First, dividends are taxed as ordinary income. There is no preferential tax treatment. I think you are referring to capital gains, which are only realized upon the sale of equity.
There is a such thing as "qualified" dividends, which have a lower tax rate, which is what I was referring to. Also, my post was in response to someone who claimed that the extra money that came from a lower tax rate would accrue only to the higher ups, who would structure the payment as a dividend in order to not only keep all the extra money from lower tax rates all to themselves, but also to pay a lower tax rate. I refute both claims as utterly false.
Second, can you prove that statement about how $X in the hands of a corporation that has a profit motive, shareholders, and probably high salaries/bonuses for executives does a better job using that money than the government which has no profit motive, no shareholders, and public employees.
$X Million dollars building a road that benefits an entire community is better than $X Million dollars buying a $Y machine and giving dividends and bonues equal to $Z.
Let's say that the tax rate gets cut. The extra money will be used as some combination of higher salaries, shareholder distribution, and MAYBE lower price, though relatively unlikely.
Let me address the possibility of distributions. I feel that many on this forum consider the "shareholders" as part of the group known as the "1%," those greedy, bloodsucking snobs who are only after money. The belief that these are the only ones who will benefit from lower tax rates seems to form the basis for opposing lower corporate tax rates. I'm arguing that that notion is not entirely true,p.
Look at it this way. Let's look at Apple for example. Most of Apple stock is owned by institutional shareholders such as mutual funds, hedge funds, etc. Entities such as pension funds invest in these funds. Individuals also invest in mutual funds. The beneficiaries of pension funds are middle class folk, the "99%."
Companies often have different classes of stock, including preferred shares that are only available to certain classes of people.
Why are gains income treated any differently than any other income? Why do investors get a tax break?
Preferred shares aren't called "preferred" because of who can buy them. They're called preferred shares because of certain characteristics that make them superior to common shares. First of all after creditors preferred shareholders get first dibs over any remaining profits before common shareholders. This means that if there's a dividend payment preferred shareholders have to get theirs first before common shareholders can get theirs. So it's because of seniority in the financing hierarchy that preferred shares are called "preferred."
Anyway you slice it it's unlikely that executives will be able to create a class of stock that they pay themselves a dividend on and make it so that the stock can only be purchased by them. One of two things will happen. Either shareholders will sue the company because the executives are pocketing something that should be going to common shareholders or the IRS will classify the dividend payment as a salary and tax it accordingly.
Lastly, as for investors getting a tax break, that's because it was decided that it would be helpful to the economy to encourage people to buy and sell stocks. Taxes are designed to influence certain behaviors. For example, cigarette taxes are designed to reduce smoking.