dagblog - Comments for "Raise The Capital Gains Tax"

If you dig a little deeper

Ron — Thu, 09 Jun 2011 15:21:47 +0000

In reply to Raise The Capital Gains Tax

If you dig a little deeper into the history of dividends and capital gains taxes you will find that prior to 1954 they were treated differently in a few different ways at different times. However, you will want to adjust you thinking of what you learn there to update with the emergence of hedge funds, high speed trading, commodity futures speculators, etc.

What I am getting at is the dividends were largely tax exempt prior to 1954, except 1936-1939. If you have the resources (which I lack just using Google), then it might be informative to learn why dividends became tax exempt again after four years of being taxed when we were still in the Great Depression and facing eminate war?

At times capital gains were taxed with increasing discount over longer terms (i.e., over 1, 2, and 5 years holding time instead of just short and long). After 1954 merger activity increased greatly. The first LBO was in 1955. Mergers rarely achive greater economic efficiency. Consolication costs include reduced competition and reduced internal investment.

I could go on but it would be better if you did. Low dividends tax rates incentivise long term investment while holding up equity value. Low capital gains rates incentivise selling at a marginal gain over basis.

I started a small cellular

Flavius — Mon, 16 May 2011 00:02:37 +0000

In reply to Using income as our primary

I started a small cellular telephone company .

Using income as our primary

EmmaZahn — Sat, 14 May 2011 22:44:25 +0000

In reply to I agree with your general

Using income as our primary tax created many of the divisions and problems we continue to squabble over. Tacking on loopholes and subsidies just made them even worse.

Why do we not tax transactions and accumulations of capital before getting to income? I know. Many progressives will have a kneejerk reaction to the idea of a transaction tax but it is the simplest and fairest tax possible. And it does not have to be the only tax. Next up should be a straight up wealth tax on great fortunes to minimize dynastic ambitions. Then maybe an income tax if needed.

Radical? Yes.

You said above that without the favored treatment of capital gains you probably would not have started your own business. What sort of business are you in that capital gains tax would make that much difference? Hedge funds?

I agree with your general

Flavius — Sat, 14 May 2011 11:51:29 +0000

In reply to OTOH -- eliminate it entirely

I agree with your general point.

I can't think of a substitute for a different capital gains rate but the fact that I don't think of one doesn't mean there isn't one .

You probably know it's conventional world wide to take the cost of an item of capital equipment , divide it by ,say , 10 and over the following 10 years "depreciate " it that is take one tenth of it and subtract that amount from the company's profit then compute tax on the amount that's left.

But in those supposedly anti capitalistic Scandinavian countries the Government permits companies to double the cost of the equipment then subtract that higher amount from profit before computing the tax. Which may explain why a tiny country like Sweden has one of the two or three leading firms world wide not just in Automobiles ( Volvo) but also in Telecommunications ( Ericson) and in air compressors and their associated tools. (Atlas Copco). . And equally tiny Finland has Nokia.

So yes , there could be better approaches to stimulating investment than the favorable cap gains tax rate.

OTOH -- eliminate it entirely

EmmaZahn — Thu, 12 May 2011 22:55:07 +0000

In reply to Raise The Capital Gains Tax

OTOH -- eliminate it entirely and look for other incentives that could accomplish the same thing.

The absolute worst part of our income tax system is how different classifications of income and their corresponding loopholes tempt taxpayers to dishonesty which then trickles out in every direction throughout society.

That makes a good amount of

Michael Maiello — Thu, 12 May 2011 13:59:48 +0000

In reply to Capital Gains tax rates have

That makes a good amount of sense to me.

Capital Gains tax rates have

Flavius — Thu, 12 May 2011 12:30:50 +0000

In reply to Raise The Capital Gains Tax

Capital Gains tax rates have to be considered in the context of the overall tax system

I can speak from personal experience. When marginal tax rates were 70% the fact that the Capital Gains rate was lower Influenced me to start a company. I won't say positively that I wouldn't have done so otherwise but I'm pretty sure that's the case.

I did. It was successfull. It employed about 20 people by the time I sold out, more now.

I've argued several times here that the marginal rate should not just be restored to the level under Clinton but to something higher than that: the bank traders who risked the existence of their employers did so knowing that if the risk went sour they'd be OK, their after tax return from their IC was enough if not for retirement , at least to finance their life style for long enough to get a new job- or to set up as an investment advisor.

BTW prior to then I had been occasionally been subject to those pre Reagan marginal rates.I could discuss their impact but that would be off thread.

As long as the marginal rate is less than 40% I agree there's no reason for a different,lower, cap gains rate. Once it get's about 50% a lower cap gains rate is worth considering.

Certainly my experience is not conclusive, just a piece of data to take into account.

Yes!!

Richard Day — Wed, 11 May 2011 18:42:34 +0000

In reply to Raise The Capital Gains Tax

Yes!!