Financial News

[NorthSideSox72]

It depends on where they put long term dividends and stock profits at. If they push them to near 40% as has been talked about, you will see a massive amount of selling before the plan goes into place. You'll see the money trickle back in, but it will be over years, and not days/weeks, like you will see it leave.

40%? Well yeah, that would of course first-of-all cause a massive short term sell-off to lock in gains. And it would do significant damage long term in the markets. But no one is talking about that, at all. I don't know where you are getting that number.

 

I think it is likely that we will see some sort of an income-tested raise in the gains tax... something like, stays at 15% up to a certain amount of realized gains from non-retirement funds, but goes to 20% above some amount.

 

There is zero chance anyone in the White House, Senate or US House is going to even consider making it 40%.

 

[StrangeSox]

Everything else aside, I really do hope some good, liberal-leaning agreement is reached before Dec. 31st. The 'cliff' really is just a massive austerity package and we all know how terrible that policy has been.

[southsider2k5]

40%? Well yeah, that would of course first-of-all cause a massive short term sell-off to lock in gains. And it would do significant damage long term in the markets. But no one is talking about that, at all. I don't know where you are getting that number.

 

I think it is likely that we will see some sort of an income-tested raise in the gains tax... something like, stays at 15% up to a certain amount of realized gains from non-retirement funds, but goes to 20% above some amount.

 

There is zero chance anyone in the White House, Senate or US House is going to even consider making it 40%.

 

The top dividend rate would go to almost 44%. Capital gains on the top end would be near 24%. Both of those numbers come from the Presidents proposed numbers, plus the new taxes coming into effect from the healthcare plan.

[StrangeSox]

Erksine Bowles, of the Simpson-Bowles Cat Food Commission:

 

Our sources say that to get past these immediate deadlines, Mr. Boehner will ask Mr. Obama to maintain the Bush tax rates for at least another year, ease the sequester for defense in particular, and in return GOP House leaders will be open to giving the President new revenue. Then the two sides can negotiate the bigger tax and entitlement questions next year.

 

Mr. Boehner will ask President Obama to give Republicans everything they want right now and in turn they promise they'll negotiate in good faith on how exactly to dismantle the social safety net.

[StrangeSox]

The top dividend rate would go to almost 44%. Capital gains on the top end would be near 24%. Both of those numbers come from the Presidents proposed numbers, plus the new taxes coming into effect from the healthcare plan.

link/source?

[southsider2k5]

link/source?

 

http://www.bloomberg.com/news/2012-02-13/o...he-wealthy.html

 

Obama is proposing a top individual income tax rate of 39.6 percent in 2013, up from 35 percent. His budget would tax long- term capital gains at a top rate of 20 percent, up from 15 percent. The top dividend tax rate is now 15 percent.

 

An additional 3.8 percent tax on the unearned income of couples earning $250,000 and individuals making at least $200,000 will take effect next year as part of the 2010 health- care law. As a result, under Obama’s plan some taxpayers would pay 43.4 percent in federal taxes on their dividends next year. That’s almost triple what they now pay and comes on top of corporate taxes.

 

http://www.businessweek.com/news/2012-11-0...-pre-2013-moves

 

President Barack Obama’s re-election means his administration will push to let tax cuts enacted during the George W. Bush era expire for high earners, as scheduled, at year-end. Obama wants to increase the top federal income tax rate to 39.6 percent from 35 percent, boost rates on long-term capital gains to as much as 23.8 percent, and shrink exemptions from estate-and-gift taxes.

[StrangeSox]

That seems to be conflating income tax rates and dividend tax rates to get to 43.4%. Bloomberg is blocked at work (filter thinks it's a financial trading website) so I can't see the details.

 

I know he wants the top income rate to go to 39.6%, but you specifically said he wants a dividends tax rate of 40%.

[NorthSideSox72]

The top dividend rate would go to almost 44%. Capital gains on the top end would be near 24%. Both of those numbers come from the Presidents proposed numbers, plus the new taxes coming into effect from the healthcare plan.

OK, did some Googling... from what I can see, there is a proposal being floated to tie dividend income to the regular income scale. So, if I'm right in my analysis of this... the rate would stay 15% for DIVIDENDS up to a level of about $37k, then start rising through a 25% to 39% scale beyond that. So this tax would only occur if your dividends are more than $37,000 per year. It only effects a tiny percentage of investors, in other words. And an even tinier percentage would actually have any significant amount be above that point.

