Obama's Capital Gains Tax

[Ben Kenobi]

I've no doubt there is a level you don't want to cross, or it will have a negative impact on investment. I doubt, however, that it's 15%.

On this I completely agree. I'd love to see what 0 percent capital gains tax would do.

[Ben Kenobi]

Do you know what raising or lowering the CGT will accomplish, Ben?

Raising it will kill a certain percentage of businesses with every percentage it goes up, putting workers out of a job when the businesses go down. You are increasing the fixed cost on all businesses in the hopes of more revenue.

Raising it will increase the relocation of companies that can afford to move elsewhere to avoid the rise in tax, and subsequently a rise in unemployment as the jobs for americans go elsewhere.

Lowering it has the opposite effect. The US becomes a more attractive place to do business, and it increases both the taxes paid by the successful businesses, as well as increasing the employment.

[Zkribbler]

Originally posted by Ben Kenobi
And raising the capital gains tax is going to help them? I don't see how.

The extra revenue can be used to fund college loans, grant aid to education, prosecute white collar criminals, repair the crumbling infrastructure, etc.

Contrary to popular belief, Congressmen do not gather in the dark of night to set fire to bonfires made of tax revenues. Sometimes, they actually use these funds for the benefit of the nation.

[Theben]

Originally posted by Ben Kenobi

On this I completely agree. I'd love to see what 0 percent capital gains tax would do.

I never figured you for an anarchist.

I think (and have said before) that there should be a 'normal' rate, and then the government should drop the rate periodically - or raise it - for a short period of time, when it is necessary to spur investment. Perhaps it should even be tied to the dollar or some other appropriate measure. Dropping the CG rate, temporarily, encourages investment in stocks as opposed to other uses of money; there is no question there. It can be very helpful to stimulate investment, in the short term. This is NOT a bad thing.

I prefer the biblical approach- tax during the 'fat' years and lower it during the 'lean' years... which prolly isn't too different from the above. The only difference is that we'd need to end our deficit dilemma in order to have a properly functioning govt that actually can respond favorably to its citizens needs.

[Ben Kenobi]

The extra revenue can be used to fund college loans, grant aid to education, prosecute white collar criminals, repair the crumbling infrastructure, etc.

Contrary to popular belief, Congressmen do not gather in the dark of night to set fire to bonfires made of tax revenues. Sometimes, they actually use these funds for the benefit of the nation.

You supported the bridge to nowhere in Alaska? Man. I thought that was setting bonfires made of tax revenues. I notice you omit national defense as legitimate government spending, but make funding college loans your first priority.

I'm sorry, if you feel that the highest unmet funding priority is forgiving student loans, then the government has too much money.

[Ben Kenobi]

I never figured you for an anarchist.

Nope. I'm like Churchill. I see business as the strong horse that pulls the cart. If you dump the anvil out the horse moves faster.

I prefer the biblical approach- tax during the 'fat' years and lower it during the 'lean' years...

I thought the US was in recession. Time to cut the capital gains tax, not talk about raising it.

As for the deficit, I wholeheartedly agree. Canada is finally out of deficit spending, but we need to be paying more of our debt down before we are entirely out of the woods.

Thank goodness we are down from 75 percent of our GDP in debt, and are now about 30 percent or so. If we can catch up to Australia who has no government debt whatsoever, we will be in clover.

[SpencerH]

Does anybody here who supports raising the capital gains tax have any stock market investments? i never understood why job income should be taxed at one rate and investment income at a much lower rate.......... until I put my money on the line by investing it and lost a bagfull in the 2000 bubble.

If you raise the capital gains tax you'll eliminate any incentive for small investors. It's a stupid idea.

[Zkribbler]

Originally posted by Ben Kenobi
...the bridge to nowhere in Alaska?

And sometimes the Congressmen do build bonfires using taxpayers money.

Luckily in the case of the Bridge to Nowhere, the vigilant Democrats turned back the profligate ways of their wild-spending Republican colleagues.

[Ben Kenobi]

Luckily in the case of the Bridge to Nowhere, the vigilant Democrats turned back the profligate ways of their wild-spending Republican colleagues.

Exhibit A: West Virginia.

Robert Byrd was leading the charge. The Dems leave nothing to chance. They put gasoline on the bonfires of taxpayer money.

[snoopy369]

Originally posted by Ben Kenobi


Raising it will kill a certain percentage of businesses with every percentage it goes up, putting workers out of a job when the businesses go down. You are increasing the fixed cost on all businesses in the hopes of more revenue.

Raising it will increase the relocation of companies that can afford to move elsewhere to avoid the rise in tax, and subsequently a rise in unemployment as the jobs for americans go elsewhere.

Lowering it has the opposite effect. The US becomes a more attractive place to do business, and it increases both the taxes paid by the successful businesses, as well as increasing the employment.

Do you know what Capital Gains Tax is a tax on?

I suggest you read:

http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States

The capital gains tax is not a tax on businesses. It does not directly increase the cost of doing business for any normal business (only trading companies and similar non-inventory companies).

