns 10% of the company so she receives $700 (10% of $7000, being $10000 - the $3000 tax) and $300 in franking credits. If Alice's marginal tax rate is 30% she has paid all her taxes. If it's 40% then she owes 40% x $1000 = $400 - $300 in franking credits = $100 in extra taxes. If her marginal tax rate is 15% she gets a refund ($1000 x 15% = $150 is her liability so her refund is $300 - $150 = $150).

So no double taxation and all the recipients pay their marginal rates of tax on the income. Easy.

This is also a far cleaner way to deal with foreign withholding taxes. Let's say the dividend recipient is a foreign corporation, should they pay taxes on the income? Well, they already have. it's a policy decision as to whether they should get the taxes back or not. But again, it's handled by that system without having to create a foreign withholding taxes regime.

> Capital gains should be taxed at windfall rates, say income + 10%.

Yeah so you lose me here. I don't see the justification for this. Investment is typically in already-taxed dollars.

Why should there be a blanket ban on stock repurchases? If a company has excess cash, you're advocating they can't put that cash to work "betting" on their future performance?

I however do agree if a company takes a recent government "bailout" they should be restricted from buybacks until they payback the loan/bailout.

>Investment is typically in already-taxed dollars.

A huge portion of investment in publicly-traded companies comes from funds like pension funds which don't use after-tax dollars.