Capital Gains and How Obama just doesn't get it

[cutthemdown]

http://online.wsj.com/article/SB120847505709424727.html?mod=googlenews_wsj

The parsons of the press corps are furious with Charlie Gibson and George Stephanopoulos of ABC News, which means the pair must have done a pretty good job moderating Wednesday's Democratic debate in Philadelphia. Barack Obama had an off-night, so his media choir wants to shoot the questioners.

We thought the debate was one of the best yet, precisely because it probed the evasive rhetoric we've heard from both Democratic candidates throughout the campaign. Nowhere was this more apparent than during the exchanges between Mr. Gibson and Mr. Obama over taxes.
Time and again, the rookie Senator has said he would not raise taxes on middle-class earners, whom he describes as people with annual income lower than between $200,000 and $250,000. On Wednesday night, he repeated the vow. "I not only have pledged not to raise their taxes," said the Senator, "I've been the first candidate in this race to specifically say I would cut their taxes."

But Mr. Obama has also said he's open to raising – indeed, nearly doubling to 28% – the current top capital gains tax rate of 15%, which would in fact be a tax hike on some 100 million Americans who own stock, including millions of people who fit Mr. Obama's definition of middle class.

Mr. Gibson dared to point out this inconsistency, which regularly goes unmentioned in Mr. Obama's fawning press coverage. But Mr. Gibson also probed a little deeper, asking the candidate why he wants to increase the capital gains tax when history shows that a higher rate brings in less revenue.

"Bill Clinton in 1997 signed legislation that dropped the capital gains tax to 20%," said Mr. Gibson. "And George Bush has taken it down to 15%. And in each instance, when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28%, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?"

Mr. Obama answered by citing rich hedge fund managers. Raising the capital gains tax is necessary, he said, "to make sure . . . that our tax system is fair and that we are able to finance health care for Americans who currently don't have it and that we're able to invest in our infrastructure and invest in our schools. And you can't do that for free."

But Mr. Gibson had noted that higher rates yield less revenue. So the news anchor tried again: "But history shows that when you drop the capital gains tax, the revenues go up?" Mr. Obama responded that this "might happen or it might not. It depends on what's happening on Wall Street and how business is going." And then he went on a riff about John McCain and the housing market.
This is instructive. The facts about capital gains rates and revenues are well known to our readers, but we'll repeat them as a public service to the Obama campaign. As the nearby chart shows, when the tax rate has risen over the past half century, capital gains realizations have fallen and along with them tax revenue. The most recent such episode was in the early 1990s, when Mr. Obama was old enough to be paying attention. That's one reason Jack Kennedy proposed cutting the capital gains rate. And it's one reason Bill Clinton went along with a rate cut to 20% from 28% in 1997.

Either the young Illinois Senator is ignorant of this revenue data, or he doesn't really care because he's a true income redistributionist who prefers high tax rates as a matter of ideological dogma regardless of the revenue consequences. Neither one is a recommendation for President.

For her part, Hillary Clinton said that she, too, was open to hiking the capital gains tax rate, just not by as much as her rival. "I wouldn't raise it above the 20% if I raised it at all," she said. Of course, she too promised during Wednesday's debate not to raise "a single tax on middle-class Americans, people making less than $250,000 a year."

Both candidates would have voters believe that taxes on investment income only affect the rich. But that's not what Internal Revenue Service returns show. The reality is that the Clinton and Obama rate increases would hit millions of Americans who make well under $200,000. In 2005, 47% of all tax returns reporting capital gains were from households with incomes below $50,000, and 79% came from households with incomes below $100,000.
* * *

By the way, a higher capital gains tax rate isn't the only middle-class tax increase that Mr. Obama is proposing. He also wants to lift the cap on wages subject to the payroll tax. That cap was $97,500 in 2007 and is $102,000 this year. "Those are a heck of a lot of people between $97,000 and $200[,000] and $250,000," said Mr. Gibson. "If you raise the payroll taxes, that's going to raise taxes on them." Ignoring the no-tax pledge he had made five minutes earlier, Mr. Obama explained that such a tax increase was nevertheless necessary.

In other words he dodged the question, as he so often does with impunity. But thanks to Mr. Gibson's persistence, for 90 minutes Wednesday night Mr. Obama didn't get away with it. The voters learned a lot about Mr. Obama, who needs to learn a lot more about taxes and revenue.

[TailgateNut]

Stop your whining. Eventually someone needs to grow a set of cajones' and raise taxes to pay for the war your hero started. The same war that bring you out of the closet wearing your cheerleading outfit.

The problem with republicans is that they "just want to pass it on to the next generation, or in Dubya case, the next president.

I guess that's on way to be conservative, in a weird kinda way. Spend it without paying for it.

[shakenbake]

I really don't understand what is his reasoning for raising capitol gains tax. It won't bring in more money, it is simply stupid.

[shakenbake]

Stop your whining. Eventually someone needs to grow a set of cajones' and raise taxes to pay for the war your hero started. The same war that bring you out of the closet wearing your cheerleading outfit.

The problem with republicans is that they "just want to pass it on to the next generation, or in Dubya case, the next president.

I guess that's on way to be conservative, in a weird kinda way. Spend it without paying for it.

Come on TGN even you can see raising capitol gains tax won't bring in more money to the government to pay for the war. Each time the lowered it, tax revenues went up not down.

[TailgateNut]

Come on TGN even you can see raising capitol gains tax won't bring in more money to the government to pay for the war. Each time the lowered it, tax revenues went up not down.


