OBAMA/TRUMPCARE MEGATHREAD

[StrangeSox]

But there's no evidence that they won't agree to it other than in the past they preferred a different cut-off. Not every single democrat needs to agree on policy before starting to negotiate with republicans.

 

The other side won't come to the table, and this is just a weak "both sides do it" deflection. In a series of posts decrying the influence of money on our politics, you've managed to blame prominent democrats, assert that they can't even after with each other let alone anyone else to get things done and haven't mentioned the group who is going to get close to a billion dollars from a handful of plutocrats this year. Comparing two different but similar policy preferences from Pelosi and Obama to an inability to pass compromise legislation with the other party is just silly.

[Jenksismyhero]

But there's no evidence that they won't agree to it other than in the past they preferred a different cut-off. Not every single democrat needs to agree on policy before starting to negotiate with republicans.

 

The other side won't come to the table, and this is just a weak "both sides do it" deflection. In a series of posts decrying the influence of money on our politics, you've managed to blame prominent democrats, assert that they can't even after with each other let alone anyone else to get things done and haven't mentioned the group who is going to get close to a billion dollars from a handful of plutocrats this year. Comparing two different but similar policy preferences from Pelosi and Obama to an inability to pass compromise legislation with the other party is just silly.

 

[StrangeSox]

Just admit that your post made no sense and we can all move on.

Edited July 10, 2012 by StrangeSox

[Y2HH]

A few points...

 

1) I have no issues with raising the income tax on upper income earners, however, I also think it's a political maneuver to get Romney to appear as if he's defend the rich, thus hurting his overall image. Raising that tax will generate only ~85 billion more per year, which is nice, and I think it should be done...but let's not pretend it's going to solve this country's fiscal problems...it wouldn't even make a tiny dent.

 

2) The part about Obama's tax plan I do not like is his proposal to raise the cap gains tax on everyone to 30%. Short term cap gains are already taxed at whatever your ordinary income level is, which is the entire point of the lower 15% on long term gains...it was done to encourage long term investing, and supplement the added risk that comes with it.

Edited July 10, 2012 by Y2HH

[StrangeSox]

We didn't really see much benefit economically from reducing the cap gains (and dividends) rates to 15%. It benefits a handful of the really wealthy, primarily, and does nothing for the majority of Americans who have little or no investments.

[Y2HH]

We didn't really see much benefit economically from reducing the cap gains (and dividends) rates to 15%. It benefits a handful of the really wealthy, primarily, and does nothing for the majority of Americans who have little or no investments.

 

First and foremost, it's important to show that there are two types of cap gains taxes, long and short.

 

Short = Investments held less than 1 full year (

 

Long = Investments held more than 1 full year ( >= 366 days), taxed at the lower 15% level. This was done to encourage long term investing, and enable lower income people to consider taking the risk of investing in stocks on a long term basis.

 

Again, I'd have no issues if this was treated the same with the upper income earners, as the tax hike/dividend rate would only affect them.

[cabiness42]

A few points...

 

1) I have no issues with raising the income tax on upper income earners, however, I also think it's a political maneuver to get Romney to appear as if he's defend the rich, thus hurting his overall image. Raising that tax will generate only ~85 billion more per year, which is nice, and I think it should be done...but let's not pretend it's going to solve this country's fiscal problems...it wouldn't even make a tiny dent.

 

2) The part about Obama's tax plan I do not like is his proposal to raise the cap gains tax on everyone to 30%. Short term cap gains are already taxed at whatever your ordinary income level is, which is the entire point of the lower 15% on long term gains...it was done to encourage long term investing, and supplement the added risk that comes with it.

 

How about a compromise:

 

Short term cap gains tax rate = whatever your income tax rate already is

 

Long term cap gains tax rate = whatever your income tax rate already is minus 5 percent

 

There is still an incentive to invest long term without cutting too much of a break to the super rich.

[Y2HH]

How about a compromise:

 

Short term cap gains tax rate = whatever your income tax rate already is

 

Long term cap gains tax rate = whatever your income tax rate already is minus 5 percent

 

There is still an incentive to invest long term without cutting too much of a break to the super rich.

 

We can't pretend to compromise with that because it's not what they're doing.

[NorthSideSox72]

We didn't really see much benefit economically from reducing the cap gains (and dividends) rates to 15%. It benefits a handful of the really wealthy, primarily, and does nothing for the majority of Americans who have little or no investments.

Not true at all. For one thing, everyone with a 401k or other non-public retirement account or the like will pay cap gains at some point. Long term ones. Second, you want to encourage investment from the rich into stocks anyway, as it helps companies stay financially healthy and hire more people.

 

That is not to say you never raise the rate - you may need to. I am just saying your premise that it only helps the very wealthy is false.

