Hillary Clinton's short-term capital tax plan.

[agamemnus]

The idea is to punish short-term traders because of some general concept that long-term investment in a particular asset is "good and noble". There can be no debate that short-term capital tax being different than long-term capital tax is a drag on the economy, as it prevents efficient reallocation of resources (stock prices) and/or leads to capital flight, and Clinton wants to make that even worse.

So ok, but what about the debates? Will it get brought up? I want to see The Donald eviscerate her on this, if it ever gets that far.

The whole situation makes me sad.

[GGT]

What?

"The Donald" is probably the last person who should complain about profits and capital flight, or short term vs long term capital gains, or even undocumented workers. The guy made his fortune in real estate by exploiting bankruptcy loopholes, and made even more money by outsourcing his product lines (for ties, colognes, etc.) to China.

From what I've read, Clinton wants to encourage profit-sharing that benefits workers, and not just investors or share-holders. Why would that be a bad thing?

[Lewkowski]

What?

"The Donald" is probably the last person who should complain about profits and capital flight, or short term vs long term capital gains, or even undocumented workers. The guy made his fortune in real estate by exploiting bankruptcy loopholes, and made even more money by outsourcing his product lines (for ties, colognes, etc.) to China.

From what I've read, Clinton wants to encourage profit-sharing that benefits workers, and not just investors or share-holders. Why would that be a bad thing?

Yes. Government intrusion is bad. I have nothing against profit-sharing but that needs to be voluntary not done at the point of a gun.

[agamemnus]

What?

"The Donald" is probably the last person who should complain about profits and capital flight, or short term vs long term capital gains, or even undocumented workers. The guy made his fortune in real estate by exploiting bankruptcy loopholes, and made even more money by outsourcing his product lines (for ties, colognes, etc.) to China.

Everyone outsources to China if it's cheaper, and everyone uses the bankruptcy code (not loopholes) if they are there.

From what I've read, Clinton wants to encourage profit-sharing that benefits workers, and not just investors or share-holders. Why would that be a bad thing?

Maybe, maybe not, but that has nothing to do with raising the short-term capital gains tax rate.

[Aimless]

The idea is to punish short-term traders because of some general concept that long-term investment in a particular asset is "good and noble". There can be no debate that short-term capital tax being different than long-term capital tax is a drag on the economy, as it prevents efficient reallocation of resources (stock prices) and/or leads to capital flight, and Clinton wants to make that even worse.

I thought the idea was to encourage long-term investment and simultaneously discourage the influence of short-term thinking that may sometimes be detrimental to a business or to an economy. Another idea was probably that it's better for some parts of the economy to move forward a little slower than it is to have the whole thing plummet into the abyss every few years and thus cause a far greater drag on both the market and on society as a whole. I dunno, I haven't read the background on the proposal.

But don't be a short Aggie, pls think about your family because they luv u.

[agamemnus]

I thought the idea was to encourage long-term investment and simultaneously discourage the influence of short-term thinking that may sometimes be detrimental to a business or to an economy.

Yeah, but it's magical thinking, because first of all, I would question even whether the definition of long-term investment was clearly defined by H. Clinton, and secondly, because people who don't live in the United States don't have the same tax burden and therefore it would put all sorts of investment companies at a disadvantage or hostage to indecision. It is similar to this, which is unfortunately a law in the United States that is meant to encourage better investment practices but instead creates significant amounts of risk for precisely the people the law is trying to help.

[Dreadnaught]

The idea makes no sense. The only possible hint of something positive in such a proposal would be that it would require Democrats to acknowledge that raising taxes on something inhibits an activity. If this allowed them to understand that incentives matter, maybe we could reform a whole lot of things.

But seriously, the core of this proposal (as well as Hillary's candidacy) seems to be clumping into:

1) Raise taxes
2) ???
3) End inequality

There are a lot of arguments over whether the stock and bond markets are sufficiently liquid. Subjecting assets to highly variable tax rates depending in duration of ownership is basically arbitrary and likely to harm liquidity.

There's also a fairness issue here; people are forgetting why capital gains/dividend taxes are lower in the first place .

[Flixy]

But seriously, the core of this proposal (as well as Hillary's candidacy) seems to be clumping into:

Haven't looked into the proposal, can't comment on that, but especially looking at the GOP candidates, and past elections, isn't primary season all about pandering to your base? It's not like this is a proposed law, is it. I find it interesting you take everything she says dead serious, but if another candidate says something stupid it's just because it's an election.

There's also a fairness issue here; people are forgetting why capital gains/dividend taxes are lower in the first place .

..because it benefited lawmakers? Serously though, why is it particularly unfair to raise those taxes?

[Lewkowski]

Because outside of a few cases those 'gains' have already been taxed as income in the first place.

[Loki]

Kind of how you have to pay a sales tax on products bought with money that already had income tax paid on them (and perhaps an estate tax on top of that). Don't see the relevance.

