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Thursday, November 11, 2010

Team Sanity: The Right - Far Right Compromise

Andrew Sullivan suggests, in passing, that I should look at the $750 billion in tax increases, that aren't quite at a level of detail to do so, convincingly.

On my numbers, if you rely on dividend income from a U.S. company, you could see an increase in after-tax income. So, I'd like to know how they did their projections of 'savings'.

Finally, a big-ticket item in the defense budget like "reduce procurement by 15%" is a throw away. Tax cuts for the top bracket should be made conditional on achieving these cuts. That way, the 'money interests' have an incentive, not to rip off the government, but to improve its efficiency and vie for good governance, in general, rather than 'regulatory capture'.

A 22% increase in dividends possible, leading to an 8% increase in after-tax dividend income:

Corporate Earnings Chart

$ 100 $ 100

Earnings before taxes

65 75

After taxes at 35% and 25% proposal

26 36

Cash available to payout in dividends

39 39

Cash needed for re-investment

22.1 27 4.9 22% Dividends paid

3.32 6.75 3.4 104% Tax on Divs, at 15%, 25%

$ 18.79 $ 20.25 1.5 8% Income to "wealthy"

*25% is the top proposed bracket, so if you are in a lower bracket, there would be even more of an increase in dividend income.