 

[StrangeSox]

The top 10% own something like 75% of financial assets in this country. The bottom 40% own nearly none at all and have negative net financial assets. It primarily benefits the wealthy, though not completely.

 

Do we have any data that supports the idea that lowering the cap gains from 30% to 15% spurred investment and the economy? It was only in 2001 that we did so, the the intervening decade does not really speak well to its overall beneficial effects, and the data shows a straight-line trajectory for investment, pre- and post-cuts:

 

 

“I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off.”

[StrangeSox]

Coincidentally, CBPP just came out with their Capital Gains Tax Chart Book last week. To illustrate my claim that it primarily benefits the wealthy:

 

 

 

And to your point about 401(k)'s and retirement income:

 

 

No matter which way you look at it, preferential rates for capital gains primarily benefits the wealthy and there's scant evidence that it boosts the economy.

[Y2HH]

Coincidentally, CBPP just came out with their Capital Gains Tax Chart Book last week. To illustrate my claim that it primarily benefits the wealthy:

 

 

 

And to your point about 401(k)'s and retirement income:

 

 

No matter which way you look at it, preferential rates for capital gains primarily benefits the wealthy and there's scant evidence that it boosts the economy.

 

The amount of data you have is absolutely minimal.

 

The current long term cap gains rate benefits me, too...and I'm not wealthy. It benefits anyone of middle class income that wishes to invest, long term, in the market. I highlighted the words long term to bring added attention to them...because it's key to the discussion at hand. Of course your graphs show that so far the wealthy have overwhelmingly benefited from it, since the 15% rate hasn't existed very long and they're the primary interests in said market. It's hard for poor people to directly benefit from such a thing since almost none of them invest. The issue is that your argument dismisses that these long term investments benefit even those that have nothing to do with the stock market, as this sort of investing helps stabilize the market, the businesses themselves, the overall economy, etc...as it encourages long term investments in our own companies.

 

As with the dividend and income tax hike, if they want to go after top earners, go after them...the issue here is this affects everyone now and in the future. To remove incentives to invest in the stock market from everyone just because a disproportionate number of rich people currently benefit is madness. And to say the impact is minimal is insane...selling a stock at a long term profit and being taxed 15% on that added profit is a far cry from being taxed 30%.

Edited July 10, 2012 by Y2HH

[StrangeSox]

Unless the financial wealth gap begins closing, then time is irrelevant. Who benefits is based on who owns investments.

 

As i said in the post above that one, there is scant evidence that it actually spurs investment.

[Y2HH]

Unless the financial wealth gap begins closing, then time is irrelevant. Who benefits is based on who owns investments.

 

As i said in the post above that one, there is scant evidence that it actually spurs investment.

 

Like I said, then raise the long term cap gains tax on the upper income earners...not everyone. Because currently, it benefits me...and again, I'm not rich.

[Y2HH]

Unless the financial wealth gap begins closing, then time is irrelevant. Who benefits is based on who owns investments.

 

As i said in the post above that one, there is scant evidence that it actually spurs investment.

 

Also, it's not meant to spur "investment", which you keep repeating. It's meant to incentivize *long term* investment. And believe me, there is a HUGE difference in a long term outlook versus day trading, or short term trading in general. There is no argument that the same people would probably be investing either way, but of those people, there ARE those of us who moved to a longer term buy/hold type of strategy because of it...it removes some of the added risk of holding a stock long term.

[Balta1701]

Also, it's not meant to spur "investment", which you keep repeating. It's meant to incentivize *long term* investment. And believe me, there is a HUGE difference in a long term outlook versus day trading, or short term trading in general. There is no argument that the same people would probably be investing either way, but of those people, there ARE those of us who moved to a longer term buy/hold type of strategy because of it...it removes some of the added risk of holding a stock long term.

The obvious question in reply is...if it encourages long term investment somewhat, but does so at a significant taxpayer cost and also produces the negative externalities of feeding the criminal wall street system we're currently supporting...is that the most effective way to incentivize long term investment?

[Y2HH]

The obvious question in reply is...if it encourages long term investment somewhat, but does so at a significant taxpayer cost and also produces the negative externalities of feeding the criminal wall street system we're currently supporting...is that the most effective way to incentivize long term investment?

 

This is a loaded question that would probably take hours to actually even scratch the surface of.

 

First, there is no true taxpayer "cost" when it comes to incentivizing long term investments aside from a select few that do not have jobs that produce income, and their investments are their sole source of income. Keep in mind the base money in the market has ALREADY been taxed once. Any taxes after that point are all added taxes on successful investments. Of those successful investments, the loss of tax revenue from the ultra rich that do not work, and thus have no "income", comes primarily from dividend gains. They're already addressing this by proposing to raise the dividend rate on top earners to 30%, bringing it in-line with ordinary income taxes. That should correct your question of any actual taxpayer cost...the issue is, not many people in the world have the wealth or investment portfolio to live off dividends and long term cap gains.

