Again, are you saying you're going to choose to not invest because your return is 65% instead of 85%, so instead you'll take 0%? Obviously not, you'll simply invest elsewhere, 35% rate or not. As you admit below.
Originally Posted by chiefst2000
Unless it's your business, they're not your workers, and your investment should not be the primary driver of workforce, increased profitabillity vs. increased cost should be.
...in a business the economy would be robbed of the labor income from the workers I would employ
Except in your own scenario, the money IS invested, in Municipal Bonds, is thus spent by the municiapallity in question, thus employing other workers, building public infrastruture or other public assets, and having the same effect economicly, with a potentially more universally valuble end result.
I will give you a real world scenario. Imagine a hotel property. It costs 25 million in upfront capital and loans to build and open. When this hotel generates a profit of say 1 million dollars that profit is taxed at the corporate rate of 35%. Then an investor recieve their share of the after tax profits of say $650,000. You example has the government now taking 35% of that 650K leaving the investors with $422,000 to split up.
In this scenario the government has taken approximately 60% of the total profits and kindly left the investors to scrap over approximately 40%. Here is the problem. If we look back at that investment and simply took the 25 Million and invested it in insured tax free munis at say 4% interest the investor would net $800,000 with no risk. That hotel would never be built, its employees would not be employed and the government would lose out on the 35% + 15% of the profit they currently take.
So anther borderline profitable Hotel doesn't get build. But a Hospital or Road or Railway or Park does.
And in the real world, the Hotel still gets built, because the vast majority of Hotels are chain operations of the huge Hotel Industry, and their build not based on your small investment, but on profitabillity of location and ongoing operations, as it should be.
The fact you bought ten shares of Marriott did not make that Hotel happen. The fact that you'd pay 35% instead of 15% on your dividend would not stop that hotel from happening either.
Then perhaps they're not really worth doing. again, perhaps the problem is that such projects are being viewed through a prism of RoI of short-term shareholders, and not long-term profitabillity/dividends.
Now some investments have an ROE so large that they would be made regardless of the tax rates. The problem is that the majority of projects, certainly the ones I've been involved with over the years, operate at the margins. They just squeak by that level where it is worth doing.
It's hard for that not to sound like a self-serving argument made only by investors or paid-for-economist, because you (an investor) obviously want to pay less taxes for no work, while the workers in that hypothetical hotel pay the 35% taxes.
In the end the lost revenues from the stifled investment will cancel out or exceed the additional revenues from the higher rates.
How about income be taxed at the very least evenly, labor or investment. What is the moral argument that a wealthy investor owes a lower rate than a maid, waiter or taxi driver?