That is very true. In practice, however, there are so many exceptions and loopholes in corporate income tax that corporations end up paying on average only something around 12% of income as tax.
So even with the “double taxation”, if $100 of profit is taxed through 12% corporate income tax and then taxed again through a 15% capital gains tax (let’s say the company pays their profit out as a dividend), the investor gets (100.88.85) $74.8, so it’s an effective tax rate of only about 25.2%. (And, yeah, the investor doesn’t directly get corporate profits unless it’s a dividend, but in theory a corporation that isn’t paying a dividend should instead be using profits to re-invest in the business in a way that makes the stock price go up, so the end result is roughly the same for the investor.)
A small business that is filing it’s profits through the as normal income tax may be paying a 39.6% tax rate, so it’s still much higher.
That is very true. In practice, however, there are so many exceptions and loopholes in corporate income tax that corporations end up paying on average only something around 12% of income as tax.
That doesn’t take into account the deadweight loss involved in jumping through hoops to get all those exceptions and loopholes. And in any case the fundamental problem is the existence of the exceptions and loopholes in corporate income tax, not the low capital gains tax.
Phrasing it that way is misleading. Capital gains tend to come from things like corporate profits which are themselves subject to income tax.
That is very true. In practice, however, there are so many exceptions and loopholes in corporate income tax that corporations end up paying on average only something around 12% of income as tax.
Source: http://business.time.com/2012/02/06/the-corporate-tax-rate-is-at-its-lowest-in-decades-is-big-business-paying-its-fair-share/
So even with the “double taxation”, if $100 of profit is taxed through 12% corporate income tax and then taxed again through a 15% capital gains tax (let’s say the company pays their profit out as a dividend), the investor gets (100.88.85) $74.8, so it’s an effective tax rate of only about 25.2%. (And, yeah, the investor doesn’t directly get corporate profits unless it’s a dividend, but in theory a corporation that isn’t paying a dividend should instead be using profits to re-invest in the business in a way that makes the stock price go up, so the end result is roughly the same for the investor.)
A small business that is filing it’s profits through the as normal income tax may be paying a 39.6% tax rate, so it’s still much higher.
That doesn’t take into account the deadweight loss involved in jumping through hoops to get all those exceptions and loopholes. And in any case the fundamental problem is the existence of the exceptions and loopholes in corporate income tax, not the low capital gains tax.