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View Diary: FLASH: Mitt knows nothing about business taxation (165 comments)

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  •  I still don't see it that way... (0+ / 0-)

    Like I mentioned before, there are plenty of C-Corps that invest in other C-Corps.  If Goldman Sachs got a dividend from Disney, GS would normally still have to pay the 35% corporate tax rate on 20-30% of the Disney dividend.  Then if GS pays a dividend to its investors, their investors will have to pay again.  A private company like Bain would totally skip out on the bolded step above.  So on dividends, Bain pays less tax than a C-Corp does.

    Now let's look at capital gains.  A C-Corp has to pay a 35% corporate tax rate on capital gains from their investments.  A private company like Bain does not.  The capital gains go directly to the partners.  So again, Bain saves on taxes.  

    So to say that Bain is also subject to double taxation is not accurate because it casts Bain in the same light as a C-Corp, when in fact Bain is subject to significantly less taxation than a C-Corp is.  

    •  cheerio - the Bain Capital investment funds (1+ / 0-)
      Recommended by:
      Clem Yeobright

      are structured as partnerships so the BC entities aren't subject to double taxation and dividends from private equity portfolio companies are very rare. However, if a portfolio company did pay a dividend it would be double taxed, once at the corporate level and once by each investor due to the flow through character of the partnership.

      I am not sure you are understanding this subject. Bain Capital pays no taxes because it isn't a corporation and all of its profits flow through to its owners who pay the taxes.

      "let's talk about that"

      by VClib on Mon Sep 24, 2012 at 07:31:23 PM PDT

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      •  We'll just have to agree to disagree on this (0+ / 0-)

        It's true that I don't understand what you're trying to say on this subject.  But I think we both agree that Romney is incorrect with his "double taxation" talk, which has been my point all along.  

        •  cheerio - dividends are double taxed (0+ / 0-)

          that's just a fact. From a policy point of view you can argue that it is fair and is also historical. We have always double taxed dividends. Capital gains are not double taxed.

          "let's talk about that"

          by VClib on Tue Sep 25, 2012 at 06:53:31 AM PDT

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          •  There is double taxation on retained earnings (0+ / 0-)

            Retained earnings is what is left from income in the company after taxes and dividends.  Economically, this portion of a capital gain is double taxed.

            A simple example of this is a company stock that is purchased for $100.  A year goes by, no dividend is paid and the cash in the company increases by $10/share after paying taxes on $15.38 in pre tax profits.

            Essentially, the company is the same as at the beginning of the year except that it now has $10/share more in cash.

            If the share owner were now to sell her shares at $110/share, capital gains tax would be due on the $10 gains that resulted from the increase in cash after paying taxes on income.

            So essentially, to avoid double taxation, an adjustment is needed, such as increasing the investors cost basis by the retained earnings.

            The most important way to protect the environment is not to have more than one child.

            by nextstep on Tue Sep 25, 2012 at 08:35:43 AM PDT

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            •  nextstep - we often agree, but don't on this issue (0+ / 0-)

              If we could isolate stock appreciation to a single variable you might have a case, but I don't think that changing the basis of every share for retained earnings is appropriate and certainly isn't feasible.

              "let's talk about that"

              by VClib on Tue Sep 25, 2012 at 10:27:05 AM PDT

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