Financial Reform

[max power]

After 2008, the entire financial sector would have ceased to exist had the government not stepped in with several trillion dollars to keep the institutions currently on Wall Street in existence. Doing so was the right move, but a side effect of this move was the government's failure (by choice) to do anything about the entrenched group of people on Wall Street who caused the mess in the first place.

Ok I agree with all that, but the individuals who are making millions pay millions in taxes (or at least I'd like to think so). Uncle sam in this case is partly themselves.

[StrangeSox]

Ok I agree with all that, but the individuals who are making millions pay millions in taxes (or at least I'd like to think so). Uncle sam in this case is partly themselves.

 

But they pay a much lower rate than you or I thanks to low capital gains and dividends taxes.

[VictoryMC98]

But they pay a much lower rate than you or I thanks to low capital gains and dividends taxes.

 

 

15% Tax vs you and I around 33%...

 

 

[kapkomet]

15% Tax vs you and I around 33%...

 

 

LOL.

 

So pitch in more and bend over.

 

You are the 1%.

[Y2HH]

15% cap gains tax is only on long term cap gains -- people don't seem to understand the difference, but it's a big one.

 

Short term cap gains = anything bought and held for less than 365 days (1 year), these are ALL taxed at ordinary income levels. So if you're ordinary income tax was 35%, your short terms cap gains tax is also 35%.

 

Long term caps gains = 15%. This is ONLY for things you've bought and held for more then 365 days (1 year 1 day).

 

I've noticed politicians trying to blur the lines between the two, pretending as if cap gains tax is all the same when it isn't.

[SuperSteve]

This is an excellent point. You are right that it would be hard to explain to the voting public how these things work, why thwy would work, and why they would want them to work. I'll take a stab at each point, and try to frame it in a way that might make more sense to that crowd...

 

1. When you invest your money with a bank or brokerage, how safe is it? Of course there is always the chance your mutual funds, stocks, 401k's or the like can lose money if the market goes down. But what if I told you that, in some cases, your money in that account can be used by banks to make bets for themselves? What if those banks have special business units to take risky bets for their own benefit, and they have your money? Plain and simple, the best way to be safe is to keep the wolves out of the hen house. Your brokerage account should not be exposed to the risks taken by sophisticated investors which you have no control over. Implementing the Volcker Rule means that those private and proprietary trading and investment units not be part of your bank, your brokerage, or your credit union.

 

2. Do you want your money being used for foreign securities that you don't choose to invest in? How about over-the-counter derivatives? You should have a choice as to whether or not your money can be used this way. If you have a brokerage account in the US - for mutual funds, stocks, bonds, or any other equities - you should not have to worry that your money is being sent overseas (unless you choose for that to be the case), or being used on risky, uncleared instruments. OTC derivatives and foreign securities should be restricted to accounts that specifically authorize that use.

 

3. Bernie Madoff was able to perpetuate his fraud by sending out fraudulent statements to his clients. Since Madoff was not a bank, the actual money and securities his clients had were held at a real bank - the custodian - for safe keeping. That bank is the holder of the real information about what the account has in it. Therefore, you should always get a statement directly from the custodian, and be able to request such a statement at any time. This will help prevent another Bernie moment.

 

4. Dear futures traders... do you want your futures cash held in non-US debt? Didn't think so.

 

5. This one is easy... why do we have multiple government agencies and multiple clearing house and multiple exchange regulators, overlapping and leaving gaps and adding layers of inefficiency? Why is it necessary to create communication gaps and gaping holes in regulation? Why are we wasting both business and taxpayor dollars on inefficient process? In order to cut down overhead, promote more efficient technology, improve communications, close regulatory gaps and reduce compliance costs for business, there should be one, single US agency responsible for overseeing the financial markets.

 

 

How's that?

Well thought out. Only thing I'd add is I'd like to see clawback options on bankers bonuses.

[NorthSideSox72]

Well thought out. Only thing I'd add is I'd like to see clawback options on bankers bonuses.

I'm never comfortable with that sort of thing myself, but I see your point.

 

[StrangeSox]

If we're going to stick within the confines of our current system more-or-less, I think I'd be happy with following what's laid out by Diamond and Saez:

 

http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.25.4.165

 

76% for top earners.

[SuperSteve]

Voelker Rule is getting crushed. The Govenor of the Bank of Canadacame out against it as well as other CBs. Treasuries would be exempt but not other sovereign debt, countries are scared!

