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Thread: It's about damn time!

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    Senior Member TJMAC77SP's Avatar
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    Re: It's about damn time!

    Quote Originally Posted by Absinthe Anecdote View Post
    I'm just screwing with you; you can be as snotty as you want, but it is obvious you aren't a car guy, and that you are heavily invested in being the winner of each and every internet squabble that you find yourself entangled in.

    You can pretend to be the winner of this particular squabble and bask in the warm after-glow of a masterfully crafted retort, but keep on your toes, because, imnohero is watching.
    I can't say that I don't want to win but I characterize my real flaw as the near inability to let a relatively minor thing go. Particularly when I recognize that the argument is being pursued for completely different purposes than the minor point itself (not in our case here but others....I'll let you figure it out).

    I am fully aware that these internet squabbles change nothing. PYB left here in a huff without changing one single bassackward thought he ever had or spewed. JoeB will remain an unrepentant and naïve liberal until he comes slam against the real world (if that truly happens). The others here that use the intellectually flawed tactic of hypberbole will continue to do so without ever changing their mind or thought process. So be it. I enjoy the mental gymnastics that is the MTF (well I used to enjoy it more...)
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    Re: It's about damn time!

    Quote Originally Posted by TJMAC77SP View Post
    The argument in support being that this encourages investments. I think that is bullshit. What would people like Buffet and Trump do with their money if capital gains were taxed at the rate your income gets taxed at...........the same.....they certainly wouldn't stick it in their mattresses.
    Well, it depends.

    Let's say you have $100,000 in the bank, earning, oh, 3%.

    Now along comes an investment. As with any investment, in entails some risk. The upside...this investment could grow by as much a 12% this year. The down side, it could lose 6%.

    So, since you already have a guaranteed 3%, your true investment cost is a possible gain of 9% or a possible loss of 9%.

    So, if that 12% gain is taxed at 50%, the upside is now 6%....or true investment payout of only 3% for you (slightly more if you want to count the tax against the bank interest), against a possible 9% loss. While it may be true that if a person has many investments, that 9% loss could be deducted from capital gains elsewhere and therefore not be a big of a loss as is represented...but that only works of you have other gains to write down against.

    As I recall though, the real inequity is CEO salaries comes off of the form of their compensation...that they might not be paid too much in a wage, but the stock options and things like that they get as compensation are not taxed like income...even before any capital gains and losses. So, like for working this month, maybe they get $20,000 in income that is taxable...and another $20,000 in stock...that stock they receive is taxed a lot lower than if it were income. And of course, from there they get capital gains on that stock (or loss), that is also not taxed like income.

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    Senior Member TJMAC77SP's Avatar
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    Re: It's about damn time!

    Quote Originally Posted by Measure Man View Post
    Well, it depends.

    Let's say you have $100,000 in the bank, earning, oh, 3%.

    Now along comes an investment. As with any investment, in entails some risk. The upside...this investment could grow by as much a 12% this year. The down side, it could lose 6%.

    So, since you already have a guaranteed 3%, your true investment cost is a possible gain of 9% or a possible loss of 9%.

    So, if that 12% gain is taxed at 50%, the upside is now 6%....or true investment payout of only 3% for you (slightly more if you want to count the tax against the bank interest), against a possible 9% loss. While it may be true that if a person has many investments, that 9% loss could be deducted from capital gains elsewhere and therefore not be a big of a loss as is represented...but that only works of you have other gains to write down against.

    As I recall though, the real inequity is CEO salaries comes off of the form of their compensation...that they might not be paid too much in a wage, but the stock options and things like that they get as compensation are not taxed like income...even before any capital gains and losses. So, like for working this month, maybe they get $20,000 in income that is taxable...and another $20,000 in stock...that stock they receive is taxed a lot lower than if it were income. And of course, from there they get capital gains on that stock (or loss), that is also not taxed like income.
    So you agree that capital gains should be taxed as any other income? I didn't want to do the math.

    BTW: Do you know how the bank can pay 3% on deposits (although the average interest on savings accounts is .06 to a high of 1%)? ......................Investments.
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    Re: It's about damn time!

    Quote Originally Posted by TJMAC77SP View Post
    So you agree that capital gains should be taxed as any other income? I didn't want to do the math.
    Well, my reason for replying was to explain why it isn't completely BS that lower captial gains taxes encourage investments.

    There are some inequities in how wealthy people are taxed compared to the rest of us...but capital gains tax breaks encourage a lot of investment from the middle class as well

    BTW: Do you know how the bank can pay 3% on deposits (although the average interest on savings accounts is .06 to a high of 1%)? ......................Investments.
    The numbers used were for illustrative purposes.

    Yes, I get that...the whole point is that if capital gains were taxed, it will necessarily slow down economic activity as it cuts into the upside of an investment, without necessarily reducing the downside...making all investments somewhat less attractive...that doesn't mean the money is going to be put into a mattress, it just means that activity will slow.

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    Re: It's about damn time!

    Quote Originally Posted by Measure Man View Post
    Well, my reason for replying was to explain why it isn't completely BS that lower captial gains taxes encourage investments.



    The numbers used were for illustrative purposes.

    Yes, I get that...the whole point is that if capital gains were taxed, it will necessarily slow down economic activity as it cuts into the upside of an investment, without necessarily reducing the downside...making all investments somewhat less attractive...that doesn't mean the money is going to be put into a mattress, it just means that activity will slow.
    I just don't buy it (completely) but as I am not a car guy I am also not an economist.........macro econ was a bit of a effort for me. I can't say empathically that it wouldn't slow down but I just don't see alternatives for these people with huge investments.

