One simple thing Obama could do to help the economy and stock market, but probably won't

[glenn1]

Very simple - pledge to *not* raise capital gain tax rates until at least 2010. Right now, with the market down significantly and an expectation that Obama will raise cap gain rates soon, people with unrealized capital losses (almost everyone in this market) will have a huge incentive to realize them this year. Not only will this further tank the markets for the next few months, many of those folks will have enough in realized losses to carry forward for multiple tax years, offseting against future gains at the new higher tax rates.

I do realize there are folks out there who think it's a matter of simple "fairness" to raise capital gains rates, but in these current circumstances it's foolish. It will both result in lower tax revenue for potentially years to come, while actually *decreasing* the amount of tax likely to be paid by wealthy individuals. Once the economy and market stabilize, then the issue of raising cap gains might be better addressed.

 

[SirStev0]

Republicans are always against socialism unless it is for big business.

 

[Rainsford]

Originally posted by: glenn1
Very simple - pledge to *not* raise capital gain tax rates until at least 2010. Right now, with the market down significantly and an expectation that Obama will raise cap gain rates soon, people with unrealized capital losses (almost everyone in this market) will have a huge incentive to realize them this year. Not only will this further tank the markets for the next few months, many of those folks will have enough in realized losses to carry forward for multiple tax years, offseting against future gains at the new higher tax rates.

I do realize there are folks out there who think it's a matter of simple "fairness" to raise capital gains rates, but in these current circumstances it's foolish. It will both result in lower tax revenue for potentially years to come, while actually *decreasing* the amount of tax likely to be paid by wealthy individuals. Once the economy and market stabilize, then the issue of raising cap gains might be better addressed.

Has anyone other than you (as in, an economist of some sort) actually supported this theory? It seems odd to me that people who otherwise wouldn't realize a capital loss would do so just because of a potential future increase in the capital gains rate. Perhaps there is some nuance of investment tax law I don't understand, but this seems a lot like the equally questionable argument that poor people will stay poor for the tax incentives.

Like I said, maybe I'm missing something, but I can't see any tax benefit, in any scenario, to realizing a capital loss on an asset I expect to appreciate in value within the next few years. Sure, I might get a tax deduction, but I also just lost some money selling an asset at below the purchase price...maybe a greater loss than I reap in tax benefits. If I HAVE to sell for some reason, that's one thing, but selling because the capital gains tax might go up doesn't make a lot of sense to me.

In any case, even if it worked, this would be a "solution" that fights the symptom instead of the problem. It helps investors with a lot in the market (in other words, very few people), and would keep stock prices up without actually influencing the foundation of the economy. The stock market should reflect the economy, not be used to drive it.

 

[bozack]

I really don't want to hear anyone complain about Taxes, especially not those on the left...


"we" voted for higher taxes, especially here in MA where we voted to keep the income tax, and property tax is destined to go up pretty massively in the next year or so...

So now we have to live with it...

Personally I hope the new administration taxes the middle and upper middle class to death, which would include me.

 

[Rainsford]

Originally posted by: bozack
I really don't want to hear anyone complain about Taxes, especially not those on the left...


"we" voted for higher taxes, especially here in MA where we voted to keep the income tax, and property tax is destined to go up pretty massively in the next year or so...

So now we have to live with it...

Personally I hope the new administration taxes the middle and upper middle class to death, which would include me.

Never going to happen, not that that will stop people from whining about it.

 

[conehead433]

With the current market situation who is going to actually have capital gains? A moot point it would seem.

 

[Rainsford]

Originally posted by: conehead433
With the current market situation who is going to actually have capital gains? A moot point it would seem.

Well the market is going to go back up sooner or later. Which is why I can't see people who don't have to selling now...it would be totally moronic. If you're a long term investor, which most casual investors should be, you should be BUYING right now, not selling.

 

[counterstrikedude]

well obama's whole economic plan centers around taxing the rich and the cooperation, which will undoubtedly end miserably.

reduce our country economically just enough so we all become co-dependents.