I was addressing Cutt's constant whining about this issue because he and his brother might have to cough up some dough/ lose some profit.
The point I added was something that BUGS ME TO NO END. Waging war in Iraq is bad enough, but to not pay for the war is insane. We are punishing our offspring by not paying for something we have allowed to occur by our actions and lack thereof.

[peacepipe]

The best thing Obama said was "you can't get something for nothing".

[shakenbake]

I was addressing Cutt's constant whining about this issue because he and his brother might have to cough up some dough/ lose some profit.
The point I added was something that BUGS ME TO NO END. Waging war in Iraq is bad enough, but to not pay for the war is insane. We are punishing our offspring by not paying for something we have allowed to occur by our actions and lack thereof.

I understand that, but in no way will raising capitol gains tax help that process. I am no expert but I can see the data and make that analysis based on history. I would also say given market conditions we need to encourage people to invest no penalize them for doing so.

[L.A. BRONCOS FAN]

I really don't understand what is his reasoning for raising capitol gains tax. It won't bring in more money, it is simply stupid.

It's about fairness.

Do you really think a tax-free sale of stocks/commodities (or 15% capital gains) is fair while regular people who produce goods/services pay about 33%?

Is a 1% or 1 penny tax too much for you? Or let's switch it: 15% income tax and 33% stock/commodites sale tax.

[cutthemdown]

The left doesn't want to address the issue. The issue is raising capital gains has been proven to not raise revenue. Also it is shown that 47% of it is paid by people who make less then Obama's 200-250 grand a yr ceiling.

Why would anyone who wants to raise revenue do something which obvioulsy drives revenue down. It also shows how both Repub and Dems have both realized this fact.

Just tell me how Obama will raise the capital gain, and raise the revenue from it, when history shows that isn't the case. Why will it be different under Obama?

[cutthemdown]

It's about fairness.

Do you really think a tax-free sale of stocks/commodities (or 15% capital gains) is fair while regular people who produce goods/services pay about 33%?

Is a 1% or 1 penny tax too much for you? Or let's switch it: 15% income tax and 33% stock/commodites sale tax.

but it's been shown that 47% of the capital gains revenue comes from the same middle class you are trying to protect.

[shakenbake]

but it's been shown that 47% of the capital gains revenue comes from the same middle class you are trying to protect.

47% came from people making less than $50,000. 79% came from those making less than $100,000

[cutthemdown]

47% came from people making less than $50,000. 79% came from those making less than $100,000

thanks and sorry. I should have re-read it again.

That makes our theory it should stay low even stronger

[L.A. BRONCOS FAN]

but it's been shown that 47% of the capital gains revenue comes from the same middle class you are trying to protect.

"Shown" by whom?

[cutthemdown]

The thing about being really rich, like the people Obama would like to get is they have enough money to not liquidate assets if taxes are high. Many middle class get forced to cash in stocks because they need the money. They get left to the mercy of the rate of the time.

Richies get to say well I will wait until the rate comes down, then cash in my 10 million in stock to buy my huge mega yacht. That's why the rate goes down the revenue goes up. People take advantage of the low rate and liquidate.

When it's high they sit on it and wait.

[L.A. BRONCOS FAN]

Buffett blasts system that lets him pay less tax than secretary (http://business.timesonline.co.uk/tol/business/money/tax/article1996735.ece)



Warren Buffett, the third-richest man in the world, has criticised the US tax system for allowing him to pay a lower rate than his secretary and his cleaner.

Speaking at a $4,600-a-seat fundraiser in New York for Senator Hillary Clinton, Mr Buffett, who is worth an estimated $52 billion (£26 billion), said: “The 400 of us [here] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”

Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent.

Mr Buffett told his audience, which included John Mack, the chairman of Morgan Stanley, and Alan Patricof, the founder of the US branch of Apax Partners, that US government policy had accentuated a disparity of wealth that hurt the economy by stifling opportunity and motivation.

[L.A. BRONCOS FAN]

47% came from people making less than $50,000. 79% came from those making less than $100,000

Bush's tax cuts were targeted to benefit those whose income came from capital gains and dividends.

Therefore, if what you're saying is true, then middle class Americans should be doing swell right now. :D

[L.A. BRONCOS FAN]

If you look at historical responses to cuts to capital gains taxes and the like, people just start realizing capital gains more, initially. So there may be a short-term jump in revenue as more people realize capital gains, but in the long run the reduction in tax rates is a loss for government revenue and puts a greater tax burden on those who work for a living.

[cutthemdown]

"Shown" by whom?

If you want to refute the stats in the article I would welcome it. They seem pretty cut and dry though. Highest revenue in yrs with lower rates.

[cutthemdown]

I have read Buffett feeling and I do respect him a ton. But even he hasn't talked about the stats this article puts forth. Hard to argue you agianst it IMO.

[L.A. BRONCOS FAN]

If you want to refute the stats in the article I would welcome it. They seem pretty cut and dry though. Highest revenue in yrs with lower rates.

What's easy to refute is your conclusions.

This income (capital gains) was previously taxed at 20%, and while it was being taxed at 20% we had a large stock market run-up, so I don't see support for the typical neocon position that higher taxes will tighten capital - especially since this type of tax rate is already a 15% subsidy to people (considering that the rate tops out at 35%.)

Stocks and bonds do not drive this economy; it is not an investment-driven economy - it is a consumption-driven economy. So, increase taxes on non-labor income (such as capital gains) and decrease labor income taxes on the middle class if you really want to strengthen the economy.

[cutthemdown]

What's easy to refute is your conclusions.

