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Old 04-17-2013, 10:54 AM   #21
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Corporate profits have been extraordinary in recent years. Considering OP is claiming: "Acme's net income increases ~25% because money that went towards taxes can now be reinvested or returned to shareholders" I'm REALLY surprised wages haven't risen. According the the WSJ just yesterday, "wages peaked in 1973, fully 40 years ago." So what's to make me believe that the money would go to shareholders, let alone reach the hourly workers?
study finance. understand the primary relationships behind corporate profits and stock value and you will get these concepts: plow back or divined pay out

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Old 04-17-2013, 10:58 AM   #22
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study finance.
It's been about a decade since I was in a finance class. How do I calculate Beta again?
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Old 04-17-2013, 10:59 AM   #23
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Yadda, yadda. What's in it for the workers?
lol eff the G ride, I want the machines that are makin' 'em!

Power to the worker!
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Old 04-17-2013, 11:00 AM   #24
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lol eff the G ride, I want the machines that are makin' 'em!

Power to the worker!
What?
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Old 04-17-2013, 11:16 AM   #25
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What?
shocker
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Old 04-17-2013, 12:15 PM   #26
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Yadda, yadda. What's in it for the workers?
There wouldn't necessarily be any benefit for the workers although there could be an increase in wages and benefits. There wouldn't be any detriment, though.

But the new scheme would make the tax code more progressive and make it easier for middle income households to own stock relative to higher income households.
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Old 04-17-2013, 12:17 PM   #27
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There wouldn't necessarily be any benefit for the workers although there could be an increase in wages and benefits. There wouldn't be any detriment, though.

But the new scheme would make the tax code more progressive and make it easier for middle income households to own stock relative to higher income households.
What do you consider a middle income household?
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Old 04-17-2013, 12:21 PM   #28
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What do you consider a middle income household?
By definition, around 53k per year.
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Old 04-17-2013, 12:29 PM   #29
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But the new scheme would make the tax code more progressive and make it easier for middle income households to own stock relative to higher income households.
No it doesn't. It changes absolutely nothing on the investor side accept the dangerous assumption they'll receive higher dividend payments.
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Old 04-17-2013, 12:30 PM   #30
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By definition, around 53k per year.
And how will this help a family that earns 53k per year?
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Old 04-17-2013, 12:40 PM   #31
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Dollars going abroad is a good thing. Because dollars circulating abroad, by definition, must eventually return to the US in the form of demand for US goods and services. In the short run, there is the possibility of deflation, but that isn't necessarily a bad thing. One of the main reasons why borrowing costs are so low for the Federal government right now is because the Chinese and Japanese central banks are willing to lend money at negative real interest rates.


The primary purpose of a corporation is to shield the owners from liability while also being able to act on behalf of the owners. That means they have to have basic rights (the most important of which is the ability to own property). The USSC has also determined that among those rights includes the ability to petition the US government. Obviously they still don't have basic rights such as the ability to vote, adopt, marry, etc.
It also depends on how long it takes those dollars to return, the longer the less the value. Not to mention that every time that dollar changes hand abroad it loses a few cents, since the currency conversion skims a a bit off the dollar for the service.


And if corporations what the ability to petition the govt then their laws need to change. They need to no longer serve as the shield of liability. If corporations want those benefit, they need to pay for the privilege.
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Old 04-17-2013, 12:41 PM   #32
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No it doesn't. It changes absolutely nothing on the investor side accept the dangerous assumption they'll receive higher dividend payments.
Are you kidding me? Higher profits for companies means higher share prices and higher EPS. If the company doesn't find a use for that extra capital they will kick it back to their shareholders. They are already doing that now. Even if the company's management doesn't increase dividends or share buybacks, it still boosts shareholder's equity, which would increase stock prices. The bottom line is that both the company and the shareholders win.

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And how will this help a family that earns 53k per year?
They can buy stocks at a cheaper relative price than higher income households.

For example, if the share price of Ford is 100 dollars, under the new tax code, it would cost 166 dollars of pre-tax money for a guy like Warren Buffett to buy one additional share of Ford, but only 133 dollars of pre-tax money for a middle income household.

Under the current tax code, it's possible for Buffett to buy a share of Ford for 117 dollars. Same for that middle income household. But since the middle income household, unlike Buffett, derives almost 100% of its earnings from regular income, it would still take on average 133 dollars of pre-tax money for a middle income household to buy a share.

This simply makes investing a more progressive system instead of the regressive system it currently is. If you actually bothered to read and comprehend what I wrote originally, you'd understand it as well instead of letting your pre-existing biases cloud your judgment.
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Old 04-17-2013, 12:53 PM   #33
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Are you kidding me? Higher profits for companies means higher share prices and higher EPS. If the company doesn't find a use for that extra capital they will kick it back to their shareholders. They are already doing that now. Even if the company's management doesn't increase dividends or share buybacks, it still boosts shareholder's equity, which would increase stock prices. The bottom line is that both the company and the shareholders win.
Sorry buddy, but that has zero bearing on whether it's easier or more difficult for a middle income home to invest.
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Old 04-17-2013, 12:55 PM   #34
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Sorry buddy, but that has zero bearing on whether it's easier or more difficult for a middle income home to invest.
Please read further:

Quote:
They can buy stocks at a cheaper relative price than higher income households.

