CAPITAL GAINS

I think I understand the taxation on Capital Gains and Corporate Dividends. It is double taxation. The Federal Income Tax code taxes a corporation’s profits at the Corporate Tax Rate before any dividends are paid. When the corporation pays dividends to its stockholders, the stockholders dividends are again taxed. This is double taxation.
It is true that the elimination of the dividend tax would benefit the wealthiest taxpayers. However, a recent article in the USA Today newspaper indicates that 52 percent of the households paying taxes now own corporate stocks; so, the elimination of the tax on taxpayers’ dividends would decrease the taxes and increase the disposable income for a majority of the taxpayers. The wealthiest taxpayers will receive a much greater reduction in their income tax than a middle class taxpayer.
What I don’t understand and don’t see mentioned in any news broadcast or newspaper article is what the wealthiest taxpayers would do with the reduction in
income tax they receive from the elimination of the taxation on dividends. What will they do with the increase in disposable income they receive?
It only makes sense that one of two things will happen with the increase in disposable income that taxpayers have realized:
• Taxpayers will spend the additional disposal income to buy goods and services from stores and companies. This rise in demand should increase the sales and profit of companies, hopefully generating additional capital investment and creating jobs.
• If the taxpayers do not spend the additional disposable income on goods and services, they are certainly not going to “hide the money under the mattress.” They will reinvest the increased disposable income in stocks, bonds and/or CD's, creating more investment dollars for corporations producing goods and services
or for banks to loan to individuals.
In both cases, the money supply for goods and services in corporations and banks is going to increase, allowing them to increase capital investments and/or loans, creating more jobs and increasing the company's profits, allowing them to increase dividends.
It has been proven that this type of “trickle-down” economics will stimulate the economy by creating more capital investment, which will increase wages and jobs, thus improving individuals’ disposable and/or investment income.
As Ronald Reagan stated so eloquently, “The government does not create jobs and improve the economy by higher taxation. It is private enterprise, through capital investment, that increases corporate profits and increases jobs and individuals’ disposable income having the greatest impact on the economy.” (See “Economic Growth.”)