This income (capital gains) was previously taxed at 20%, and while it was being taxed at 20% we had a large stock market run-up, so I don't see support for the typical neocon position that higher taxes will tighten capital - especially since this type of tax rate is already a 15% subsidy to people (considering that the rate tops out at 35%.)

Stocks and bonds do not drive this economy; it is not an investment-driven economy - it is a consumption-driven economy. So, increase taxes on non-labor income (such as capital gains) and decrease labor income taxes on the middle class if you really want to strengthen the economy.

Then wouldn't a sales tax be more effective then just an income tax? That way even drug dealer would get taxed. I can agree with you that tax comes from so many angles it's hard to say that a higher capital gains for sure lowerd revenue. There is numbers to support it. But I can agree with the theory you don't know what effect the capital gains rate had on the income tax revenue.

I just feel Obama has to admit that taxes in some areas are going to go up for some people that are middle class.

Can you honestly say you think Obama's ideas are really good? Or do you think they might not really do much or work. Do you see him being able to pull out of Iraq, get healthcare reformed, get his tax package through all in first term?

[L.A. BRONCOS FAN]

Then wouldn't a sales tax be more effective then just an income tax? That way even drug dealer would get taxed. I can agree with you that tax comes from so many angles it's hard to say that a higher capital gains for sure lowerd revenue. There is numbers to support it. But I can agree with the theory you don't know what effect the capital gains rate had on the income tax revenue.

There should be lower taxes for everyone - starting with actual productive members of society, e.g., labor/producers of goods and services. If you want to tax something, tax consumption or speculation (you can make IPOs tax free, but not buying second-hand stock or sales/commodities trading - which are more akin to buying a used car or retail buying.) When you 'invest in stocks' from second-hand sales, it's more akin to investing in real estate or buying comic books in the hope that they will increase in value (as opposed to directly funding the corporation or investing in new tech or research/development.)


I just feel Obama has to admit that taxes in some areas are going to go up for some people that are middle class.

You just "feel," or do you have actual evidence to support this?


Can you honestly say you think Obama's ideas are really good? Or do you think they might not really do much or work. Do you see him being able to pull out of Iraq, get healthcare reformed, get his tax package through all in first term?

He's smarter than the other dogs in the hunt. If elected, he will have a mandate to accomplish all three objectives you mentioned (as reflected by public opinion polls.) I think he has a good chance at all three - given the Dems hold onto or increase their majority in both houses.

[footstepsfrom#27]

Not so fast.

*Disclaimer--if you're not a CPA, a tax attorney or an economist you are on dangerous ground trying to understand this stuff. I confess to being none of these things so I'll include myself here. I do however, work with and around quite a few people engaging in these disciplines and have had a few discussions regarding the capital gains tax with some of them over the last couple of years. Take this as worth what you're paying for it...like everything else in here:

Capital gains taxation policy is probably missunderstood by taxpayers as much as anything else out there. This topic has been the subject of a great deal of speculation by economists and politicians related to it's perceived ability to do two things 1) stimulate growth in the economy, and 2) increase tax revenues. Whether this is true or not is not the slam dunk that most taxpayers think it is. In fact it's highly dubious. Here's why:

The current Wall Street Journal article cited in this thread includes a small graph that you won't see unless you actually click on the link.

Do so: http://online.wsj.com/article/SB1208...googlenews_wsj

Examining the graph closely you'll notice that it appears to represent an inverse correlation betwen capital gains tax revenue collected by the IRS and the capital gains taxation rate. The higher the rate, the less money the government collects...right?

Not exactly. It's a bit more complicated than that and more involved than the media pundit who wrote this story would have you believe. Note that the left side of the graph reads, "capital gains realizations % of GDP". If you didn't know to look for it you probably wouldn't even see itand you might skip over it anyway....but the words "% of GDP" are not insignificant. What the "formula" is actually showing is that capital gains tax revenue is tied not to the capital gains tax rate but to the GDP, and it's the GDP that some economists argue will increase as an inverse product relevant to the movement of the capital gains tax rate. In other words, if you cut the rate, you grow the economy and this adds up to more tax revenue. This is not exactly the same thing as "cut the rate and you collect more taxes". It's close...but the distinction is worth noting.

This argument is almost always (including this time) framed like a simple equation that goes like this; "lower capital gains taxes and the government will collect more revenue". This is technically probably correct but it's not really what you ought to be considering. Why the government is collecting more revenue is the real question. What the data shows...and there are a number of other factors that may influence this...is that generally speaking when the capital gains tax rates were lowered, the government collected more taxes relative to the gross domestic product for that year. What we are primarily talking about here is short term economic growth relevant to the movement of the GDP as it varries inversely to the capital gains tax rate. That's important to understand.

There's an obvious reason for this. Most people only consider the tax rate when looking at this, but the other factor that impacts the equation even more is how the government decides what your rate is. Gains on assets held for less than a year are taxed at the highest rate, while those held for 1-5 years are taxed at a lower rate and those held longer than five years are taxed at the lowest rate. In other words, the government wants you to hold onto investments and they're willing to reward you for doing so. If you don't hold onto your investments you won't be rewarded with a lower rate but instead will be taxed at your normal rate reflective of your tax bracket just as if you're gain was income from your job.

Half of all capital gains are not taxed at all but that's another story. The point I'm making here is this; the reason the government collects more tax money from capital gains when the rate is lowered is because people know that the best time to sell their investments is when they won't be taxed as highly on the profit. If you stood to make $200,000 on the sale of stock would you tend to sell it when your tax rate is 15% or 28%? Would WalMart sell more widgets if they're marked down 50%? Obviously they would.