 

Second, most wall street criminal trading is not done via long term investments, of course it can be in cases of insider trading, but when it comes to long term investments, it's often too easy to trace such activity. The easiest place to do this sort of thing is in quick turn-around revolving markets, such as credit markets, etc...where the numbers change constantly.

 

Third, I'm not sure what to say about the criminal wall street system...they have enough oversight in the world to police this, the issue is, they don't bother. I invest in the market and I do so without breaking the law. So because others cannot, I should get penalized, too? I'm not sure what you're getting at with this.

[Balta1701]

This is a loaded question that would probably take hours to actually even scratch the surface of.

 

First, there is no true taxpayer "cost" when it comes to incentivizing long term investments aside from a select few that do not have jobs that produce income, and their investments are their sole source of income. Keep in mind the base money in the market has ALREADY been taxed once. Any taxes after that point are all added taxes on successful investments. Of those successful investments, the loss of tax revenue from the ultra rich that do not work, and thus have no "income", comes primarily from dividend gains. They're already addressing this by proposing to raise the dividend rate on top earners to 30%, bringing it in-line with ordinary income taxes. That should correct your question of any actual taxpayer cost...the issue is, not many people in the world have the wealth or investment portfolio to live off dividends and long term cap gains.

 

Second, most wall street criminal trading is not done via long term investments, of course it can be in cases of insider trading, but when it comes to long term investments, it's often too easy to trace such activity. The easiest place to do this sort of thing is in quick turn-around revolving markets, such as credit markets, etc...where the numbers change constantly.

 

Third, I'm not sure what to say about the criminal wall street system...they have enough oversight in the world to police this, the issue is, they don't bother. I invest in the market and I do so without breaking the law. So because others cannot, I should get penalized, too? I'm not sure what you're getting at with this.

Well, one, yes, if you invest in the market without cheating, you are getting penalized by the systemic lawbreaking. But that's besides the point.

 

But take a look at everything else you wrote...nothing there argues that minimal capital gains taxes are an effective way of subsidizing long-term investment compared to the $300 billion 10 year cost. The question I'm asking is...is that the best use of $300 billion additional funds on top of the enormous 401k subsidy?

 

For comparison, an alternative method that is employed in some of the financial centers overseas is a Financial Transactions tax. Combined with the hundreds of billions of dollars used to subsidize the 401k system, you now have a setup where there is a substantial tax benefit for investing, but then that builds into a growing penalty if you do not have a long term setup. The cost to the taxpayer of doing that is still substantial because the 401k subsidy for investment is huge, but it accomplishes the same task without spending hundreds of billions more on a capital gains subsidy. And you get the added benefit of penalizing the high frequency, day-trading markets at the same time, while raising tax funds from those who can most easily afford it; wall street.

 

That's my question. If we're looking to encourage long term investment...and the cost of a capital gains tax cut extension is $300 billion+ over the 10 year period, we have to ask whetehr that's the most effective way of encouraging long term investment. It's not. It's extremely inefficient.

[Y2HH]

Well, one, yes, if you invest in the market without cheating, you are getting penalized by the systemic lawbreaking. But that's besides the point.

 

But take a look at everything else you wrote...nothing there argues that minimal capital gains taxes are an effective way of subsidizing long-term investment compared to the $300 billion 10 year cost.

 

For comparison, an alternative method that is employed in some of the financial centers overseas is a Financial Transactions tax. Combined with the hundreds of billions of dollars used to subsidize the 401k system, you now have a setup where there is a substantial tax benefit for investing, but then that builds into a growing penalty if you do not have a long term setup. The cost to the taxpayer of doing that is still substantial because the 401k subsidy for investment is huge, but it accomplishes the same task without spending hundreds of billions more on a capital gains subsidy. And you get the added benefit of penalizing the high frequency, day-trading markets at the same time, while raising tax funds from those who can most easily afford it; wall street.

 

Looking overseas on how to properly tax the markets isn't a very good idea, either...considering they are largely in a worse fiscal mess than we are. I've noticed a lot of American's like to pretend they (Europe) are doing great, and everything is perfect over there...when it's really not.

 

Whatever the case may be, they need to be smarter about doing things here...and removing incentives which is essentially penalizing the few of us middle class investors they have is probably not the wisest choice. I'm sure they can do something about the upper 1% without affecting the rest of us. Then again, I'm not sure it even matters. If they raised the income tax rate to 90% across the board, they'd still find a way to spend more than they bring in.

