Taxation of Carried Interest

Re:Taxation of Carried Interest by xapata on Sunday June 10, 2018 @04:34AM (#17277164)

Or we could simply allow shareholders to pressure companies into giving dividends, as was the original intent for the value of a share. The bizarre focus on capital gains at the expense of dividends was created by the tax code. Switching it back would eliminate the perverse incentive for corporations to merge and acquire for no other reason than to avoid disbursing capital as dividends.

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Re:Taxation of Carried Interest by phkahler on Sunday June 10, 2018 @08:48AM (#17277863)

A hundred times this. If your plan is make money by selling at a higher price, you're playing the greater-fool game. If you make your return via dividends, it is a direct reflection of the value of the company.

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Re:Taxation of Carried Interest by chii on Sunday June 10, 2018 @09:45AM (#17278079)

but how does that system allow for a company that re-invest all profits into growing, if doing so is a tax disadvantage?

selling at a higher price is how investors "get out" of the game, but allow other investors to "take over the reigns", all without the company having had to pay out dividends at inopportune times.

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Re:Taxation of Carried Interest by phkahler on Sunday June 10, 2018 @01:18PM (#17279048)

>> selling at a higher price is how investors "get out" of the game, but allow other investors to "take over the reigns", all without the company having had to pay out dividends at inopportune times.

No. Selling is how investors get out. No need for a higher price because they presumably got a return via dividends. If there's no increase in stock price, there will be no capital gains on the sale price either.

Reinvesting all the profits into growing is a phenomenon that became popular due to tax law. A dividend paying company can still make the choice to reinvest profits rather than pay them out. That will just mean a lower dividend than if they paid out all the profit to shareholders.

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Re:Taxation of Carried Interest by bzbarsky on Sunday June 10, 2018 @06:43PM (#17280587)

> If there's no increase in stock price

Then the value of the company (and the expected dividend stream) presumably fell, in real terms, because inflation is typically nonnegative.

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Re:Taxation of Carried Interest by xapata on Monday June 11, 2018 @05:05AM (#17282847)

There's also depreciation. Most assets tend to decline in real value while simultaneously inflating. Companies may have a period over which the value appreciates, but the evidence points to eventual obsolescence. They'll probably liquidate their assets and give one final dividend at that time.

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Re:Taxation of Carried Interest by xapata on Sunday June 10, 2018 @06:22PM (#17280494)

Long term investors might buy shares if they expect high dividends in the future. Eventual profit, not immediate profit.

It's not a tax disadvantage if the expectation is that the bulk of the income eventually comes from dividends, even if that time is 10 years down the road.

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Re:Taxation of Carried Interest by JetSpiegel on Sunday June 10, 2018 @11:48AM (#17278640)

> but how does that system allow for a company that re-invest all profits into growing, if doing so is a tax disadvantage?

Use your own money to gamble. Once you accept shareholder's money, you play by their rules.

If you are not paying dividends, register as non-profit.

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