If you're worried about capital gains taxes there's a simple solution; don't sell your assets when the gains tax is high. Wait till it comes down. The government historically has had a vested interest in having investors hold onto their holdings. The real question is not how much revenue they collect, but whether it's a good idea that we maintain capital gains tax rates that are basically encouraging investors to sell off their holdings. In periods of economic down cycles or recession it's inherently dangerous to promote policies that push investors to dump their assets on the market.

So in essense, Obama's answer, "it depends on what's going on with Wall Street" was essentially correct. It's unfortunate the Wall Street Journal has to buy into the politics of this because they could be a source for balanced perspective.

Now read this for a more detailed look: http://www.cbpp.org/9-20-01tax.htm

[footstepsfrom#27]

The PDF version reads easier: http://www.cbpp.org/9-20-01tax.pdf

[Rohirrim]

I think we should have a targeted tax system that focuses on responsibility. For instance, the tax rate for Bush, Cheney, Rumsfeld, Rice, etc. for the rest of their lives would be set at 98% of earnings. Halliburton would get 95%, followed by 90% for any other person or corporation that benefitted from the war in Iraq.

[Beantown Bronco]

2 Things that jumped out at me in this thread:

1. Warren Buffett's secretary is GROSSLY underpaid. $60,000? Really? Over half the secretaries in and around Boston make more than that.....and they aren't working for one of the richest men in the world.

2. Maybe it's just me, but I find it crazy to call people with a salary of $200,000-250,000 "middle class."

[ScottXray]

Come on TGN even you can see raising capitol gains tax won't bring in more money to the government to pay for the war. Each time the lowered it, tax revenues went up not down.

What everyone fails to see is that the revenues went up because we had an expanding economy and stock market at the time...NOT because of the cut in capitol gains taxes. Our current economy is not expanding and the market
is stagnant. The AVERAGE person is not moving large sums of money in and out of the market or speculating in real estate.

How can you say that the 50 hedge fund managers who just received 40plus Billion dollars in pay should NOT be taxed at the rate of 28% , but rather 15%,
when people who make far less are taxed at higher rates because they made EARNED income, rather than stock manipulation or dividend income.

Our tax system is extremely inequitable to the working class people who need to retain the most. While some point to older americans who are counting on selling their homes as being unfairly penalised by a capitol gains tax when they do so, they also fail to see or mention that there is a one time $1 million dollar exclusion of this tax for people over 55. And if your house is worth OVER that amount then you probably shouldn't be crying you're poor.

[shakenbake]

What everyone fails to see is that the revenues went up because we had an expanding economy and stock market at the time...NOT because of the cut in capitol gains taxes. Our current economy is not expanding and the market
is stagnant. The AVERAGE person is not moving large sums of money in and out of the market or speculating in real estate.

If the average person is not moving large sums of money in and out of the market, explain to me why 79% of the taxes collected from capitol gains tax comes from people who make less than $100,000 a year.

[ScottXray]

If the average person is not moving large sums of money in and out of the market, explain to me why 79% of the taxes collected from capitol gains tax comes from people who make less than $100,000 a year.

I really don't have an explanation of that. Perhaps because smaller investors don't have the means to HIDE that income via write offs and other tax dodges, but that would be conjecture. Or possibly because they sell their house and cannot reinvest in a new home and or must raid their 401k or IRAs early to pay off debt, and end up paying capital gains on those transactions. The figures don't seem to make sense, as they are the least likely to have LARGE gains to be taxed on a regular basis.

Once again, the tax code is inequitable in that respect. Lower income investors should not be paying the bulk of the tax. The fact that upper income investors have the resources to HOLD their investments longer when the tax rate is higher should be factored in. Perhaps a progressive scaled tax could rectify it...total income from salary and investments could be considered income and taxed accordingly at the same or equivalent rates, and the percentage would go up as income went up.

At any rate your argument merely supports my position that the tax code is unfairly slanted to support upper income groups as it currently exists

[Bronco Jamus]

I was addressing Cutt's constant whining about this issue because he and his brother might have to cough up some dough/ lose some profit.
The point I added was something that BUGS ME TO NO END. Waging war in Iraq is bad enough, but to not pay for the war is insane. We are punishing our offspring by not paying for something we have allowed to occur by our actions and lack thereof.

Who are you to decided what someone should pay and what they can afford. We're over taxed as it is. The solution is to stop federal spending. Something none of these candidates are talking about getting congress to do.

[Bronco Jamus]

but it's been shown that 47% of the capital gains revenue comes from the same middle class you are trying to protect.

It won't. Obama is in over his head.

[cutthemdown]

I also agree with Footsteps no way any of us smart enough to really understand this stuff. I got a c in economics because I barly got it. I can remember getting tons of help from a girl that was in the class with me. She went on to be a CPA she was really smart in economics.

Still I believe that less tax = more incentive to make money = a better economy.

I guess some of will never agree but like I said if Obama is the President I will support him and give him the respect he deserves as the leader of the greatest country that ever was or will be.

[broncofan7]

Not so fast.