For example, if the share price of Ford is 100 dollars, under the new tax code, it would cost 166 dollars of pre-tax money for a guy like Warren Buffett to buy one additional share of Ford, but only 133 dollars of pre-tax money for a middle income household.

Under the current tax code, it's possible for Buffett to buy a share of Ford for 117 dollars. Same for that middle income household. But since the middle income household, unlike Buffett, derives almost 100% of its earnings from regular income, it would still take on average 133 dollars of pre-tax money for a middle income household to buy a share.
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Old 04-17-2013, 12:57 PM   #35
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For example, if the share price of Ford is 100 dollars, under the new tax code, it would cost 166 dollars of pre-tax money for a guy like Warren Buffett to buy one additional share of Ford, but only 133 dollars of pre-tax money for a middle income household.

Under the current tax code, it's possible for Buffett to buy a share of Ford for 117 dollars. Same for that middle income household. But since the middle income household, unlike Buffett, derives almost 100% of its earnings from regular income, it would still take on average 133 dollars of pre-tax money for a middle income household to buy a share.
LOL! That's nice. They get a 20% discount compared to the guy who makes 1188 times more than they do. They'll move up in no time. Are you seriously thinking that a family with a household income of 53k is going to start investing, not because shares are cheaper, but because they are cheaper for them compared to someone in the top bracket? So, no change in income, no change in price of shares, and yet, this will spur investment? Correct me if I'm putting words in your mouth.
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Old 04-17-2013, 12:58 PM   #36
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Higher profits for companies means higher share prices.
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They can buy stocks at a cheaper relative price than higher income households.


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Please read further:
There is nothing to read. You've contradicted yourself in the same post. If anything it's now more difficult for a middle income household to invest because their dollar buys fewer shares. And we know how many extra dollar middle income households have laying around after accounting for COL expenses.
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Old 04-17-2013, 01:01 PM   #37
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Old 04-17-2013, 01:04 PM   #38
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It's been about a decade since I was in a finance class. How do I calculate Beta again?
Regress your stock on the index using SLR.

y = a + bx

Index = alpha + (stock)beta
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Old 04-17-2013, 01:08 PM   #39
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LOL! That's nice. They get a 20% discount compared to the guy who makes 1188 times more than they do. They'll move up in no time. Are you seriously thinking that a family with a household income of 53k is going to start investing, not because shares are cheaper, but because they are cheaper for them compared to someone in the top bracket? So, no change in income, no change in price of shares, and yet, this will spur investment? Correct me if I'm putting words in your mouth.
A discount is a discount. What makes you so sure a family would not invest? Maybe skip out here and there on the latest upgrade for something and allocate those dollars towards investments.
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Old 04-17-2013, 01:10 PM   #40
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There is nothing to read. You've contradicted yourself in the same post. If anything it's now more difficult for a middle income household to invest because their dollar buys fewer shares. And we know how many extra dollar middle income households have laying around after accounting for COL expenses.
I didn't contradict myself at all. You're confusing a short term effect with a structural effect and you overlooked an operative term. By definition, if a company doesn't pay taxes any more, its shares will automatically jump to reflect the new underlying fundamentals of profitability. That's a one-off. It only happens once when we repeal the corporate income tax.

At the same time, it also makes it cheaper, relative to higher income households, to buy stock because all income gets taxed under regular rates, which are progressive. That effect is permanent.

It's relatively cheaper for lower income individuals to buy additional stock compared to higher income individuals because our personal income tax code is progressive.

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LOL! That's nice. They get a 20% discount compared to the guy who makes 1188 times more than they do. They'll move up in no time. Are you seriously thinking that a family with a household income of 53k is going to start investing, not because shares are cheaper, but because they are cheaper for them compared to someone in the top bracket? So, no change in income, no change in price of shares, and yet, this will spur investment? Correct me if I'm putting words in your mouth.
I'm not promising a panacea. Repealing the corporate income tax doesn't magically solve all of society's ills. But the current system has a structural advantage for wealthy households to invest (the rich get richer, something you supposedly despise, right?) relative to poorer households. This eliminates that disparity and also has the added benefit of making the capital structure of firms more economically efficient.

Again, so you don't misunderstand me, eliminating the corporate income tax and removing the long term capital gains/dividends tax rate makes the tax system more progressive.

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It also depends on how long it takes those dollars to return, the longer the less the value. Not to mention that every time that dollar changes hand abroad it loses a few cents, since the currency conversion skims a a bit off the dollar for the service.
Right. That effect is called seigniorage and it actually benefits the US quite a bit. If some foreigner invests money into the US, which gets spent on goods and services within the US, and then receives a profit which gets less valuable over time, then the people within the US get all of the benefit.

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And if corporations what the ability to petition the govt then their laws need to change. They need to no longer serve as the shield of liability. If corporations want those benefit, they need to pay for the privilege.
At this point we're getting into a separate philosophical/ideological argument which I feel is unrelated to the main point I'm making.
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