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Vanguard founder John Bogle on tax fairness: "Rates may have to be changed, but we also need to...

Vanguard founder John Bogle on tax fairness: "Rates may have to be changed, but we also need to look at what is taxed, and how. Dividend income should be taxed at the same rate as ordinary income. As for capital gains, there ought to be some distinction between capital made by people who start businesses, and contribute value to society, and capital made by gamblers on Wall Street."
Comments (23)
  • jschroe36
    , contributor
    Comments (66) | Send Message
     
    agreed
    22 Dec 2011, 07:33 PM Reply Like
  • Terry330
    , contributor
    Comments (866) | Send Message
     
    No more special tax breaks for top 1%. They have used this ill gotten money to buy more lobbyist and politicians for decades.
    22 Dec 2011, 07:38 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    What part is ill gotten?
    23 Dec 2011, 01:21 AM Reply Like
  • Bainjer
    , contributor
    Comments (61) | Send Message
     
    yep. too bad nothing will change.
    22 Dec 2011, 07:39 PM Reply Like
  • Bouchart
    , contributor
    Comments (755) | Send Message
     
    But congress just fixed the tax code for the next two months.
    22 Dec 2011, 07:40 PM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    So now, not only picking winners and losers, our government will decide what legal income is more "Morally justified" in their opinion.

     

    Gee, That would be great. I can't wait.

     

    Thought we already had short vs long term cap gains rates.

     

    Slippery slope. Have at it. The sheeple will accept anything I see.
    22 Dec 2011, 07:50 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (5219) | Send Message
     
    Easy to fix that, make it illegal, and tune out the crap the financialists put out to find a moral justification for their outrageous behavior.

     

    Outlawing naked CDS would be a good place to start, then they could build from there, naked short-selling, HFT, pump and dump, short and distort, etc.
    22 Dec 2011, 08:07 PM Reply Like
  • Econdoc
    , contributor
    Comments (2944) | Send Message
     
    nonsense

     

    Dividends are income that has already been taxed once at the company level. A better reform would be to either

     

    - let companies treat dividends like interest and get a tax deduction and then have them be taxed as regular income in the hands of investors

     

    or

     

    - only tax them up to the true corporate tax rate in the hands of investors. So if a company pays the full 35% tax rate - those dividends are "tax free" in the hands of investors - if a coman=ny pays 1% tax - the investor is taxed at the less of their marginal tax rate or 34%. This system is acutally in use in Australia and it works.

     

    What you want in a tax system is efficiency and good incentives.

     

    In either of these you reward companies who pay their taxes and you don't provide incentives to over leverage.

     

    As for capital gains - you eliminate the need for this if if you tax consumption. A capital gain from the sale of a business or an investment represents capital that can be either reinvested or consumed. Taxing such gains at the time they are made means that people can be "frozen in place" - this is bad for capital mobility. Better to tax the gain as it is consumed this allows capital to flow more easily and promotes investment and saving.

     

    Capital put to work that funds businesses and wealth creation is a good thing. Not a bad thing. You want more of it not less. Anything that chases it away or reduces the incentives is generally a bad thing.

     

    E
    22 Dec 2011, 08:06 PM Reply Like
  • D_Virginia
    , contributor
    Comments (2280) | Send Message
     
    > Capital put to work that funds businesses and wealth creation is
    > a good thing.

     

    I think you're missing a big part of Bogle's point.

     

    Let me fix your statement for you:

     

    Capital put to work that funds businesses and REAL VALUE creation is a good thing.

     

    There, now it makes sense. :)
    22 Dec 2011, 08:38 PM Reply Like
  • Econdoc
    , contributor
    Comments (2944) | Send Message
     
    I know you know this but Bogle's point is not a very good one -

     

    in his world there is good productive investment and bad unproductiive investment - who decides this? this is just qualitative waffle.

     

    there is one capital that earns a return and capital which does not. the rest is garbage thinking.

     

    if that money is invested directly in a pizza parlor or in a financial instrument that provides liquidity that ultimately enables the pizza parlor to be built - it just does not matter. money is money and it flows to where it generates the best return.

     

    E
    22 Dec 2011, 08:57 PM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    Econdoc,

     

    I totally agree.

     

    Do agree with Tom Armstead that some transactions should be banned however.