*Disclaimer--if you're not a CPA, a tax attorney or an economist you are on dangerous ground trying to understand this stuff. I confess to being none of these things so I'll include myself here. I do however, work with and around quite a few people engaging in these disciplines and have had a few discussions regarding the capital gains tax with some of them over the last couple of years. Take this as worth what you're paying for it...like everything else in here:

Capital gains taxation policy is probably missunderstood by taxpayers as much as anything else out there. This topic has been the subject of a great deal of speculation by economists and politicians related to it's perceived ability to do two things 1) stimulate growth in the economy, and 2) increase tax revenues. Whether this is true or not is not the slam dunk that most taxpayers think it is. In fact it's highly dubious. Here's why:

The current Wall Street Journal article cited in this thread includes a small graph that you won't see unless you actually click on the link.

Do so: http://online.wsj.com/article/SB1208...googlenews_wsj

Examining the graph closely you'll notice that it appears to represent an inverse correlation betwen capital gains tax revenue collected by the IRS and the capital gains taxation rate. The higher the rate, the less money the government collects...right?

Not exactly. It's a bit more complicated than that and more involved than the media pundit who wrote this story would have you believe. Note that the left side of the graph reads, "capital gains realizations % of GDP". If you didn't know to look for it you probably wouldn't even see itand you might skip over it anyway....but the words "% of GDP" are not insignificant. What the "formula" is actually showing is that capital gains tax revenue is tied not to the capital gains tax rate but to the GDP, and it's the GDP that some economists argue will increase as an inverse product relevant to the movement of the capital gains tax rate. In other words, if you cut the rate, you grow the economy and this adds up to more tax revenue. This is not exactly the same thing as "cut the rate and you collect more taxes". It's close...but the distinction is worth noting.

This argument is almost always (including this time) framed like a simple equation that goes like this; "lower capital gains taxes and the government will collect more revenue". This is technically probably correct but it's not really what you ought to be considering. Why the government is collecting more revenue is the real question. What the data shows...and there are a number of other factors that may influence this...is that generally speaking when the capital gains tax rates were lowered, the government collected more taxes relative to the gross domestic product for that year. What we are primarily talking about here is short term economic growth relevant to the movement of the GDP as it varries inversely to the capital gains tax rate. That's important to understand.

There's an obvious reason for this. Most people only consider the tax rate when looking at this, but the other factor that impacts the equation even more is how the government decides what your rate is. Gains on assets held for less than a year are taxed at the highest rate, while those held for 1-5 years are taxed at a lower rate and those held longer than five years are taxed at the lowest rate. In other words, the government wants you to hold onto investments and they're willing to reward you for doing so. If you don't hold onto your investments you won't be rewarded with a lower rate but instead will be taxed at your normal rate reflective of your tax bracket just as if you're gain was income from your job.

Half of all capital gains are not taxed at all but that's another story. The point I'm making here is this; the reason the government collects more tax money from capital gains when the rate is lowered is because people know that the best time to sell their investments is when they won't be taxed as highly on the profit. If you stood to make $200,000 on the sale of stock would you tend to sell it when your tax rate is 15% or 28%? Would WalMart sell more widgets if they're marked down 50%? Obviously they would.

If you're worried about capital gains taxes there's a simple solution; don't sell your assets when the gains tax is high. Wait till it comes down. The government historically has had a vested interest in having investors hold onto their holdings. The real question is not how much revenue they collect, but whether it's a good idea that we maintain capital gains tax rates that are basically encouraging investors to sell off their holdings. In periods of economic down cycles or recession it's inherently dangerous to promote policies that push investors to dump their assets on the market.

So in essense, Obama's answer, "it depends on what's going on with Wall Street" was essentially correct. It's unfortunate the Wall Street Journal has to buy into the politics of this because they could be a source for balanced perspective.

Now read this for a more detailed look: http://www.cbpp.org/9-20-01tax.htm

Excellent post with great insight and very likely true. To not raise the capital gains tax would be irresponsible with the enormous deluge of debt we collect on a daily basis by our mere presence in Iraq. In addition, more people own stock presently than at any other time in our nations history and with the present state of our economy (people in hard times, fuel costs, food costs etc) the pie from which captials gains taxes are garnered will be lareger than in our past. Now, in regards to a tax that needs to be lowered IMHO --that would be the Corporate Tax ,which is higher in the USA than the world average.

[TailgateNut]

Who are you to decided what someone should pay and what they can afford. We're over taxed as it is. The solution is to stop federal spending. Something none of these candidates are talking about getting congress to do.



Why don't we start by stopping the federal spending on the Iraq debacle. That'll make a big dent in the current expenditures.

[broncofan7]

Why don't we start by stopping the federal spending on the Iraq debacle. That'll make a big dent in the current expenditures.

ABSOLUTELY! we need to address the fact that we pay for so many illegals and their healthcare----it is an epidemic at both JPS in Ft worth and Parkland in dallas--the illegals go into our hospital ERs for things as trivial as sneezing fits or an arm rash costing our helathcrae system $$$millions daily--and that is not even counting what we spend when they take their prescriptions to the Pharmacy for fulfillment--2 things I want to see in the McCain administration--getting out of Iraq and fixing our border issues

[TailgateNut]

ABSOLUTELY! we need to address the fact that we pay for so many illegals and their healthcare----it is an epidemic at both JPS in Ft worth and Parkland in dallas--the illegals go into our hospital ERs for things as trivial as sneezing fits or an arm rash costing our helathcrae system $$$millions daily--and that is not even counting what we spend when they take their prescriptions to the Pharmacy for fulfillment--2 things I want to see in the McCain administration--getting out of Iraq and fixing our border issues

1.You're looking at the wrong guy to get us out of Iraq.

2.The illegal immigrant issue is a bit more involved than just medical treatment paid for by our insurance premiums.

