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Forum Post: What is the cost of doubling the long term Cap Gains rate from 15% to 30% as Obama suggests?

Posted 2 years ago on Jan. 28, 2012, 11:18 a.m. EST by Galt01 (55)
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[-] 4 points by nucleus (3291) 2 years ago

"The reduced tax rate actually encourages people to take a chance on investments that are not so great."

Excellent point. It also encourages rapid turnover (churning) and over-development. The housing market is a particularly pertinent example of this.

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[-] -3 points by Galt01 (55) 2 years ago

So - no cost - people will behave the same - That is your position?

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[-] -2 points by Galt01 (55) 2 years ago

History proves you wrong.

[-] 3 points by XaiverBuchsIV (508) 2 years ago

History proves that you are an idiot. At least on this forum.

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[-] 0 points by Galt01 (55) 2 years ago

how so? please expand and educate me as to where I am wrong. do you deny that increasing the cost of something results in less of that activity? Does increasing the cost of steak increase or decrease the amount of steak that will be purchased?

[-] 0 points by Galt01 (55) 2 years ago

Increase the cost of doing business like anything else & you will have less of it. If you want less investment - increase the cost. Just like if you want people to consume less cigarettes or steak - increase the cost. Do you deny this is how the world works?

[-] 1 points by shoozTroll (17632) 2 years ago

So by this thinking, all we have to do is raise the cost of bribing politicians, to get less bribery.

Genius.

Karl loves you.

[-] 0 points by Galt01 (55) 2 years ago

So you refute the principals of supply & demand. Political corruption is not in the same category. Actually the only reason money trumps all in politics is because most people are too lazy to a) do their homework and b) become active. the people have the numbers. If we are to stupid to fall for these tv ads etc then who's fault is that?

[-] 1 points by shoozTroll (17632) 2 years ago

The GOP think tanks?

Coercion by multi-pronged marketing/PR?

Money trumps all, because those that could. paid to make it that way.

[-] 0 points by Galt01 (55) 2 years ago

supply & demand is exclusive to GOP think tanks lol!? now I've heard everything.

[-] 1 points by shoozTroll (17632) 2 years ago

Supply and demand are not some kind of magic.

It's manipulated by those who can.

Those who can, donate unsparingly to GOP think tanks.

[-] -1 points by Galt01 (55) 2 years ago

hahaha! It's all a conspiracy. That's what weed does to your brain - paranoid & munchies lol!

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[-] 0 points by Jflynn1964 (-206) 2 years ago

What??? If there is a higher cap gains rate that makes the after tax rate return lower so that increases the risk of the investment. People don't just flippingly make an investment when it doesn't meet the criteria.

[-] -1 points by Galt01 (55) 2 years ago

"but I really don't care." and hence the essence of a juvenile argument.

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[-] 0 points by Galt01 (55) 2 years ago

you are missing the fact the huge impact this behavioral change has on the growth of the economy. But - hey - that's only the story of world history - no biggie.

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[-] 0 points by Galt01 (55) 2 years ago

what is "fractional banking"? I like low taxes. its more equitable. when they devalue the currency to accomodate their wreckless spending - everybody pays. Your utopian ideas have proved to be fantasy to this point. while supply side proves growth. of course their are business cycles. you can have zero cycle & live like Cuba.

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[-] 1 points by ithink (761) from York, PA 2 years ago

We need more libertarians in the world like you..

[-] 0 points by Galt01 (55) 2 years ago

and who lowered the bank reserve requirements? I agree totally with your second point.

[-] 2 points by Mooks (1985) 2 years ago

I think most behavior will be the same because people will still want to invest in stocks and the like. Personally, I will probably move a little bit more money into things like municipal bonds that are tax exempt to bring my overall effective tax rate down a bit but I would still maintain most of my investments in stocks and real estate.

What I will also do, and I am sure others will do too, is to realize a lot of my profits before the new tax comes into effect to lock in the profits at 15%. A large scale profit taking would probably temporarily bring down the markets but those people will buy back in. For example, I have profits in CAT that I would take at the 15% (if the rate was going to change to 35%) but since I still like it long term I would probably sell it to realize the gain and then buy it back again. So long term I would probably just move a little into muni's but that is about it.

