Generally in countries where cap gains are taxed at a favorable rate as compared to dividend, high-tax bracket investors (like some individuals) prefer low dividend payouts , and low tax bracket investors (like corporation and pension funds) prefer high dividend payouts.
I understand that high tax bracket investors prefer low payouts, so they can take out more cap gains and be taxed less. Why is it any different for low tax bracket investors? Why do low tax bracket investors prefer high dividend payouts even though it is taxed more? Does it have to do with overall taxes they pay?
Tax brackets refer to each individual’s marginal income tax rate (dividend tax rate) whereas captial gain tax rate is universal for all investors in the same country.
So relatively speaking, a low tax bracket investor would prefer dividends over CG because dividends are taxed at a lower rate (low tax bracket) than CG gain.
I didn’t realize that Tax brackets refer to individuals marginal income tax rate (dividend tax rate)…
In the U.S., both cap gains and dividends are taxed at 15%… no matter what your overall income is right? is that wrong, or is it different everywhere outside of the U.S.?
wasnt there alot of controversy during the last US presential elections when people realized that Mitt was paying very little in taxes through cap gains/dividends?