Re: Bush Tax Cuts, now Obama Tax Cuts !
posted at 1/3/2013 11:48 AM EST
In response to UserName99's comment:
Here is a good example of how capital gains work for the top earners.
I own stock in Campbell's Soup and I was reviewing the 10K they sent me in the mail.
Denise Morrison's Salary is $950K & stock awards are $5,067,264. She pays regular tax on the salary. Sells the stock in 12 months and pays a mere 15% (soon to be 20%)tax on the gains even though everyone knows its income.
Then there are the grand children of the founder, so lets talk about dividends:
Bennett Dorrance has 46,362,107 shares
Mary Alice D Malone has 53,118,146 shares
The dividend for the year was $1.16 per share.
For Bennett: 46,362,107X1.16=53,780,011.4. He ends up paying a 15% tax of $8,067001.60 on the payday. Again....how is this not regular income?
I hold no grudge against Mr. Dorrance but he is just one example of the 1% who pay a lower tax rate than your local auto mechanic.
It is not regular income because ity is not income, it is a dividend. Do you want to get paid based on a dividend that is claculated at the time (or nearly the time)of the dividend? Even if inherited, the stock is paid for. Seems like you are just jealous that your grandfather didn't work as hard.
As far as your first example, Morrison, do you want to hold onto your stock, which you PAY FOR at a set price (usually the price on the day of the grant, but other arrangements are possible), hold for a year to see if it generates any "income" for you? It is called risk. You might get a lot, you might get the goose egg.
So, in this case, Morrison puts @$5 million at risk for a possible return in the vicinity of an additional $150K return. So, Morrison in 2013, if the deal is relatively the same, Morrison pays a combined rate of 35%. Somewhat higher than the worker putting the soup into the cans. That's just on dividents and income. If the stock is sold, well we would need to know the stock price at the time of purchase, and the time of sale, whihc is likely to not be that great.
Now, don't misconstrue this as my thinking that the overall compensation is OK. I am explaining WHY cap gains is lower than regualr income.