 

That said... as I said earlier, that won't pass, at least not as written. It is a starting point, just as Boehner saying no rate increases, is really a starting point.

 

The idea here, of course, is to avoid having people who live off investments getting to pay much lower rates than those who make much less money. And in general I agree with that, though you have to be careful how you execute it.

 

And even if something LIKE this got passed, because it effects so few people, and because those investors will still invest, it won't have a huge long term impact on the markets.

 

[southsider2k5]

OK, did some Googling... from what I can see, there is a proposal being floated to tie dividend income to the regular income scale. So, if I'm right in my analysis of this... the rate would stay 15% for DIVIDENDS up to a level of about $37k, then start rising through a 25% to 39% scale beyond that. So this tax would only occur if your dividends are more than $37,000 per year. It only effects a tiny percentage of investors, in other words. And an even tinier percentage would actually have any significant amount be above that point.

 

That said... as I said earlier, that won't pass, at least not as written. It is a starting point, just as Boehner saying no rate increases, is really a starting point.

 

The idea here, of course, is to avoid having people who live off investments getting to pay much lower rates than those who make much less money. And in general I agree with that, though you have to be careful how you execute it.

 

And even if something LIKE this got passed, because it effects so few people, and because those investors will still invest, it won't have a huge long term impact on the markets.

 

It doesn't have to pass. All that has to happen is the tax cuts expire. And you also seem to be missing that because of where wealth is concentrated, it will affect a much larger percentage of people who hold assets in the market. The large investors will be the ones who are selling. These are the same investors who have the ability to move the market. The same people who have already moved the market down about 5% in two days.

[StrangeSox]

The dividends rate won't go to 40+% if the tax cuts expire. It'll go to the 30% it was before the Bush tax cuts.

 

It sucks that our entire economic system is apparently held hostage to investors who are willing to crash it all if they have to pay higher taxes.

[southsider2k5]

The dividends rate won't go to 40+% if the tax cuts expire. It'll go to the 30% it was before the Bush tax cuts.

 

It sucks that our entire economic system is apparently held hostage to investors who are willing to crash it all if they have to pay higher taxes.

 

They should crash it. They shouldn't be held hostage to someone who wants to take their money.

[NorthSideSox72]

It doesn't have to pass. All that has to happen is the tax cuts expire. And you also seem to be missing that because of where wealth is concentrated, it will affect a much larger percentage of people who hold assets in the market. The large investors will be the ones who are selling. These are the same investors who have the ability to move the market. The same people who have already moved the market down about 5% in two days.

 

Tax cuts expiring makes all Cap Gains at the Bush-era levels. Not 40%.

 

Of course there is larger concentration at the top. But what I think you are missing is, those investors will sell short term, and re-buy long term, because those people still make their money from the markets. The money will go somewhere, and not in their mattresses. The very people that tax would hit, are the very people who most need the markets to rise for their income.

 

Now at some level, sure, that tax gets silly. If you make it 75%, or even 50%, it starts to get much more tempting for those folks to use money in non-standard avenues, often overseas. But going, say, back to the 25% rate it was a while back, or 30% more recently? Not going to be a giant impact at all, in the long run.

 

 

[StrangeSox]

They should crash it. They shouldn't be held hostage to someone who wants to take their money.

 

They should crash the economy and cause tens of millions to suffer so that they don't have to pay slightly higher tax rates that won't actually impact their living standard at all? That's some set of morals you've got there.

[NorthSideSox72]

They should crash it. They shouldn't be held hostage to someone who wants to take their money.

Held hostage?

 

Seriously, let's get with reality. The cap gains rate that it would revert to is 30%, which was the same tax rate that was in place during the huge 90's run-ups. These guys aren't going to take their ball and go home. They will book some gains late this year, then reinvest in the new year when the fiscal situation is addressed more long term.

 

Now, I don't want that to happen, by the way - I would rather they get something done quickly to avoid the cliff. Something easier in the lame duck session - say, 3 months or same tax rates, with a few further cuts, but let the Bush cuts expire on top income, or somethign like that. Then re-do the whole thing in the first few months of the new year, in a cleaner way. And I am OK with a small increase in cap gains and/or dividend rates being part of the long term picture, especially for larger incomes.

 

BUT, even if we hit 30% on cap gains and dividends, this will not result in some sort of meltdown.

 

Actually, the thing that most bothers me about Obama's apparent proposal on these rates, is making cap gains so much lower than dividends. I think that ends up pusing companies to do things they wouldn't otherwise do, and it discourages investing in dividend-producing stocks, which furthers the problem of stock bubbles.