[-] 0 points by Galt01 (55) 2 years ago

so you would move into muni's because you think less risk for virtually same reward. There you have it. More people would move to bonds and out of stocks because the risk/reward isn't as great. Just like anything else if you want less of something - increase the price. So higher taxes like anything else - results in less activity. same as increasing the price of going to the movies. Double the price of a movie ticket and see how many people stop going to the movies.

[-] 1 points by Mooks (1985) 2 years ago

No, I would move money into muni's to lower my effective tax rate. The coupon payments on muni's are tax exempt so it would be income that I would not have to pay taxes on, thus lowering my overall tax rate. It has nothing to do with risk/reward because taxes are considered after realization of a gain/loss and the capital gains tax on stocks/bonds/real estate are all the same.

Personally, I would probably do more stock trading because I would not have to worry about the difference in capital gains tax between short-term and long-term positions. Currently, I try to hold onto my profitable investments for at least a year so that I only pay 15% on the profits. If it was going to be 35% whether it is long-term or short-term, I would do a lot more trading to try to maximize profits, rather than waiting around for an investment to be a year old.

So I would argue that there would probably be more trading activity (and therefore volatility) because there would be no more advantage to holding onto an investment for the long term, as there is now.

[-] 0 points by Galt01 (55) 2 years ago

"I would move money into muni's to lower my effective tax rate." So look who is making decisions to avoid taxers now lol! How is this any different than anyone else serving their own interests? So you are gauging your behavior based on the tax structure. You say you would do more stock trading. You previously stated you thought behavior would remain the same. Which is it?

[-] 1 points by Mooks (1985) 2 years ago

My behavior would stay the same in the sense that I would still be invested in stocks/bonds/real estate. One of the arguments against increasing the capital gains tax is that it will cause people to invest less money. This, in my opinion at least, is false because I am not going to put my money in a savings account or fill a safe deposit box with gold bullion. People are always going to put their money to work so to say.

So I guess you could say it is my overall investment behavior would stay the same, it is my day-to-day activities I would change. For example., I bought some CAT in October at around 80, it is now at about 111. I don't really see it going much higher in the near term but I also would rather pay 15% instead of 35% tax on my profits. So I need to decide whether I want sell it now and pay 35% on my profit or wait until next Oct to pay 15%, obviously with the risk that it may go lower by then. If capital gains tax were the same as my normal tax, it would make the decision easier. I would just sell now and then buy it back at a lower level when it dips.

And yes, I admit I go to great lengths to legally minimize my taxes by paying an accountant and tax lawyer to advise me, mainly on decisions regarding my business because that is where the taxes are most complicated.

[-] 0 points by Galt01 (55) 2 years ago

Ah - so do as I say not as I do. You condemn other peoples "greed" yet employ the same behavior yourself. It's only the other guy that's greedy. Typical Liberal behavior.

[-] 1 points by Mooks (1985) 2 years ago

First off, I voted for Bush x2 so I wouldn't call myself a liberal.

Also, when did I condemn others greed? And I would hardly call minimizing your tax bill greed.

Do you pay more taxes than you are required to?

[-] 0 points by Galt01 (55) 2 years ago

Are you a supporter of OWS? If so you condemn the so called "greedy" 1%.

[-] 1 points by Mooks (1985) 2 years ago

I support taking money out of politics. I don't care how much money people make. I am a business owner and try to maximize profits and minimize my taxes so I guess I am greedy too. I don't have a problem with people legally acquiring wealth, I just don't think they should be able influence politicians with it.

And like I asked earlier, do you pay more tax than you are required to?

[-] -1 points by Galt01 (55) 2 years ago

you will never get money out of politics. Of course I dont pay one penny more than required

[-] 3 points by beautifulworld (21543) 2 years ago

Why not treat capital gains like ordinary income? There is work involved in managing investments.

[-] 1 points by nucleus (3291) 2 years ago

Work? Like calling your investment manager, or reading your monthly statement?

