OBAMA/TRUMPCARE MEGATHREAD

[southsider2k5]

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.

 

Remember this is the same school of thought that provides decreasing the projected rate of increase is somehow a "cut" in spending.

[Y2HH]

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

 

Erm...that's not how a 401k really works. While they technically CAN work that way, for most people, that's just not going to happen.

 

401k's are taxed as ordinary income upon withdrawal. As in, at the tax rate at the time of liquidation. That puts some of this up in the air, because upon retirement, you have no idea what the income tax rates will be, they could end up being lower or much higher...whatever the case may be, we will not know until that time arrives. So, for example, if upon your retirement, those making more than 50k a year are taxed at 50%...guess what you're deferred 401k is taxed at? That's right...50%...unless of course you can live an entire year on less than 50K, and you have NO other sources of income at all. Keep in mind that 401k proceeds are added to whatever income you currently have, be it pensions, part time jobs, etc., so you could easily find yourself in a much higher bracket than you are currently expecting. It also gets taxed as you liquidate it...so if, for example, you think the market may crash and you liquidate the entire thing to avoid such a scenario, you'll put yourself into a very high tax bracket and pay a huge amount of taxes at that time.

 

My point is, there are a lot of unforeseen scenarios to consider in the distant future when it comes to your expected income level...as I assure you, things in 20 years will NOT be as they are now.

 

Think of it as a government savings lay-away plan. The government giving it's citizens an incentive to invest in their own futures, so when that uncertain future arrives, they will be LESS reliant on the government picking them up. So, by the same rational you use to call it a tax subsidy, you could also, in essence, call it a HUGE savings plan to the government in that some day, it's elderly will be far less reliant on them to live.

Edited July 11, 2012 by Y2HH

[StrangeSox]

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 data do not support the claim that it increases investment.

[Y2HH]

The data do not support the claim that it increases investment.

 

Again, that's not what it's designed to do. This is the key point you keep erroneously leaning on, and I've already pointed out why it doesn't apply, which you've now ignored multiple times.

 

The question is NOT, 'does it spurs investment?'...the questions IS, 'does it increase the percentage of LONG TERM INVESTMENT within those investments?' The data doesn't differentiate investment types...it simply shows investments, and again...they're not the same. It was designed to offset the added risk and give investors an incentive to invest in companies on a long term basis...not simply to invest.

 

Long term investments stabilize markets...and in an era of instant computer trades and a market flooded with day traders, they were seeking a method of increasing the number of long term investments people would make.

Edited July 11, 2012 by Y2HH

[Balta1701]

Again, that's not what it's designed to do. This is the key point you keep erroneously leaning on, and I've already pointed out why it's a bad use of generalized data. The question isn't if it spurs investment...the questions is does it increase the percentage of LONG TERM INVESTMENT within those investments? The data doesn't differentiate investment types...it simply shows investments, and again...they're not the same.

So...let's put the onus on you then. Can you show us some data that remotely suggests "Long term investment" has increased since 2003 in any way, shape, or form? I'm going to bet you can't. The savings rate has continued going down despite the recession. The entire financial industry is even more oriented on short-term gains. Give me some evidence that the $150 billion+ spent on that tax cut has done what you keep insisting it's supposed to do.

[Y2HH]

So...let's put the onus on you then. Can you show us some data that remotely suggests "Long term investment" has increased since 2003 in any way, shape, or form? I'm going to bet you can't. The savings rate has continued going down despite the recession. The entire financial industry is even more oriented on short-term gains. Give me some evidence that the $150 billion+ spent on that tax cut has done what you keep insisting it's supposed to do.

 

First, no money was "spent" on a tax cut. I don't know why you speak like this...this simply lacks logic. They're simply raising less money, but they've spent nothing in the process of that.

 

Yes, I can show you data that remotely suggests a massive increase in long term investment. Since 2003 gold has steadily risen and it's now at 1600$+. Gold is known as THE long term buy/hold/investment in the US. And it started this drastic rise to prominence WELL BEFORE the crash in 2008 when people started seeking safe havens. The massive investment shift to gold occurred in 2003.