 

[Brainonska511]

Originally posted by: counterstrikedude
well obama's whole economic plan centers around taxing the rich and the cooperation, which will undoubtedly end miserably.

reduce our country economically just enough so we all become co-dependents.

What? English please.

 

[miketheidiot]

Originally posted by: glenn1
Very simple - pledge to *not* raise capital gain tax rates until at least 2010. Right now, with the market down significantly and an expectation that Obama will raise cap gain rates soon, people with unrealized capital losses (almost everyone in this market) will have a huge incentive to realize them this year. Not only will this further tank the markets for the next few months, many of those folks will have enough in realized losses to carry forward for multiple tax years, offseting against future gains at the new higher tax rates.

I do realize there are folks out there who think it's a matter of simple "fairness" to raise capital gains rates, but in these current circumstances it's foolish. It will both result in lower tax revenue for potentially years to come, while actually *decreasing* the amount of tax likely to be paid by wealthy individuals. Once the economy and market stabilize, then the issue of raising cap gains might be better addressed.

if the market goes down, then you should hope to get in. Anyone who investing with an eye only for the capital gain is not smart. A moderate increase in capital gains taxes should not have an realistic impact on the real economy

 

[miketheidiot]

Originally posted by: Brainonska511

Originally posted by: counterstrikedude
well obama's whole economic plan centers around taxing the rich and the cooperation, which will undoubtedly end miserably.

reduce our country economically just enough so we all become co-dependents.

What? English please.

its just as stupid in english as it is in gibberish, maybe moreso. Consider it a favor that it was for the most part unintelligible.

 

[Jhhnn]

Please. We've been living in a fairytale of low taxes and huge deficits, which is simply unsustainable.

Cutting or restraining spending is only part of an honest answer, the other part is increased revenue, higher taxes. the only way that'll be politically acceptable is to start at the top, work down until revenues are sufficient. Higher capital gains taxes are part of that, like it or not.

The vast majority of Americans merely wish they made enough money to endure the "burden" of the higher taxes proposed by Obama. Those so affected voted for Obama in the same proportion as the rest of America, so it seems clear those who did so are not opposed to putting their country ahead of their wallet...

 

[counterstrikedude]

Originally posted by: miketheidiot

Originally posted by: Brainonska511

Originally posted by: counterstrikedude
well obama's whole economic plan centers around taxing the rich and the cooperation, which will undoubtedly end miserably.

reduce our country economically just enough so we all become co-dependents.

What? English please.

its just as stupid in english as it is in gibberish, maybe moreso. Consider it a favor that it was for the most part unintelligible.

uhh it's basic economics?

you think the middle class is self-employed?

60% works for the top 100 companies. when obama's tax plans get passed and hammer is set, do u think the cooperation are just going to take it? no, theyre gonna lay off workers and transfer the work load to india, china, etc..

it's simple logic.

 

[alphatarget1]

Originally posted by: conehead433
With the current market situation who is going to actually have capital gains? A moot point it would seem.

shorters

 

[Brainonska511]

Originally posted by: counterstrikedude
uhh it's basic economics?

you think the middle class is self-employed?

60% works for the top 100 companies. when obama's tax plans get passed and hammer is set, do u think the cooperation are just going to take it? no, theyre gonna lay off workers and transfer the work load to india, china, etc..

it's simple logic.

The Cooperations? Are they communists?

You sound like one of the chicken littles here. Corporations are going to leave and we'll be a 3rd world country in no time. :roll:

 

[alphatarget1]

Originally posted by: Jhhnn
Please. We've been living in a fairytale of low taxes and huge deficits, which is simply unsustainable.

Cutting or restraining spending is only part of an honest answer, the other part is increased revenue, higher taxes. the only way that'll be politically acceptable is to start at the top, work down until revenues are sufficient. Higher capital gains taxes are part of that, like it or not.

The vast majority of Americans merely wish they made enough money to endure the "burden" of the higher taxes proposed by Obama. Those so affected voted for Obama in the same proportion as the rest of America, so it seems clear those who did so are not opposed to putting their country ahead of their wallet...