[LittleFuzzy]

I'm of mixed minds because it's an entirely a matter of how you interpret it Loki, at least wrt taxes on dividends. Income tax, sales tax, estate tax, etc, they're all transaction taxes. Each distinct transaction merits taxing. But it would perfectly reasonable and valid to say that the dividend is actually the same lump as the money which corporate income tax was paid on, that it's not a separate transaction because the money was already theirs, as owners of the company, and that handing it over to them directly is not an actual transaction anymore than handing it to a department or putting it in the bank is.

Now I don't see any reason why taxation on capital gains should be considered double-taxation.

[Loki]

Is that really different from a payroll tax, which has to be paid by both the employee and the employer on the same underlying work? Why does the number of times something is taxed matter? Would someone prefer to be taxed twice at 5% or once at 8%? People are making a moral argument where none exists.

[LittleFuzzy]

Is that really different from a payroll tax, which has to be paid by both the employee and the employer on the same underlying work? Why does the number of times something is taxed matter? Would someone prefer to be taxed twice at 5% or once at 8%? People are making a moral argument where none exists.

Yes. Because a payroll tax is one tax on one transaction, with each party to the transaction paying part of the tax. And maybe it doesn't matter whether something is taxed twice (though I do think that yes, people would prefer to be taxed once at 8% than twice at 5%, because they're paying less at 8%. 5% twice is either 9.75% or 10% total, depending on whether you're taxing the original sum twice or taxing it consecutively), I did say I was of mixed minds, but you alleged that it shouldn't be considered double-taxation at all, and compared it to a bunch of other transactional taxes which shows that by comparison it definitely is double-taxation.

[agamemnus]

A big grey area with capital gains taxes is small corporations that largely benefit one or a small group of shareholders, and/or startups and the like. Say they're receiving only equity as compensation. That is a capital gain!!!

To clarify, capital gains taxes in itself is a different issue from having different long-term and short-term tax rates.

[GGT]

To clarify, capital gains taxes in itself is a different issue from having different long-term and short-term tax rates.

Weren't capital 'assets' defined (in part) by the amount of time they were bought/owned before they were sold....and taxes were lower for long-term capital gains (long-held assets) to encourage people to invest?

*The average retail investor can buy and sell stocks, bonds, or mutual funds on all sorts of electronic markets, but if they try to time the market (or act like a Day Trader or speculator) they can get hammered by short-term capital gains taxes. Contrast that to large corporations, day traders, speculators, and high-frequency traders with CPA firms and tax attorneys who know the loopholes, how to exploit them, and it's a different outcome.

*The average home buyer wants a nice place to live, with an "affordable" mortgage interest rate, and plans to live there for at least five years. But when the price of RE gets jacked up by speculators/flippers who buy-and-sell within a few months but never live in the home, that investment model falls apart.



Now, I don't know the details of Clinton's proposals, but I do favor reforms in the banking/financial industry and tax laws --- so that the average person isn't paying for a risk-profit model that mostly benefits "big players" just looking to make a buck.

[agamemnus]

If we're going to argue tax policy in general, I am going to whip out my "get rid of income taxes entirely and use end-user sales taxes only" approach. In fact, I can't find a single thing that is regressive about just having an end-user sales tax (no VAT), in and of itself.

[Loki]

If we're going to argue tax policy in general, I am going to whip out my "get rid of income taxes entirely and use end-user sales taxes only" approach. In fact, I can't find a single thing that is regressive about just having an end-user sales tax (no VAT), in and of itself.

The less you earn, the higher portion of your income you spend. Someone earning $20k is going to spend $20k (at least). Assuming a 20% sales tax, they're going to spend $4k on that tax (i.e. 20% of their income). Someone earning $1m is going to spend perhaps 30% of their income. Taxes at 20%, they're going to spend $60k on that tax, which is actually 6% of their income.

Even if you put exemptions on the items poor people buy, you're going to end up with millionaires still paying significantly lower taxes than people making middle class wages.

[Lewkowski]

The less you earn, the higher portion of your income you spend. Someone earning $20k is going to spend $20k (at least). Assuming a 20% sales tax, they're going to spend $4k on that tax (i.e. 20% of their income). Someone earning $1m is going to spend perhaps 30% of their income. Taxes at 20%, they're going to spend $60k on that tax, which is actually 6% of their income.

Even if you put exemptions on the items poor people buy, you're going to end up with millionaires still paying significantly lower taxes than people making middle class wages.

Completely false. Middle class will still pay FAR fewer taxes than the millionaires. A dollar is a dollar is a dollar. Saying someone pays less taxes because they may pay a *lower percentage* of their income is stupid. That's not how math works. If someone pays $10 dollars in taxes and another person pays $20 dollars in taxes the person who paid the 20 PAID MORE. Regardless of income.

[agamemnus]

The less you earn, the higher portion of your income you spend. Someone earning $20k is going to spend $20k (at least). Assuming a 20% sales tax, they're going to spend $4k on that tax (i.e. 20% of their income). Someone earning $1m is going to spend perhaps 30% of their income. Taxes at 20%, they're going to spend $60k on that tax, which is actually 6% of their income.

Even if you put exemptions on the items poor people buy, you're going to end up with millionaires still paying significantly lower taxes than people making middle class wages.

