Double Taxation? Another Romney Myth, Busted.

Mitt Romney said this during his interview on 60 Minutes:

Scott Pelley: Now, you made on your investments, personally, about $20 million last year. And you paid 14 percent in federal taxes. That's the capital gains rate. Is that fair to the guy who makes $50,000 and paid a higher rate than you did?

Mitt Romney: It is a low rate. And one of the reasons why the capital gains tax rate is lower is because capital has already been taxed once at the corporate level, as high as 35 percent.

Pelley: So you think it is fair?

Romney: Yeah, I think it’s the right way to encourage economic growth, to get people to invest, to start businesses, to put people to work.

As a successful businessman, he should know better than echoing a myth that's been busted time and time again:

There is no factual evidence that dividends are double-taxed. To claim they are is a complete falsification indulged in by many who would know better if they examined the facts.

Dividends are taxed only once to stockholders. The income taxes the corporation pays are completely different than those paid by stockholders — they are calculated at different rates and under different rules and regulations.

To say that stockholders pay corporate income taxes is at complete odds with the facts. The corporation is well-established as an entirely separate and distinct legal entity. The stockholders do not manage corporate operations or have title to its assets. They are not management and cannot take possession of a pro rata share of corporate buildings or other assets. Stockholders do not declare dividends or run the corporation’s daily operations—they simply own a piece of paper that entitles them to a share of net assets on dissolution and to dividends if corporate management declares any.

It is true the ups and downs in a corporation’s profitability will affect all parties interested in its operations whether they are employees, lenders, taxing authorities or stockholders, but it is not true they are all double-taxed simply because the corporation pays taxes on its income. So, let us therefore hear the end of the myth of the double taxation of dividends. It just doesn’t hold up under any honest study of the facts.

Source: An Opinion on Dividend’s Taxation.

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