Hi - could someone explain how moving from a common progressive tax regime to a heavy dividend tax regime (would increase the tax on dividends )would shift some of the investment risk to the government.
I understand this when we talk about the capital gains taxes (capital loss), but don*t understand for dividends.
Thank you
It seems an academic sort of approach where they mean to say that dividends (which are discretionary unlike capital gains), mean “investment risk” to the government when they tax them. Sort of mental gymnastics if you ask me. Perhaps someone understands it better than I do and can explain to both of us lol. But to me it looks like since dividends are a discretionary decision of companies, they are saying if governments go ‘all in’ on dividends for additional tax revenues it means they are ‘risking it’ on the fact that companies will in fact issue dividends. Again, maybe there’s a better explanation out there.
Is it not to do with that concept (from asset allocation I think) where if the government tax an investment then they share some of the investment risk along with the investor?
That would explain why if tax rates are higher (i.e. under heavy dividend regime) the government would have a higher proportion of the risk?
I think in case of capital losses I understand what you say - but in case of dividends payments, what is the risk that government shares?