    I also think it goes along with spreading the pain with regard to fixing the economy. One side says increase tax on the richest but doesn't want to cut anything from entitlement programs. The other side protects every tax break and shelter and says entitlement programs have to be fixed (not eliminated as is often cited). It is a cake and eat it too response from both sides.
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    Re: It's about damn time!

    Money that has already been taxed should not bet taxed again. If I buy something for 50k, I have paid tax on that. If I sell it for 75k that 25k profit should be mine as the original money was taxed, as was the sell that the new buyer paid the 75k for. If that 25k profit is taxed then the money is, in essence, being taxed 2 (and can strongly be argued 3) times.

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    Re: It's about damn time!

    Quote Originally Posted by TJMAC77SP View Post
    I just don't buy it (completely) but as I am not a car guy I am also not an economist.........macro econ was a bit of a effort for me. I can't say empathically that it wouldn't slow down but I just don't see alternatives for these people with huge investments.
    The alternative is safer, long-term investments...why take short-term risk on something innovative if you're only going to lose half your gains anyway?

    I also think it goes along with spreading the pain with regard to fixing the economy. One side says increase tax on the richest but doesn't want to cut anything from entitlement programs. The other side protects every tax break and shelter and says entitlement programs have to be fixed (not eliminated as is often cited). It is a cake and eat it too response from both sides.
    There is a definite balance. I know I come across as a liberal a lot, but I do have some reservations, particularly at the state level, with taxing businesses and the rich...especially small business. It will only drive them away. At the same time, I see it as bit of an injustice that they often pay less, percentage-wise, than a working class family.

    As far as entitlements...I am sure there is some fraud in the system, and maybe some folks who would rather not work and just draw their check...I don't believe it is as widespread as the conservative-types would lead you to believe. I know better men than me that are unemployed. As a contractor and at-will employee, I worry about it all the time.

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    Re: It's about damn time!

    Quote Originally Posted by Measure Man View Post
    The alternative is safer, long-term investments...why take short-term risk on something innovative if you're only going to lose half your gains anyway?

    There is a definite balance. I know I come across as a liberal a lot, but I do have some reservations, particularly at the state level, with taxing businesses and the rich...especially small business. It will only drive them away. At the same time, I see it as bit of an injustice that they often pay less, percentage-wise, than a working class family.

    As far as entitlements...I am sure there is some fraud in the system, and maybe some folks who would rather not work and just draw their check...I don't believe it is as widespread as the conservative-types would lead you to believe. I know better men than me that are unemployed. As a contractor and at-will employee, I worry about it all the time.
    I think what you state here is key, unfortunately the progressive income tax scaling we use now is a big part of the issue. With Cap gains set at a standard 15%, of course an executive with income tax at 39% is going to want to shift most of their salary over to the 15% rate. It is also important to understand that purchasing of business stocks is a great mechanism for expansion of a business (which usually is accompanied by more jobs). The alternative is of course liabilities (debt) and usually it is desirable to strike a balance of both mechanisms to acquire capital. Of course if we scaled Capital Gains up with the higher earners (maybe dragged it to 30%) the higher earners would get taxed more as a whole, but the riskier alternative to expansion would be the preferred choice to grow their business, and will likely cause a business to shy away from expansion (and job creation) that it would otherwise have chosen to engage in. So even the businesses that do not move their business and jobs away to avoid the tax rates would be hampered in their operations. I do see a lot of Laissez-Faire economists advocate the elimination of the Capital Gains tax altogether alongside duties and tariffs for such a reason, as it would maximize the potential expansion of the economy (and make up the immediate deficits in tax revenues through future economic expansion. If we coupled this with a flat tax or fair tax system, income parity itself would exist, the differential would be based only upon how much of an individual's income is salaried and how much of it is based on assets. There is also that global economy loophole. Entrepreneurs go where they feel they can run their businesses most effectively for the lowest cost, and their provided employment opportunities follow.
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    Re: It's about damn time!

    The idea that business will invest money that is not paid in taxes is at least temporarily on hiatus. Businesses are sitting on cash (something like 3-4 trillion) and not reinvesting it into the business or economy. This has been going on for a few years now.

    When I asked my economics professor in college the other day if it was just me that was a) noticing this and b) "what's the deal?" She answered that it was definitely not just me...there was an econ summit last summer that was consumed with this very phenomenom and b) no one knows why...it would seem that corporations are not "acting rationally" relative to economics.

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    Re: It's about damn time!

    Quote Originally Posted by imnohero View Post
    The idea that business will invest money that is not paid in taxes is at least temporarily on hiatus. Businesses are sitting on cash (something like 3-4 trillion) and not reinvesting it into the business or economy. This has been going on for a few years now.

    When I asked my economics professor in college the other day if it was just me that was a) noticing this and b) "what's the deal?" She answered that it was definitely not just me...there was an econ summit last summer that was consumed with this very phenomenom and b) no one knows why...it would seem that corporations are not "acting rationally" relative to economics.
    Not sure why it is an area of confusion, retention of it implies there's a market uncertainty which makes businesses apprehensive to invest their cash reserves, kind of like normal people reigning in spending if/when they anticipate a period of strife. The only variable in my mind is what is the most prominent thing at its source. I do think many probably are seeing the ACA business mandate on the horizon and are considering riding out that particular uncertainty, but there are also future budget talks/ debt ceiling debates in the near term (and notice the level of frequency lately). The simplest economic explanation is that these businesses feel their going interest is best served by being very risk averse for the time being.
    "The two enemies of the people are criminals and government, so let us tie the second down with the chains of the Constitution so the second will not become the legalized version of the first." ~ Thomas Jefferson

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