Although some want us to believe that the illegals are paying taxes, I call BS. Most if not all illegals are using false SSN and are claiming excempt status. So, they are paying the required medicare and SS deductions, but are not contributing their fair share of income taxes and are also harming our economy by sending untold millions/ billions to their families in mexico.

The educations system is being robbed of funding due to the same issues mentioned above, and the quality is eroding due to the abnormal high numbers of children flooding the schools without a proper grasp of the english language. This doesn't address the amount of money spent in remedial courses and free services due to low income claims.

[broncofan7]

1.You're looking at the wrong guy to get us out of Iraq.

2.The illegal immigrant issue is a bit more involved than just medical treatment paid for by our insurance premiums.

Although some want us to believe that the illegals are paying taxes, I call BS. Most if not all illegals are using false SSN and are claiming excempt status. So, they are paying the required medicare and SS deductions, but are not contributing their fair share of income taxes and are also harming our economy by sending untold millions/ billions to their families in mexico.

The educations system is being robbed of funding due to the same issues mentioned above, and the quality is eroding due to the abnormal high numbers of children flooding the schools without a proper grasp of the english language. This doesn't address the amount of money spent in remedial courses and free services due to low income claims.

Obviously it is more involved than just the healthcare aspect of it--and you touvched on some of those additional points..I was referring to ways for this country to begin taking back our government and with it, get our budget under control. This will be controversial but----- NO MORE ANCHOR BABIES! We need skilled immigrants that are willing to learn English (mostly from India/Pakistan, the mid East and Eastern Europe) and not laborers willing to take our cash , use our health care system , our public school system and abuse our government with a corrupt lobby such as LULAC helping them carry out there crimes against our country and culture.

[Bronco Jamus]

Why don't we start by stopping the federal spending on the Iraq debacle. That'll make a big dent in the current expenditures.

I agree. I just don't see the ROI there.

[L.A. BRONCOS FAN]

How can you say that the 50 hedge fund managers who just received 40plus Billion dollars in pay should NOT be taxed at the rate of 28% , but rather 15%,
when people who make far less are taxed at higher rates because they made EARNED income, rather than stock manipulation or dividend income.


:yep: Exactly. :yep:

That is the issue.

[Spider]

I really don't understand what is his reasoning for raising capitol gains tax. It won't bring in more money, it is simply stupid.

Color me shocked ........... But here is the deal , Congress passed a law you cant use deductions after a Million dollars , so in essence CEO and other top dogs are getting paid in stocks rather then salary , so they are only paying 15% INSTEAD OF THE 24% the rest of us are .......... Is it really that complicated ?

[Spider]

Not so fast.

*Disclaimer--if you're not a CPA, a tax attorney or an economist you are on dangerous ground trying to understand this stuff. I confess to being none of these things so I'll include myself here. I do however, work with and around quite a few people engaging in these disciplines and have had a few discussions regarding the capital gains tax with some of them over the last couple of years. Take this as worth what you're paying for it...like everything else in here:

Capital gains taxation policy is probably missunderstood by taxpayers as much as anything else out there. This topic has been the subject of a great deal of speculation by economists and politicians related to it's perceived ability to do two things 1) stimulate growth in the economy, and 2) increase tax revenues. Whether this is true or not is not the slam dunk that most taxpayers think it is. In fact it's highly dubious. Here's why:

The current Wall Street Journal article cited in this thread includes a small graph that you won't see unless you actually click on the link.

Do so: http://online.wsj.com/article/SB1208...googlenews_wsj

Examining the graph closely you'll notice that it appears to represent an inverse correlation betwen capital gains tax revenue collected by the IRS and the capital gains taxation rate. The higher the rate, the less money the government collects...right?

Not exactly. It's a bit more complicated than that and more involved than the media pundit who wrote this story would have you believe. Note that the left side of the graph reads, "capital gains realizations % of GDP". If you didn't know to look for it you probably wouldn't even see itand you might skip over it anyway....but the words "% of GDP" are not insignificant. What the "formula" is actually showing is that capital gains tax revenue is tied not to the capital gains tax rate but to the GDP, and it's the GDP that some economists argue will increase as an inverse product relevant to the movement of the capital gains tax rate. In other words, if you cut the rate, you grow the economy and this adds up to more tax revenue. This is not exactly the same thing as "cut the rate and you collect more taxes". It's close...but the distinction is worth noting.

This argument is almost always (including this time) framed like a simple equation that goes like this; "lower capital gains taxes and the government will collect more revenue". This is technically probably correct but it's not really what you ought to be considering. Why the government is collecting more revenue is the real question. What the data shows...and there are a number of other factors that may influence this...is that generally speaking when the capital gains tax rates were lowered, the government collected more taxes relative to the gross domestic product for that year. What we are primarily talking about here is short term economic growth relevant to the movement of the GDP as it varries inversely to the capital gains tax rate. That's important to understand.

There's an obvious reason for this. Most people only consider the tax rate when looking at this, but the other factor that impacts the equation even more is how the government decides what your rate is. Gains on assets held for less than a year are taxed at the highest rate, while those held for 1-5 years are taxed at a lower rate and those held longer than five years are taxed at the lowest rate. In other words, the government wants you to hold onto investments and they're willing to reward you for doing so. If you don't hold onto your investments you won't be rewarded with a lower rate but instead will be taxed at your normal rate reflective of your tax bracket just as if you're gain was income from your job.

Half of all capital gains are not taxed at all but that's another story. The point I'm making here is this; the reason the government collects more tax money from capital gains when the rate is lowered is because people know that the best time to sell their investments is when they won't be taxed as highly on the profit. If you stood to make $200,000 on the sale of stock would you tend to sell it when your tax rate is 15% or 28%? Would WalMart sell more widgets if they're marked down 50%? Obviously they would.