[-] 1 points by beautifulworld (21543) 2 years ago

Yes. Treat it like earned income. Does it matter how much time it takes them? It is how they make their living, no?

[-] -1 points by Galt01 (55) 2 years ago

why not lower the tax on ordinary income instead of raising the tax on cap gains? Do you want the govt to have more money? do you think they spend it wisely?

[-] 2 points by beautifulworld (21543) 2 years ago

We need revenue to pay down our debt and provide for the things the American people need. If we are going to continue on the way we have, with the rich getting richer, while everyone else stagnates, then, yes, I'd rather have the government handle the money. The rich folks and the corporations are hoarding the fruits of the labor of the American people for themselves.They have proven through the current statistics that they care only for themselves and will not share either economically or politically since they have effectively bought our government.

[-] -1 points by Galt01 (55) 2 years ago

you'd rather have the government handle money other people have earned. the labor implemented to achieve those earnings were agreed to and compensated by a voluntary arrangement of employee & employer. How can you prove through statistics as you say what people care about hahaha! That's a joke. You don't know what people are thinking.

You take the easy way out. why don't you organize the voters in your area and bring your concerns to your representative? are you lazy? or do you fear you don't have enough support in your cause to affect your representatives actions?

[-] 2 points by aotraynor (4) from Littleton, NH 2 years ago

Our best option is a complete overhaul of the tax code -- remove all but a very few deductions, include reasonable brackets, and treat all income the same.

Why should income from working be treated differently from other income?

[-] 0 points by mantis1 (28) 2 years ago

And to that I would institute a flat tax.

[-] -1 points by Galt01 (55) 2 years ago

they treat cap gains different because they want to increase the incentive to invest. cap gains are not just from retails stock picks. its for people selling their homes, or any business venture. you want to make the investment less of a risk. If you want to kill jobs make it less attractive for someone to put their money at risk in starting a business. or expanding a business etc.

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[-] 0 points by Galt01 (55) 2 years ago

So the maximum I can gain is 8%. What is the maximum I can lose?

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[-] 1 points by NOAMISRICH (28) 2 years ago

I don't think that will happen. Obama has been moving towards the center to survive. single payer healthcare, high carbon taxes, mini cars with model t engines, forget it! The democrats know they will lose everything if this happens.

[-] 2 points by nucleus (3291) 2 years ago

Obama would have to move significantly to the left to move toward the "center".

[-] 0 points by Galt01 (55) 2 years ago

So it's just a lot of class warfare hot air to get you guys riled up ?

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[-] 1 points by Jflynn1964 (-206) 2 years ago

You will obviously reduce your after tax gain by about 18%. The more important issue is not increasing the rate but equalizing the rates so that you treat ordinary income, dividend income, and cap gains the same. This will eliminate the incentive to game the system. If you also eliminate the deductions this would go even farther.

[-] 0 points by Galt01 (55) 2 years ago

how is it "gaming" the system? How about lowering the rate on ordinary income instead of raising the tax on cap gains? why do you want more money going to the government? Do you think they spend it wisely?

[-] 0 points by Jflynn1964 (-206) 2 years ago

Yes I agree with you that it is better to lower the ordinary income to equal cap gains. By doing this and eliminating the deductions then you will have much cleaner investment decisions being made. For instance, I was just talking to some investors last night regarding a solar farm that does not work economically unless you have the state subsidy. Should this be built?

[-] 0 points by Galt01 (55) 2 years ago

Why wont it work without the subsidy?

[-] 0 points by Jflynn1964 (-206) 2 years ago

Too costly to produce the power especially with natural gas prices declining as much as they are.

[-] 0 points by Galt01 (55) 2 years ago

So then your investors think it's not worth it because the costs outweigh the benefits. They need the taxpayer to subsidize their poor investment choice.

No - the solar farms should not be built. Why did T Boone Pickens back out of his brilliant wind farm idea?

[-] 0 points by Jflynn1964 (-206) 2 years ago

I'm not sure about Pickens but yes to your first point.

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