Comment by triceratops
17 hours ago
> delivering to themselves the tax-advantaged equivalent of a 4% dividend?
Long-term gains and qualified dividends (shares held longer than 60 days) are taxed at the same rate. What's the tax advantage here?
17 hours ago
> delivering to themselves the tax-advantaged equivalent of a 4% dividend?
Long-term gains and qualified dividends (shares held longer than 60 days) are taxed at the same rate. What's the tax advantage here?
That is US-specific tax policy, but many international companies are listed on US exchanges and purchased by international investors. As a Canadian, my retirement savings in my TFSA are subject to 15% taxes on dividends and 0% taxes on capital gains (for US-listed stocks).
The tax advantage of stock buybacks is that investors aren't forced to immediately realize gains. They have the freedom to time sales to minimize overall income tax liability, for example by harvesting losses in other investments in a future year.
This is true. I'd still file tax-loss harvesting under "advanced maneuvers employed by high net worth people".
At a societal level, and I understand this is a completely different point, I also question whether it's prudent to allow tax dodging this way. We already tax labor heavily and at the same time we incentivize companies to improve productivity (read: use less labor). How do we pay for society without taxing some of the productivity (read: profits) or taxing labor even more? You can only cut so many services.
Even folks who are just saving for retirement benefit, since they need not take any income on top of their normal employment income. They may be in a lower bracket when they sell.
Also the reality is that its somewhat rare for retirees to spend down their entire portfolios.