If you're worried about capital gains taxes there's a simple solution; don't sell your assets when the gains tax is high. Wait till it comes down. The government historically has had a vested interest in having investors hold onto their holdings. The real question is not how much revenue they collect, but whether it's a good idea that we maintain capital gains tax rates that are basically encouraging investors to sell off their holdings. In periods of economic down cycles or recession it's inherently dangerous to promote policies that push investors to dump their assets on the market.

So in essense, Obama's answer, "it depends on what's going on with Wall Street" was essentially correct. It's unfortunate the Wall Street Journal has to buy into the politics of this because they could be a source for balanced perspective.

Now read this for a more detailed look: http://www.cbpp.org/9-20-01tax.htm
Yep I dont totaly understand it , really cant explain it to well , but My moms family goes through this every year ...... I got tax headaches , but nothing on this level

[L.A. BRONCOS FAN]

Color me shocked ........... But here is the deal , Congress passed a law you cant use deductions after a Million dollars , so in essence CEO and other top dogs are getting paid in stocks rather then salary , so they are only paying 15% INSTEAD OF THE 24% the rest of us are .......... Is it really that complicated ?

What's really difficult to understand is why you have regular working and middle class Americans (of a "conservative" mindset) defending this thievery.

http://www.bartcop.com/wn-shop.jpg

[Dukes]

What's really difficult to understand is why you have regular working and middle class Americans (of a "conservative" mindset) defending this thievery.

http://www.bartcop.com/wn-shop.jpg

Spoken like a true socialist

[L.A. BRONCOS FAN]

Spoken like a true socialist

Spoken like a complete ignoramus.

[Dukes]

You're so afraid of what you are. Why?

[L.A. BRONCOS FAN]

You're so afraid of what you are. Why?

You're so afraid of learning the fundamentals required to participate in this kind of discussion, viz., the difference between liberalism and socialism.

Why?

Answer:

"The very powerful and the very stupid have one thing in common.
Instead of altering their views to fit the facts, they alter the facts
to fit their views..."

- Doctor Who, "Face of Evil"

[L.A. BRONCOS FAN]

http://www.bartcop.com/owner-tax-ship.jpg

[Spider]

Spoken like a true socialist

Just so I understand , a Socialist is someone who thinks the rich should have to pay taxes like the middle class and poor ?
Those ****ing Heathens ........a pox on their houses , everyone knows the rich work alot harder then the middle class and poor , so therefore the rich deserve not to pay taxes , while us deadbeats aka middle class and working poor need to pull our fair share ......

[baja]

Like the seas have been over fished so too has the middle class been over fished to the point of threatened extinction.

They are jobless, broke, in debt up their eyeballs, burdened with high interest on that debt, malnourished with real food (pure organic grown) being hard to find and expensive, obese, lacking energy and without the knowledge to look to self sufficiency to ride out the storm. Yep it's the perfect storm a coming and it will not be like the 1930's when people were relatively healthy and often had a victory garden and the small farmer still grew America's food and the government was not broke.

[footstepsfrom#27]

Spoken like a true socialist
What does the capital gains tax have to do with socialism? You do understand that capital gains tax rates, even at their highest levels, represent a tax BREAK right? The government is letting you pay a lower tax rate on your income because it's income from an investment. That constitutes an incentive to invest. That's the whole point of capital gains taxes...you're getting to pay less than you would if it was "earned" income from your paycheck or your business. Regardless of what tax bracket you're in, you're going to pay a lower percentage on capital gains tax than you would on income tax.

So explain to me what lowering tax liability on income from investments has to do with socialism because I'm really not seeing the connection. :kiddingme

[W*GS]

You're so afraid of learning the fundamentals required to participate in this kind of discussion, viz., the difference between liberalism and socialism.

You're a socialist. You continually attempt to cover up your dogma by calling yourself a "liberal" (another deflection in and of itself), despite the facts.

You're a lying coward.

[mhgaffney]

The most fair system would be to eliminate all income taxes on wages. Early Supreme Court decisions established the principle that wages are not taxable income. They are in fact a form of barter or trade - you puts in your time and you are remunerated in return.

Taxable income was originally (and should still be) income earned from investments. By this rule Capitalists (all entrepreneurs, bankers, industrialists etc) should be paying taxes and wage earners should be exempt.

Of course, today, most of the big corporations have set up tax shelters of one kind or another -- often businesses or real estate holdings that lose money or barely break even -- or they have gone off shore -- to escape taxation altogether.

The present system also favors speculation -- which makes the hair splitting about corporate gains beside the point. JFK and the New Deal policy discouraged speculation - a policy that was on the right track. But of course under Greenspan we saw deregulation -- which opened the floodgates to wild speculation, derivatives, and the securitzation revolution that has destroyed our economy.

Speculation always makes us weaker -- not stronger

This is what shmucks like Spider fail to understand. They think "we are all pulling together." Bullsh*t. The present system is designed to favor a tiny tiny group of bankers and capitalists at the expense of everyone else, esp the working man.

It's why we are in the mess we are in.

[W*GS]

gaffney's understanding of economics is about as correct as his knowledge of metallurgy and physics.

[Spider]

gaffney's understanding of economics is about as correct as his knowledge of metallurgy and physics.

LOL , well seeing how I busted you in a big ass lie .........pretty much could be lying now ....