[NorthSideSox72]

Voelker Rule is getting crushed. The Govenor of the Bank of Canadacame out against it as well as other CBs. Treasuries would be exempt but not other sovereign debt, countries are scared!

I could care less how scared they are. Reality is still that the money will be there, it won't have a long term negative effect on overall investment levels.

 

[Balta1701]

I could care less how scared they are. Reality is still that the money will be there, it won't have a long term negative effect on overall investment levels.

But if they can say there are, they can prevent that rule from passing!

 

(BTW, I like the concept of that rule but the way it is structured in the proposed law is silly).

[NorthSideSox72]

But if they can say there are, they can prevent that rule from passing!

 

(BTW, I like the concept of that rule but the way it is structured in the proposed law is silly).

They want to prevent it, they may or may not be able to.

 

And tell me what you see in the proposed method that is silly. I honestly want to know.

 

[Balta1701]

And tell me what you see in the proposed method that is silly. I honestly want to know.

We already did it, except last time it was called the "Alternative Minimum Tax". And that one doesn't work too well these days either.

 

The concept is nice, that deductions should be minimized at higher levels...but this is literally repeating one tax that has had enough holes poked in it by various mantras (no double taxation on dividends! Lower capital gains taxes are good for the economy!) that I have little confidence in it holding. With time, there's every reason to think this rule will just get more complex and have to exempt more stuff also.

[NorthSideSox72]

We already did it, except last time it was called the "Alternative Minimum Tax". And that one doesn't work too well these days either.

 

The concept is nice, that deductions should be minimized at higher levels...but this is literally repeating one tax that has had enough holes poked in it by various mantras (no double taxation on dividends! Lower capital gains taxes are good for the economy!) that I have little confidence in it holding. With time, there's every reason to think this rule will just get more complex and have to exempt more stuff also.

What are you talking about? This is the VOLCKER rule being discussed. Sounds lke you are talking about the BUFFET rule.

 

[Balta1701]

What are you talking about? This is the VOLCKER rule being discussed. Sounds lke you are talking about the BUFFET rule.

Man...that is one ****ing big miss.

[StrangeSox]

One idea: make state taxes progressive instead of heavily regressive.

 

[SuperSteve]

I could support a more progressive tax however I would want it to be accompanied by a true review of entitlements. I'm truly concerned about Medicaid and Medicare expenses. I think that's where our government falters. It seems like the folks in power see it as one or the other rather than a compromise using a combination of revenue increases (taxes) and spending responsibly (entitlement and defense cuts).

 

Jim Bianco's research (Bianco Researh/Arbor Research) had some tremendous commentary on the Buffet Tax off a WSJ article that expectied the Buffet Tax to raise $40b over ten years. That's just a drop in the bucket.

[Balta1701]

I could support a more progressive tax however I would want it to be accompanied by a true review of entitlements. I'm truly concerned about Medicaid and Medicare expenses. I think that's where our government falters. It seems like the folks in power see it as one or the other rather than a compromise using a combination of revenue increases (taxes) and spending responsibly (entitlement and defense cuts).

 

Jim Bianco's research (Bianco Researh/Arbor Research) had some tremendous commentary on the Buffet Tax off a WSJ article that expectied the Buffet Tax to raise $40b over ten years. That's just a drop in the bucket.

I'm gonna call you on a misread here, ecause everything I've found says the so called buffet rule, aka amt2: electric boogaloo would raise $40-$50 billion per year, not per decade. Here's a far rightwing link. Can you add a link saying why that estimate is wrong by a factor of 10?

[SuperSteve]

I'm gonna call you on a misread here, ecause everything I've found says the so called buffet rule, aka amt2: electric boogaloo would raise $40-$50 billion per year, not per decade. Here's a far rightwing link. Can you add a link saying why that estimate is wrong by a factor of 10?

Correct. I was remembering just a bit. The real reference after re-reading was deficit of $1.249t being decreased to $1.209t had it been enacted for the year ending Dec 31st so basically a rounding error. Thanks for the catch Balta.

[Balta1701]

Small redemption for the Volcker rule fail.

[SuperSteve]

Small redemption for the Volcker rule fail.

I never enjoyed tax in college so it seems I cannot even fully read a tax article to this day without getting distracted!