Originally Posted by All Day Breakfast
As I remember it Buffet was talking about income tax rates, not dividends. The wisdom of congress in having lower taxes on dividends is that the govt is really taxing this money twice. First it (in this case) taxes Apple's revenues. What's left over Is profits. Apple then pays you a dividend payout from the profits and the govt then taxes you. You can look at it as a lower tax rate for the receiver of dividends or you can follow the money and see the govt as taxing that money twice.
The government does not tax Apple's revenues.
There is a sales tax in some (but not all) states where the government taxes the consumer, but that does not impact Apple directly, nor is Apple the one paying the tax (even when Apple is the retailer, the law simply says that Apple is collecting the tax from the consumer and forwarding it to the government.
The government DOES tax Apple's profits, so the 'double taxation' argument has some validity.
However, IMHO, it's a weak argument. Virtually everything you buy is taxed multiple times. Let's say you buy a car.
- Import duties may be applied if it's foreign-made
- The car company pays taxes on the profits
- The steel companies pay taxes on the profits
- The car dealer pays taxes on the profits
- The tire companies pay taxes on the profits
- You pay a variety of sales and use taxes in most states
- The car companies pay their share of employment taxes. Same for the steel companies, tire companies, etc.
- The trucking company who delivers their car pays taxes on their profits.
And so on.
Anything you buy has taxes applied at many places in the production, delivery, and sale process. It's not clear why dividends are unique in that regard.