What makes you think that people of Wall Street and rich people (CEOs and the likes) who are willing to screw America and get saved by golden parachutes time and again to want to stay here and let you tax them?

Reality is that America isn't all that competitive anymore. Companies can run their businesses much cheaper with more talent elsewhere, so why would they want to stay here? It's one thing that most of my liberal friends fail to grasp.

 

[counterstrikedude]

Originally posted by: Brainonska511

Originally posted by: counterstrikedude
uhh it's basic economics?

you think the middle class is self-employed?

60% works for the top 100 companies. when obama's tax plans get passed and hammer is set, do u think the cooperation are just going to take it? no, theyre gonna lay off workers and transfer the work load to india, china, etc..

it's simple logic.

The Cooperations? Are they communists?

You sound like one of the chicken littles here. Corporations are going to leave and we'll be a 3rd world country in no time. :roll:

u didnt even respond.

ill explain it:

obama tax plan: impose new taxes on big corp.

our country: 60% domestically employed by big corp.

result: increase in layoffs, and thus increasing our need for more government-dependence (all those unemployed will have to supported somehow).

get it??

what do you think is going to happen? what is your ideal response? people are just gonna walk home and feed their kids with hope and change?

 

[Brainonska511]

Originally posted by: counterstrikedude

Originally posted by: Brainonska511

Originally posted by: counterstrikedude
uhh it's basic economics?

you think the middle class is self-employed?

60% works for the top 100 companies. when obama's tax plans get passed and hammer is set, do u think the cooperation are just going to take it? no, theyre gonna lay off workers and transfer the work load to india, china, etc..

it's simple logic.

The Cooperations? Are they communists?

You sound like one of the chicken littles here. Corporations are going to leave and we'll be a 3rd world country in no time. :roll:

u didnt even respond.

ill explain it:

obama tax plan: impose new taxes on big corp.

our country: 60% domestically employed by big corp.

result: increase in layoffs, and thus increasing our need for more government-dependence (all those unemployed will have to supported somehow).

get it??

what do you think is going to happen? what is your ideal response? people are just gonna walk home and feed their kids with hope and change?

I just don't see jobs being shipped over seas and nothing new being created here. If jobs are shipped overseas, it's because there are new, up and coming industries here that are creating jobs to replace those that are lost. Economics is not a zero sum game, and a developing India/China might hurt us in the short term, in the long run, it is good for everyone.

What's wrong with taxing corporations? You're not taxing them on revenue anyway, only on profit. You might try and claim that a corporation will then raise prices to keep profits the same, but all that really means is another company will come in, take less of a profit, but sell to more people for a cheaper price.

 

[counterstrikedude]

I just don't see jobs being shipped over seas and nothing new being created here. If jobs are shipped overseas, it's because there are new, up and coming industries here that are creating jobs to replace those that are lost. Economics is not a zero sum game, and a developing India/China might hurt us in the short term, in the long run, it is good for everyone.

uhh...im confused. do you not agree that taxing the cooperations will simply lead to more jobloss?

i don't know where ur getting at here.

What's wrong with taxing corporations? You're not taxing them on revenue anyway, only on profit. You might try and claim that a corporation will then raise prices to keep profits the same, but all that really means is another company will come in, take less of a profit, but sell to more people for a cheaper price.

cooperations will simply layoff enough people to maintain their expectations. all the jobs will be shipped first class to india, pakistan, and china - countries who citizens will work for a fraction of what people make here. i don't know where ur getting this "new industries" b.s.

 

[daishi5]

Originally posted by: Rainsford

Originally posted by: glenn1
Very simple - pledge to *not* raise capital gain tax rates until at least 2010. Right now, with the market down significantly and an expectation that Obama will raise cap gain rates soon, people with unrealized capital losses (almost everyone in this market) will have a huge incentive to realize them this year. Not only will this further tank the markets for the next few months, many of those folks will have enough in realized losses to carry forward for multiple tax years, offseting against future gains at the new higher tax rates.