Edited July 11, 2012 by Y2HH

[StrangeSox]

Again, that's not what it's designed to do. This is the key point you keep erroneously leaning on, and I've already pointed out why it doesn't apply, which you've now ignored multiple times.

 

NSS made the statement that lower rates are good because it encourages the rich to invest in corporations. There is no evidence to support that.

 

The question is NOT, 'does it spurs investment?'...the questions IS, 'does it increase the percentage of LONG TERM INVESTMENT within those investments?' The data doesn't differentiate investment types...it simply shows investments, and again...they're not the same. It was designed to offset the added risk and give investors an incentive to invest in companies on a long term basis...not simply to invest.

 

Long term investments stabilize markets...and in an era of instant computer trades and a market flooded with day traders, they were seeking a method of increasing the number of long term investments people would make.

 

Do we have any evidence at all that this is what has happened? That the policy has been effective at doing this is and in some way beneficial to society as a whole? We certainly haven't seen much stability in markets from 2003-2012.

[southsider2k5]

Again, that's not what it's designed to do. This is the key point you keep erroneously leaning on, and I've already pointed out why it doesn't apply, which you've now ignored multiple times.

 

The question is NOT, 'does it spurs investment?'...the questions IS, 'does it increase the percentage of LONG TERM INVESTMENT within those investments?' The data doesn't differentiate investment types...it simply shows investments, and again...they're not the same. It was designed to offset the added risk and give investors an incentive to invest in companies on a long term basis...not simply to invest.

 

Long term investments stabilize markets...and in an era of instant computer trades and a market flooded with day traders, they were seeking a method of increasing the number of long term investments people would make.

 

Not to mention the data presentation is skewed to make a political point. It is presented by income brackets instead of by what individuals receive as a percentage of income. Tax breaks in the lower group at a lesser percentage are more important to those income groups than larger income breaks at higher percentages because of the nature of their limited income. Even though a lower percentage in those brackets are able to utilize these benefits, they are vastly more important to the ones that do.

 

The reality is any tax break is going to skew towards the wealthy because they are best able to utilize them. Pick a break and it will be true. Should we eliminate the break for mortgage interest? The poor don't own houses, right? I'm sure if you could find a chart on it, it would skew highly towards the upper income brackets. Something like mass transit would skew the same way. The ultra-poor aren't commuting to jobs, it is the middle and higher classes that are. The poorest groups either aren't working, or they are working at very low income jobs close to home. Should we shut down mass transit, because it doesn't benefit the poor. College loans/grants? They aren't going to the poorest income groups, as they aren't utilizing the lower levels of education, let alone the higher ones. Should we shutdown things like the Pell program?

 

This is yet another case of skewing data to make a point, without realizing what the point should be.

[Balta1701]

Not to mention the data presentation is skewed to make a political point. It is presented by income brackets instead of by what individuals receive as a percentage of income. Tax breaks in the lower group at a lesser percentage are more important to those income groups than larger income breaks at higher percentages because of the nature of their limited income. Even though a lower percentage in those brackets are able to utilize these benefits, they are vastly more important to the ones that do.

 

The reality is any tax break is going to skew towards the wealthy because they are best able to utilize them. Pick a break and it will be true. Should we eliminate the break for mortgage interest? The poor don't own houses, right? I'm sure if you could find a chart on it, it would skew highly towards the upper income brackets. Something like mass transit would skew the same way. The ultra-poor aren't commuting to jobs, it is the middle and higher classes that are. The poorest groups either aren't working, or they are working at very low income jobs close to home. Should we shut down mass transit, because it doesn't benefit the poor. College loans/grants? They aren't going to the poorest income groups, as they aren't utilizing the lower levels of education, let alone the higher ones. Should we shutdown things like the Pell program?

