If the company pays a 6% dividend, a California resident would have to pay 1.4% of that 6% in taxes, reducing the after tax yield to 4.6%.
That is one of the ways in which increasing a tax rate can reduce the total tax yield, thereby defeating the whole supposed object of the tax-raising exercise.
The interest on municipal bonds is exempt from income tax on the federal and sometimes state levels, giving them a higher after-tax yield than a corporate or Treasury with the same coupon and maturity.
FORBES: Loose Lips, Lots Of Hype Make Municipal Bonds Look Juicy
Most students of economics are familiar with the Laffer curve, named by Dr. Art Laffer, which demonstrates how higher taxes do not necessarily mean a higher tax yield, with there being a point (the peak of his curve) after which total revenue falls when the tax rate increases.
For instance, while 10-year Treasuries currently yield 2%, you can find triple-A rated 10-year munis that yield 2.5%, which is a 3.85% tax equivalent yield for taxpayers in the 35% bracket and 3.47% for those in the 28% bracket.
For starters, repealing the tax would yield lower health costs for American patients.
FORBES: In The Aftermath Of Obama's Re-Election, What's Next For Health Care?
This is just one example of a myriad of tax planning techniques that can yield major tax benefits for both the owner and the company.
FORBES: From "Do-it-Yourself" retirement income planning to "Don't-do-it-Yourself" exit planning
The payoff for putting up with these hurdles is a potentially higher tax-adjusted yield. (Muni bonds offer tax advantages over other types of bonds and are most beneficial when held in a taxable account.) You may have to dig, but short-term fears can create opportunities for those who are astute and selective.
Many fund companies, including Vanguard Group, offer online tax-equivalent yield calculators.
How higher tax rates can yield lower collections is a good question.
For example, a tax-free yield of 3% would be the equivalent of a 4.6% taxable yield for someone in the 35% bracket, and 4.97% for someone in the 39.6% bracket.
The IRS only audits about 1 percent of tax returns each year, so the agency tries to pick returns that are most likely to yield additional tax money.
Following the House budget resolution would almost certainly shift more of the tax burden to low- and middle-income households and yield a less progressive tax system.
FORBES: How Would the House Budget Resolution Affect Tax Progressivity?
This is nontaxable, so 75% of its current 6.7% yield is tax free.
Town officials said they believe developing the island would cost more in service expenses that it would yield in tax revenues.
This development is important for investors as REITs invest in real estate, get special tax considerations and offer high yield.
Tax efficiency, expense ratios, yield and risk all should be considered when evaluating a fund.
However, insurance can be combined with existing estate, tax, and business planning to yield a respectable asset protection plan.
Maybe the tax on the insured deposits will yield 2 billion euros.
Not only does this combo yield the maximum possible tax benefit, but since the 401(k) contributions are optional each year, it will also give you the flexibility to cut back a bit on saving if you need to reinvest in that business or have an off year.
FORBES: How Entrepreneurs Can Get Big Tax Breaks For Retirement Savings
The new tax is even more reason to move income-generating investments such as high-yield bonds or high-turnover mutual funds into tax-sheltered accounts such as IRAs, says Eric Lewis, a principal at Bedrock Capital Management, a financial-planning firm in Los Altos, Calif.
In the top federal tax bracket, that plum-looking yield shrinks to around 5%.
Of course, if you are investing through a tax-favored account, there is no state tax, and this component of your yield spread is gravy.
Flat-tax proponents say that the reform would yield many economic benefits.
ECONOMIST: The Conservatives toy with a politically risky idea
The yield for seven-day tax-free and municipal money-market funds slipped to 1% in the latest week from 2%, while the yield for 30-day funds held steady at 0.02%.
If the investor is in the 35 percent marginal tax bracket, then to get the same income from an equally risky bond that is not tax-free would require a gross yield of 3 percent per year.
This eases the cash flow of a strapped business, and the time value of money makes such investment yield a higher (after-tax) rate of return.
FORBES: Depreciation Rules, Investment Swings And Rescheduled Economic Growth
Government should tax either the value of an asset or its yield but not both.
FORBES: Capital Gains Tax is an Economic Monkey Wrench (2012)
应用推荐