[Spider]

See W*GS , If I took you and 5 family members of your choice , and arranged you guys into a perfect circle , we would have a dope ring

[L.A. BRONCOS FAN]

See W*GS , If I took you and 5 family members of your choice , and arranged you guys into a perfect circle , we would have a dope ring

Ha! ^5

The really funny part is that he actually thinks his response to Mark's post qualifies as an actual couterargument. ROFL!

[W*GS]

Two of the Three Stooges of the Apocalypse have said their piece; their stupid lackey, Spider, has jumped in as well.

The four of you ought to form a bridge club.

[Spider]

Two of the Three Stooges of the Apocalypse have said their piece; their stupid lackey, Spider, has jumped in as well.

The four of you ought to form a bridge club.

oh thats right , whats going on with the economy right now is just a mere cold ..... W*GS the weatherman/Economist told us so .........

[L.A. BRONCOS FAN]

oh thats right , whats going on with the economy right now is just a mere cold ..... W*GS the weatherman/Economist told us so .........

:rofl:

Hilarious how he thinks his cute little name-calling and 'attack the messenger' qualifies as an actual rebuttal.

[cutthemdown]

Who are you to decided what someone should pay and what they can afford. We're over taxed as it is. The solution is to stop federal spending. Something none of these candidates are talking about getting congress to do.

Thank you brother Jamus. I raise a tankard of ale in your honor.

[cutthemdown]

Color me shocked ........... But here is the deal , Congress passed a law you cant use deductions after a Million dollars , so in essence CEO and other top dogs are getting paid in stocks rather then salary , so they are only paying 15% INSTEAD OF THE 24% the rest of us are .......... Is it really that complicated ?

Why not close that loophole instead of shafting the middle class to get to them?
The actually get paid in stock options though right? They don't just hand them stock. I could be wrong but this is how I understand it.

CEO gets a fat cat option to purchase 100 thousand shares at some low price. Like half what the stock is trading for. Then they sell it and make a fortune. I just refuse to accept that to get to these CEO and try to milk them for another 10% means that we have to get screwed in the process.

[L.A. BRONCOS FAN]

Why not close that loophole instead of shafting the middle class to get to them?

The idea that the middle class would get "shafted" by an increase in the capital gains tax rate is a right-wing myth perpetrated by (you guessed it) people the majority of whose income comes from capital gains.

Although it's true that most Americans own capital assets (like homes or businesses), they sell them only a few times in their life. The rich, on the other hand, make most of their annual income in capital gains, and deal in them constantly. That is why a capital gains tax cut would overwhelmingly benefit the rich.

[L.A. BRONCOS FAN]

What does the capital gains tax have to do with socialism? You do understand that capital gains tax rates, even at their highest levels, represent a tax BREAK right? The government is letting you pay a lower tax rate on your income because it's income from an investment. That constitutes an incentive to invest. That's the whole point of capital gains taxes...you're getting to pay less than you would if it was "earned" income from your paycheck or your business. Regardless of what tax bracket you're in, you're going to pay a lower percentage on capital gains tax than you would on income tax.

So explain to me what lowering tax liability on income from investments has to do with socialism because I'm really not seeing the connection. :kiddingme

Chirp, chirp, chirp... Ha!

[L.A. BRONCOS FAN]

At any rate, just in case anyone happened to miss it, footstepsfrom#27 debunked the original claim, viz., that Obama "doesn't get it" (in reference to capital gains tax) here:

http://www.orangemane.com/BB/showpost.php?p=1950509&postcount=23

[baja]

LABF are starting to warm up to Obama?

I am.

[Spider]

Why not close that loophole instead of shafting the middle class to get to them? What Raise taxes ? you commie socialist cheese eating surrender monkey , move to the nanny state of France ..........heard any of this before ? I have
The actually get paid in stock options though right? They don't just hand them stock. I could be wrong but this is how I understand it. And interfere with the free market ? just admit you are a socialist , and you want income distribution , so people can live off of welfare and not work ........but you really cant tell a company on how to pay , or how someone wants to be paid

CEO gets a fat cat option to purchase 100 thousand shares at some low price. Like half what the stock is trading for. Then they sell it and make a fortune. I just refuse to accept that to get to these CEO and try to milk them for another 10% means that we have to get screwed in the process.
this is life ........

[cutthemdown]

Like I said just make a law that stock given for services is income. Stock bought for investment is not.

[Spider]

Like I said just make a law that stock given for services is income. Stock bought for investment is not.

but the CEO's are investing ........ they are just using services instead of money

[Bronco_Beerslug]

Why not close that loophole instead of shafting the middle class to get to them?
Uh, no one is talking about raising taxes on the middle class, just Bush and a few Republican lackeys when trying to smear other candidates. It seems to be working as this thread proves.

[mhgaffney]

Thing is,

even if Obama turns out to be THE MAN of the hour --

what is he going to be able to do -- if elected? Unfortunately, not much.

Notice what happened to JFK -- and I don't mean Dallas. In JFK's first weeks in office the big wigs tried to corner and control him -- by raising the price of steel -- after lying to JFK that they would hold the price steady.

Then the CIA and Pentagon sprang the Bay of Pigs on him --trying to leverage him into invading Cuba.

No doubt, there are similar contingency plans to be implemented in the off chance that Obama is elected in a landslide too great to overcome with rigged voting machines. I suspect it will be another "terrorist" attack -- or a faked incident in the gulf -- to drag him into war.

If the bastards don't screw you one way -- they'll do it another.

Or - to be more poetic: life is hell. Then you die.
MHG