     

    So long as something is "legal" Gov't should not be assessing any variable taxes based on it's opinion of morality or socially worthiness.
    22 Dec 2011, 09:02 PM Reply Like
  • Econdoc
    , contributor
    Comments (2944) | Send Message
     
    No. I don't agree with Tom.

     

    It is the thin end of the wedge.

     

    What is moral or "fair" has no place in this. It is either legal or illegal - and the standards need to be applied according to the rule of law not taste or public opinion. Once you go that route you end up in Venezuela.

     

    E
    23 Dec 2011, 03:01 PM Reply Like
  • Playdeep
    , contributor
    Comments (58) | Send Message
     
    Yes you are correct, dividends are taxed twice. One at the corporate tax rate, and then at the personal tax rate. We need to eliminate the double taxation of dividends. I also agree that capital gains should be taxed a very low rate,or taxed at different levels, or not taxed at all in some cases. I think seed capital to start a new business does have more economic value than buy and selling an investment for a capital gain. Risk taking and capital investment are the backbone of your economic system. We have to encourage that, not discourage that. We are competing on a global stage. Cost of capital both financial and intellectual are key to our future success.
    22 Dec 2011, 08:29 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9923) | Send Message
     
    Plenty of issues with the tax system. But fundamentally from an individuals view, all income received spends the same and thus all sources of income should be taxed the same. Probably should eliminate taxation of dividends at the corporate level and just tax at the individual level.
    22 Dec 2011, 11:39 PM Reply Like
  • Wapiti33
    , contributor
    Comments (3) | Send Message
     
    > I think seed capital to start a new business does have more economic value than buy and selling an investment for a capital gain.

     

    Unless, of course, that new business is named Solyndra.
    23 Dec 2011, 04:12 AM Reply Like
  • positivethoughts
    , contributor
    Comments (1812) | Send Message
     
    It doesn't matter how much tax revenue is brought in, the government will still overspend.
    22 Dec 2011, 08:34 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3529) | Send Message
     
    "What we need is a transfer tax on trading." from Bogle's article.

     

    This is probably the one point in his article that is doable and won't have an army of my compatriots seeking the loopholes. Otherwise we're just adding more complexity to a code that no one has understood since Wilbur Mills.
    22 Dec 2011, 09:19 PM Reply Like
  • bkpark
    , contributor
    Comments (325) | Send Message
     
    Er, so is he advocating much change at all? He speaks as if we don't already tax short-term capital gains (i.e. capital gains from positions held for less than a year) as ordinary income. Long-term capital gains are already taxed at the special capital gains tax rate.

     

    Other than advocating for higher taxes on dividend, it sounds like the man is more or less for status quo---he just makes it sound as if he isn't.
    22 Dec 2011, 10:35 PM Reply Like
  • Phill Stone
    , contributor
    Comments (78) | Send Message
     
    I never understood why dividend income wasn't taxed like ordinary income... makes zero sense. They could even make it under say... a million bucks of dividend income @ 15% still, and everything above 25%. but just to have it all on a non-graduated plan versus income taxes... illogical.
    22 Dec 2011, 11:33 PM Reply Like
  • SlingWing9
    , contributor
    Comments (473) | Send Message
     
    Bogle sounds like a puppet.
    23 Dec 2011, 12:02 AM Reply Like
  • 1980XLS-2.0
    , contributor
    Comments (525) | Send Message
     
    Puppet, rhymes with Buffett.

     

    Do as I say, not as I do.
    23 Dec 2011, 12:09 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    Why not just forget all this crap and just slash spending and simplify the tax code so we are all paying one flat rate..........around 10% to 15% for Federal revenues and then the states can pick up 5%. End of story everyone can go home. We would not have to consider capital gains or the fact that our marginal rate is so high that it encourages capital flight. Corporations could also live with these rates and take away all their tax breaks.

     

    Likely have a lot of tax accountants UE.
    23 Dec 2011, 01:29 AM Reply Like
  • Poor Texan
    , contributor
    Comments (3529) | Send Message
     
    "Likely have a lot of tax accountants UE."

     

    Still plenty of work as the I.R.S. will just issue new report requirements to keep their own people looking busy and business will have to respond with more useless paper.
    23 Dec 2011, 12:07 PM Reply Like
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