It potentially affects the amount of investment funds available for businesses, in that it could cause people to choose not to invest their money in businesses, but this is not a direct effect, and is not always true, particularly in a strong economy.

Investors choose whether to invest or not based on the expected return of an investment, net of taxes and fees. If that amount is greater than the benefit they will gain from any other activity (loans and/or bonds, bank account, property, mattress, etc.), then they will invest; if it is less, then they will not invest.

During a boom economy, investment is generally profitable. Investors will happily invest, largely regardless of the CG tax rate, because the expected return of investment is very high, while bonds are low, banks are steady (and low), and mattresses are, well, mattresses. (Property gains are taxed at the CG tax rate, if they qualify as LT capital gains, in my understanding.)

In a boom economy, then, it is not only beneficial to raise the CG tax to the 'normal optimal' level, but it can be beneficial to raise it *above* that level, to discourage investment. A high CG tax in the 1920s might have lessened the effect of the 1929 crash, because less money would have been stuck in the stock market, for example.

In a weakening economy, lowering the CG tax encourages people to invest further. However, if you did not raise the CG tax rate before, you cannot lower it at this point, because it is already as low as can be reasonably expected.

So, I would not necessarily say raise the CG tax now (though I think 15% is the lowest it should be, and it shouldn't stay there for too long); but I would say, unless there is a mechanism for adjusting it based on the economics - ie, it is not simply kept low because the rich prefer to not pay taxes - it needs to be raised higher. A mechanism for adjusting it to the current economy would be better, of course; for that matter, it's not that different than the federal funds rate (that is already set by the Fed Reserve Board) in the way it can directly, and quickly, impact the economy - except that it's actually MORE powerful.

I doubt they'd give the Fed that sort of control, mind you, since Congress prefers to keep its hands on the purse strings ... but it would be a good move if they did.

[Zkribbler]

Originally posted by Ben Kenobi


Exhibit A: West Virginia.

Robert Byrd was leading the charge. The Dems leave nothing to chance. They put gasoline on the bonfires of taxpayer money.

From Wikipedia:

The project had been met with fierce opposition. Local Ketchikan resident Charlie Arteaga labeled the project the "Bridge to Nowhere" in an interview with ABC's news program 20/20 in a story produced by Glenn Ruppel. It was cited by some as a typical example of pork barrel spending in the 2005 Transportation Equity Act.

Media coverage of the bridge issue had focused on the secondary purpose put forward by the State of Alaska's official documentation, that of providing road access to the Ketchikan International Airport, and had called into question the document's declared primary purpose — to provide access to developable lands on Gravina Island.

Statistics show that Ketchikan's airport is the second largest in Southeast Alaska after Juneau International Airport, accommodating over 200,000 passengers a year, while the ferry shuttles approximately a half million people in the same time period (as of December 2006).

The ferry, which costs US$5 per person and US$6 per vehicle (one way), runs to the island every 30 minutes for most of the year. During the peak tourist season (May–September), a ferry runs every 15 minutes.

According to USA Today, the bridge was to have been nearly as long as the Golden Gate Bridge and taller than the Brooklyn Bridge. Ketchikan's primary industry is tourism, so the bridge was designed to be tall enough to accommodate the cruise ships which frequent the Alaskan waters during the summer.

In October 2005, Republican Senator Ted Stevens of Alaska became the object of strong media criticism when he opposed diverting the Gravina and Knik Arm Bridge funds to help aid recovery from Hurricane Katrina. In his speech on the Senate floor, Stevens threatened to quit Congress if the funds were removed from his state.

Congress dropped the specific allocation for the two bridges, but the amount of money appropriated to Alaska remained unchanged. In August 2007, Alaska's DOT stated that it was "leaning" toward alternative ferry options, citing bridge costs, despite having already received the funds from the federal government.

The city of Ketchikan has already begun to develop roads and a small amount of infrastructure for the island's inhabitants. However, residents continue to seek funding for the Gravina Island span.

The project was canceled on September 21, 2007 by Alaska governor Sarah Palin:

[snoopy369]

Originally posted by SpencerH
Does anybody here who supports raising the capital gains tax have any stock market investments? i never understood why job income should be taxed at one rate and investment income at a much lower rate.......... until I put my money on the line by investing it and lost a bagfull in the 2000 bubble.

If you raise the capital gains tax you'll eliminate any incentive for small investors. It's a stupid idea.

Because if it had been higher in 1999 you would have not invested as much

[Zkribbler]

If you raise the capital gains tax you'll eliminate any incentive for small investors. It's a stupid idea.

So, if you're taxed on your salary, you'll still work, but if you're taxed on your investments, you won't invest?

[PLATO]

Raising Capital Gains Tax is a stupid idea.

Investors are running for the hills even as we speak. Raise the CG tax and they will stay there.

Obama really doesn't get economics.

[snoopy369]

ZK, that's an absurd comment, as you well know ... Admittedly, an absurd comment to a comment that is rather simplistic and thus somewhat absurd, but still.

The CG rate will not 'eliminate' incentive. It will reduce incentive. That is not necessarily a bad thing...