 

[southsider2k5]

They should crash the economy and cause tens of millions to suffer so that they don't have to pay slightly higher tax rates that won't actually impact their living standard at all? That's some set of morals you've got there.

 

It is the economic right to do what they want with their money. I know in your world that doesn't exist, but in mine it does.

[NorthSideSox72]

It is the economic right to do what they want with their money. I know in your world that doesn't exist, but in mine it does.

THere is a difference between their right (which they have), and you saying earlier that they SHOULD do it. I can do lots of things that are sleazy.

 

But none of this matters, because they won't, not in the long run. And not over a relatively small increase.

 

[Jake]

It is the economic right to do what they want with their money. I know in your world that doesn't exist, but in mine it does.

 

I don't think anyone argues with that right being there, but it sucks that those few can have that effect and it sucks that they almost certainly will let it have that catastrophic effect.

 

 

 

The main thing that I get from this situation is that Bush f***ed up very badly by cutting tax rates. We flourished with significantly higher rates than this in the past -- so it isn't the rate that is the issue, it's the changing of it. Dumb. Shouldn't have changed in the first place.

[southsider2k5]

THere is a difference between their right (which they have), and you saying earlier that they SHOULD do it. I can do lots of things that are sleazy.

 

But none of this matters, because they won't, not in the long run. And not over a relatively small increase.

 

If there a large increase in taxes, individuals should be the best financial decisions for them and their family, which would be to sell their holdings and lock in their gains in the 2012 calendar year. Plus they will probably be able to buy back their holdings later at a cheaper rate. They should absolutely do it.

[StrangeSox]

It is the economic right to do what they want with their money. I know in your world that doesn't exist, but in mine it does.

is/ought

 

You said they should act like a bunch of giant babies and harm millions so that they can afford another yatch. That is disgusting.

[StrangeSox]

If there a large increase in taxes, individuals should be the best financial decisions for them and their family, which would be to sell their holdings and lock in their gains in the 2012 calendar year. Plus they will probably be able to buy back their holdings later at a cheaper rate. They should absolutely do it.

 

Their families will be completely unaffected in any material way by the tax increases. They should absolutely not cause millions to suffer so that they can continue to hoard more wealth.

[southsider2k5]

I don't think anyone argues with that right being there, but it sucks that those few can have that effect and it sucks that they almost certainly will let it have that catastrophic effect.

 

 

 

The main thing that I get from this situation is that Bush f***ed up very badly by cutting tax rates. We flourished with significantly higher rates than this in the past -- so it isn't the rate that is the issue, it's the changing of it. Dumb. Shouldn't have changed in the first place.

 

This is such a myth. The Chicago Tribune did an article, along with a chart in the Sunday paper (of course the chart isn't available on-line) that outlined the increase in revenue from the return to the Bush era tax rates. The return of the 1% to their former rate will generate something like $8 billion in revenue.

[southsider2k5]

is/ought

 

You said they should act like a bunch of giant babies and harm millions so that they can afford another yatch. That is disgusting.

 

They absolutely should do what is best for them and sell. Its not about the left wing rhetoric. It is about individual economic freedom.

[StrangeSox]

They absolutely should do what is best for them and sell. Its not about the left wing rhetoric. It is about individual economic freedom.

 

See, and that's s*** morals, to do what's "best" for yourself and f*** the millions that would be impacted by it. Even if not doing what's "best" for yourself won't actually affect your life.

 

We have many freedoms to do stupid and terrible things. That doesn't mean that we should exercise them in those manners.

[StrangeSox]

btw long-term, it's probably not "best" for the uber-wealthy to crash the system and cause widespread economic suffering. That usually doesn't end well for the "let them eat cake" crowd.

[NorthSideSox72]

If there a large increase in taxes, individuals should be the best financial decisions for them and their family, which would be to sell their holdings and lock in their gains in the 2012 calendar year. Plus they will probably be able to buy back their holdings later at a cheaper rate. They should absolutely do it.

The fall and rise would be their own then, and therefore flatten everything gains-wise as a group.

 

They will do the only smart thing. If they have gains to lock in, stuff they think they were only going to hold another few days/weeks/months anyway, then they will sell before EOY. They will not sell massively and then try to play the game if buying right back in, because they know there is a significant chance they lose money trying. That is what is best for them, and that is what most will do. Furthermore, the money they get from selling the select securities early, they will reinvest in 2013 pretty quickly, not because they are trying to time the dip, but because they don't want the money to do nothing.