I do realize there are folks out there who think it's a matter of simple "fairness" to raise capital gains rates, but in these current circumstances it's foolish. It will both result in lower tax revenue for potentially years to come, while actually *decreasing* the amount of tax likely to be paid by wealthy individuals. Once the economy and market stabilize, then the issue of raising cap gains might be better addressed.

Has anyone other than you (as in, an economist of some sort) actually supported this theory? It seems odd to me that people who otherwise wouldn't realize a capital loss would do so just because of a potential future increase in the capital gains rate. Perhaps there is some nuance of investment tax law I don't understand, but this seems a lot like the equally questionable argument that poor people will stay poor for the tax incentives.

Like I said, maybe I'm missing something, but I can't see any tax benefit, in any scenario, to realizing a capital loss on an asset I expect to appreciate in value within the next few years. Sure, I might get a tax deduction, but I also just lost some money selling an asset at below the purchase price...maybe a greater loss than I reap in tax benefits. If I HAVE to sell for some reason, that's one thing, but selling because the capital gains tax might go up doesn't make a lot of sense to me.

In any case, even if it worked, this would be a "solution" that fights the symptom instead of the problem. It helps investors with a lot in the market (in other words, very few people), and would keep stock prices up without actually influencing the foundation of the economy. The stock market should reflect the economy, not be used to drive it.

Just a quick trip to google scholar
Capitalization of capital gains taxes: evidence from stock price reactions to the 1997 rate reduction

A slightly old study, but there is some evidence that increaing the capital gains tax could further hurt stock market prices even further. This may or may not be worth the additional revenue, but there is also the problem that capital is highly mobile and there is also evidence that people report capital gains less honestly in higher tax situation leading to lower revenue, which would further lessen the gains from a tax increase.

Unfortunately, I cannot find a definitive answer for you, because none of the papers give anything more than suggestions as to what we might see.

 

[Jhhnn]

Originally posted by: alphatarget1

Originally posted by: Jhhnn
Please. We've been living in a fairytale of low taxes and huge deficits, which is simply unsustainable.

Cutting or restraining spending is only part of an honest answer, the other part is increased revenue, higher taxes. the only way that'll be politically acceptable is to start at the top, work down until revenues are sufficient. Higher capital gains taxes are part of that, like it or not.

The vast majority of Americans merely wish they made enough money to endure the "burden" of the higher taxes proposed by Obama. Those so affected voted for Obama in the same proportion as the rest of America, so it seems clear those who did so are not opposed to putting their country ahead of their wallet...

What makes you think that people of Wall Street and rich people (CEOs and the likes) who are willing to screw America and get saved by golden parachutes time and again to want to stay here and let you tax them?

Reality is that America isn't all that competitive anymore. Companies can run their businesses much cheaper with more talent elsewhere, so why would they want to stay here? It's one thing that most of my liberal friends fail to grasp.

Because even with the proposed increases, their total taxes are still more than competitive with anywhere else they want to live.

 

[alphatarget1]

Originally posted by: Jhhnn

Originally posted by: alphatarget1

Originally posted by: Jhhnn
Please. We've been living in a fairytale of low taxes and huge deficits, which is simply unsustainable.

Cutting or restraining spending is only part of an honest answer, the other part is increased revenue, higher taxes. the only way that'll be politically acceptable is to start at the top, work down until revenues are sufficient. Higher capital gains taxes are part of that, like it or not.

The vast majority of Americans merely wish they made enough money to endure the "burden" of the higher taxes proposed by Obama. Those so affected voted for Obama in the same proportion as the rest of America, so it seems clear those who did so are not opposed to putting their country ahead of their wallet...

What makes you think that people of Wall Street and rich people (CEOs and the likes) who are willing to screw America and get saved by golden parachutes time and again to want to stay here and let you tax them?

Reality is that America isn't all that competitive anymore. Companies can run their businesses much cheaper with more talent elsewhere, so why would they want to stay here? It's one thing that most of my liberal friends fail to grasp.

Because even with the proposed increases, their total taxes are still more than competitive with anywhere else they want to live.

You didn't respond to my statement about America's competitiveness.