[Y2HH]

That's my question. If we're looking to encourage long term investment...and the cost of a capital gains tax cut extension is $300 billion+ over the 10 year period, we have to ask whetehr that's the most effective way of encouraging long term investment. It's not. It's extremely inefficient.

 

On this...while it may be semantics, it bothers me. I don't like it when people use the word "cost" where it doesn't belong. It's not "costing" anything, it simply means they're taking in less tax revenue. It's not an expense...and I really dislike how people try to look at it as if it's an expense. It's a seriously wonky/f***ed up way of looking at tax revenue.

 

If cap gains tax is at 15%, they're making 15% profit. If it's at 30%, they're making 30% profit. If it drop's back down to 15%, they're not LOSING anything, they're just not making as much. That's NOT a cost.

 

They want to tax the hell out of the market, but they don't want to give us anything in return for this tax. Where is this promised oversight? Where are the prosecutions of all the rich bankers that cheated the system and crashed the real estate market? That's what this tax should be doing, paying for the enforcment of the regulations they put in place, which costs money, but these regulations end up doing nothing to most of them...so why would I want to pay more for nothing in return? Because they happen to need it?

Edited July 11, 2012 by Y2HH

[Balta1701]

On this...while it may be semantics, it bothers me. I don't like it when people use the word "cost" where it doesn't belong. It's not "costing" anything, it simply means they're taking in less tax revenue. It's not an expense...and I really dislike how people try to look at it as if it's an expense. It's a seriously wonky/f***ed up way of looking at tax revenue.

 

If cap gains tax is at 15%, they're making 15% profit. If it's at 30%, they're making 30% profit. If it drop's back down to 15%, they're not LOSING anything, they're just not making as much. That's NOT a cost.

And that is why we're having this discussion. Because it's never worth asking if any particular tax credit is an efficient way of subsidizing a certain behavior. As long as it is a tax cut, it's just assumed to be effective/useful.

[Y2HH]

And that is why we're having this discussion. Because it's never worth asking if any particular tax credit is an efficient way of subsidizing a certain behavior. As long as it is a tax cut, it's just assumed to be effective/useful.

 

Well, I absolutely think it's beneficial for incentives to exist which can attract new, younger, and less than rich investors into the market. It's a great avenue for saving/investing for the future. These incentives should apply to those making less than 500k (for example). The issue is, one way or another, the rich keep themselves rich via endless incentives and perks...and guess who we have in office?

 

The rich.

 

Some of them pretend to be on our side (Democrats), but they're not. And the republicans have made it pretty clear they're not on our side, either...unless it also benefits them (the rich).

 

But in the end...all of them are rich...and they've configured the system to make sure they stay that way.

[Balta1701]

Well, I absolutely think it's beneficial for incentives to exist which can attract new, younger, and less than rich investors into the market. It's a great avenue for saving/investing for the future. These incentives should apply to those making less than 500k (for example). The issue is, one way or another, the rich keep themselves rich via endless incentives and perks...and guess who we have in office?

 

The rich.

 

Some of them pretend to be on our side (Democrats), but they're not. And the republicans have made it pretty clear they're not on our side, either...unless it also benefits them (the rich).

 

But in the end...all of them are rich...and they've configured the system to make sure they stay that way.

I can accept that.

But we're already doing that. The existence of 401ks alone is a cost of $50 to $70 billion or more per year to the treasury. It's there, it's a gigantic tax advantage already.

 

The long term savings rate has just gone down and down since the 03 cuts of those taxes. Youd get better performance on long term savings by just employing people for that $300 billion.

 

[Y2HH]

I can accept that.

But we're already doing that. The existence of 401ks alone is a cost of $50 to $70 billion or more per year to the treasury. It's there, it's a gigantic tax advantage already.

 

The long term savings rate has just gone down and down since the 03 cuts of those taxes. Youd get better performance on long term savings by just employing people for that $300 billion.

 

401k's are tax deferred, so they'll get the money eventually. The issue with 401k investing is it's very long term, and locked into retirement ages to avoid high tax penalties. So while these are good to have, they should by no means be the ONLY thing to have...as the money is essentially useless until retirement. There needs to be an avenue of investment in addition to that which allows you to have access to the money BEFORE retirement. For that we have long term capital gains investments.

 

Like I said, they can put the taxes, dividend rates, and long term cap gains rate higher on the ultra rich...but leave the rest of us alone. Especially in light of the skyrocketing local/state taxes. It was one thing to pay 30% out in 1997 under Clinton, while my local taxes were quite low...but now that our local taxes have more than doubled in every area of the past 10 years...we've seen no actual tax savings. All we've really seen is a tax shift...less to the federal government, more to the local government...

[Balta1701]

401ks allow you to defer high income years onto lower income years. That is an enormous tax subsidy.