 

This is yet another case of skewing data to make a point, without realizing what the point should be.

Frankly, yes, if we could start all over again, the tax break for mortgage interest winds up being a terrible setup, huge waste of money compared with other means of subsidizing/stabilizing home ownership, and a giant subsidy to encourage people to buy more house(s) than they reall can afford. The problem with getting rid of it, of course, is that people have made 30 year purchase plans assuming that credit would continue to exist, which makes getting rid of it extremely difficult.

 

Mass transit, OTOH, actually skews quite poor, because they're the group that can't afford cars.

[southsider2k5]

Frankly, yes, if we could start all over again, the tax break for mortgage interest winds up being a terrible setup, huge waste of money compared with other means of subsidizing/stabilizing home ownership, and a giant subsidy to encourage people to buy more house(s) than they reall can afford. The problem with getting rid of it, of course, is that people have made 30 year purchase plans assuming that credit would continue to exist, which makes getting rid of it extremely difficult.

Mass transit, OTOH, actually skews quite poor, because they're the group that can't afford cars.

 

I'm not seeing that at all. My mass transit experience over the last 14 years is seeing way more people from middle and upper class areas versus poor areas commuting to jobs.

[StrangeSox]

Not to mention the data presentation is skewed to make a political point. It is presented by income brackets instead of by what individuals receive as a percentage of income. Tax breaks in the lower group at a lesser percentage are more important to those income groups than larger income breaks at higher percentages because of the nature of their limited income. Even though a lower percentage in those brackets are able to utilize these benefits, they are vastly more important to the ones that do.

 

One of the charts I posted showed the impact on after-tax income by income bracket:

 

 

As we can see, it doesn't even amount to 1/2% of a difference until you clear $100k/year. As I posted before, 40% of Americans have negative financial net worth. The people in the lower groups do not own financial assets and thus capital gains and dividends cuts are meaningless. Tax cuts for investment income simply cannot be dressed up as a benefit for the poor and only show a marginal benefit for the upper-middle class. They primarily and overwhelmingly benefit the wealthy, and it comes at the expense of calls for cuts in social programs for the poor in order to eliminate deficits.

[Reddy]

Frankly, yes, if we could start all over again, the tax break for mortgage interest winds up being a terrible setup, huge waste of money compared with other means of subsidizing/stabilizing home ownership, and a giant subsidy to encourage people to buy more house(s) than they reall can afford. The problem with getting rid of it, of course, is that people have made 30 year purchase plans assuming that credit would continue to exist, which makes getting rid of it extremely difficult.

 

Mass transit, OTOH, actually skews quite poor, because they're the group that can't afford cars.

 

yeah you're wrong about that actually.

 

poor folk work at jobs in their neighborhoods. they walk.

[Y2HH]

NSS made the statement that lower rates are good because it encourages the rich to invest in corporations. There is no evidence to support that.

 

Do we have any evidence at all that this is what has happened? That the policy has been effective at doing this is and in some way beneficial to society as a whole? We certainly haven't seen much stability in markets from 2003-2012.

 

It's impossible to definitively show if its beneficial to society as a whole. It's very beneficial to investors that land in the middle class, such as myself. It is good to encourage long term investments in this day of online trading, but I'm not sure if it changes anything the rich would do. It does, however, change what some middle class people would do, I amongst them...and can only offer my own anecdotal evidence to back this.

 

I'm not arguing that it's disproportionately helping the ultra rich, of couse it is...I'm sure they designed it that way in their infinite wisdom. Just like the ultra rich don't need the tax breaks...they really don't need this, either. But I see no reason to cancel these sorts of incentives to invest for the middle class. It is one of the main reasons why buy and hold/long term investing is more attractive to me.

[southsider2k5]

One of the charts I posted showed the impact on after-tax income by income bracket:

 

 

As we can see, it doesn't even amount to 1/2% of a difference until you clear $100k/year. As I posted before, 40% of Americans have negative financial net worth. The people in the lower groups do not own financial assets and thus capital gains and dividends cuts are meaningless. Tax cuts for investment income simply cannot be dressed up as a benefit for the poor and only show a marginal benefit for the upper-middle class. They primarily and overwhelmingly benefit the wealthy, and it comes at the expense of calls for cuts in social programs for the poor in order to eliminate deficits.

 

Like I said, it doesn't look at effect it has on individuals who utilize the cut. It looks at the bracket as a whole, which skews the data.

[Balta1701]

I'm not seeing that at all. My mass transit experience over the last 14 years is seeing way more people from middle and upper class areas versus poor areas commuting to jobs.

Do you take the bus very often? That's the method of transit that skews strongest to the lowest income brackets.

[Balta1701]

Like I said, it doesn't look at effect it has on individuals who utilize the cut. It looks at the bracket as a whole, which skews the data.

But that also means that there is a skew in who can really make use of that cut.

[StrangeSox]

yeah you're wrong about that actually.

 

poor folk work at jobs in their neighborhoods. they walk.

 

The working households ($20k-50k) spend more of their income on transportation than other groups:

 

http://www.brookings.edu/~/media/research/...ion_puentes.pdf

[StrangeSox]

It's impossible to definitively show if its beneficial to society as a whole. It's very beneficial to investors that land in the middle class, such as myself. It is good to encourage long term investments in this day of online trading, but I'm not sure if it changes anything the rich would do. It does, however, change what some middle class people would do, I amongst them...and can only offer my own anecdotal evidence to back this.

 

I'm not arguing that it's disproportionately helping the ultra rich, of couse it is...I'm sure they designed it that way in their infinite wisdom. Just like the ultra rich don't need the tax breaks...they really don't need this, either. But I see no reason to cancel these sorts of incentives to invest for the middle class. It is one of the main reasons why buy and hold/long term investing is more attractive to me.

 

If cap gains suddenly went up to 30% on, say, January 1st, 2013, what other investments would you start making? On the aggregate, lumping you and all other middle-class investors together, would this amount to even a drop in the ocean of high-frequency trading?

[Reddy]

after i posted i did think about buses and realized that those may skew things back your way.

 

i'll admit more often than not i'm on the subway, and that seems to have a good number of businessfolk vs. your convenience store workers.

[StrangeSox]

Like I said, it doesn't look at effect it has on individuals who utilize the cut. It looks at the bracket as a whole, which skews the data.

 

It shows that almost no one in those brackets benefits from it.

 

If your concern is the plight of the rare low-income person who has substantial (to them) capital gains income, would you support what Y2HH is suggesting, and leaving the lower cap gains brackets as-is but raising the top ones back to 30%?

Edited July 11, 2012 by StrangeSox

[southsider2k5]

Do you take the bus very often? That's the method of transit that skews strongest to the lowest income brackets.

 

And even your numbers generated by the American Public Transportation Association, show it is a primarily middle class or better activity.

[southsider2k5]

The working households ($20k-50k) spend more of their income on transportation than other groups:

 

http://www.brookings.edu/~/media/research/...ion_puentes.pdf

 

What do the total benefits look like, if we want to compare apples to apples here, and not switch focuses as it benefits the debate.

[StrangeSox]

And even your numbers generated by the American Public Transportation Association, show it is a primarily middle class or better activity.

It still benefits a wide swath of Americans. With cap gains and dividends reductions, 0.1% capture 42% of the benefits.

[southsider2k5]

What do the total benefits look like, if we want to compare apples to apples here, and not switch focuses as it benefits the debate.

 

 

It still benefits a wide swath of Americans. With cap gains and dividends reductions, 0.1% capture 42% of the benefits.

 

[StrangeSox]

What do the total benefits look like, if we want to compare apples to apples here, and not switch focuses as it benefits the debate.

I'm not sure what benefits you're referring to? I posted that in response to the idea that the working poor typically walk to work. That isn't true.