I just can't agree with that line of thinking. Remember also that low taxes or outright payments are a form of subsidy for employers. If they didn't exist, employers (at least in local markets) would not offer such marginal jobs, since it would be financially untenable. (And perhaps they shouldn't, and it is detrimental for society to have them.) Further, consider also how much efficiency you gain by significantly cutting back the IRS and the entire tax consulting industry.

By the way, Huckabee said he was for a flat tax during the debate. Might have to vote for him.

[agamemnus]

I do think there is a sort of moral component to it, though. The capital gains tax is saying "here is the tax rate for your investments -- things you didn't work for but only paid capital for", while payroll tax is saying "here is the tax for your active labor". Except, that isn't how it works in real life, since people do get equity compensation in real life which is an effective payroll tax loophole, and in any case an investor often takes a lot of effort in picking their investments, so that's work too. And largely because of the equity compensation for "active labor" loophole, I think that it's "not fair" the way it is now.

[Loki]

No, it's saying "here's a tax; we're the government and we need taxes to fund services". The government gets revenue in a million different ways. I fail to see a moral dimension to most of them (except when the taxes are prohibitive, like they are on cigarettes).

[agamemnus]

A regressive tax by nature of it being lower than payroll tax?

[agamemnus]

Ok, don't call it a moral component, but in any case you can't deny that the personal-vs-investment rates loopholes exist and are probably impossible to get rid of without making the tax laws even more complicated and invasive.

[Loki]

Any law is going to have loopholes the second it's implemented. A fix of this problem will create new loopholes. Personally, I would support a higher capital gains tax (and a lower income tax to offset it) simply because it's a highly regressive tax in practice.

[Loki]

The average person paying a capital gains tax is far, far richer than the average person paying an income tax, and yet the former is much lower than the latter. This wouldn't be an issue if not for all the people who live entirely off capital gains. This means we have billionaires who are paying an effective tax rate of 10%.

[Dreadnaught]

Is that really different from a payroll tax, which has to be paid by both the employee and the employer on the same underlying work? Why does the number of times something is taxed matter? Would someone prefer to be taxed twice at 5% or once at 8%? People are making a moral argument where none exists.

I think it's morally wrong to choke investment with taxation at every turn, thus reducing investment and job prospects.

The average person paying a capital gains tax is far, far richer than the average person paying an income tax, and yet the former is much lower than the latter. This wouldn't be an issue if not for all the people who live entirely off capital gains. This means we have billionaires who are paying an effective tax rate of 10%.

Tell that to the pension funds.

Also, the billionaire isn't paying 10%. His/her company is already paying a variety of taxes. The billionaire could easily withdraw his/her billions from the company and put it into a safe like in Duck Tales. Then no one has to be troubled with their 35% corporate income tax, 12-xx% payroll and local taxes and, oh yes, the dividend taxes.

[GGT]

I think it's morally wrong to choke investment with taxation at every turn, thus reducing investment and job prospects.

Is this like the which came first, the chicken or the egg game?

Who would want to "invest" in a state or nation with undereducated, underskilled, or unhealthy people, with crappy roads and airports, or sub-standard infrastructure?

[agamemnus]

Also, the billionaire isn't paying 10%. His/her company is already paying a variety of taxes. The billionaire could easily withdraw his/her billions from the company and put it into a safe like in Duck Tales. Then no one has to be troubled with their 35% corporate income tax, 12-xx% payroll and local taxes and, oh yes, the dividend taxes.

Nice pic. But, also remember that if the billionaire isn't spending the money and puts it in a safe (let's say forever), it is like s/he burned the money.

Now, I don't know the details of Clinton's proposals, but I do favor reforms in the banking/financial industry and tax laws --- so that the average person isn't paying for a risk-profit model that mostly benefits "big players" just looking to make a buck.

So you shouldn't vote for H. Clinton, since increasing the short-term capital gains tax rate will have the opposite effect of what she is claiming even if she puts a "rich person" minimum on it. Someone can just live elsewhere and not pay capital gains at all.

[Loki]

I think it's morally wrong to choke investment with taxation at every turn, thus reducing investment and job prospects.

So you'd prefer an 80% corporate tax rate with no capital gains? If not, is the number of taxes really that important?

Also, the billionaire isn't paying 10%. His/her company is already paying a variety of taxes. The billionaire could easily withdraw his/her billions from the company and put it into a safe like in Duck Tales. Then no one has to be troubled with their 35% corporate income tax, 12-xx% payroll and local taxes and, oh yes, the dividend taxes.

Unless you're one of a handful of really active billionaires, you're not make all that much money from your business. You make most of your money from your investments. Again, look at the effective tax rate of a large portion of the richest people in this country. They pay a smaller rate than someone making $100k.

As for them putting their money in a safe: would he prefer to make half of a lot or all of little? Assuming his business and investments grow at 10% a year, he'd still be getting a 5% return after those taxes. Seems preferable to getting nothing in the bank. There is clearly a trade-off here in that higher taxes do reduce investment, but you make it sound investment should take precedence over everything else, including incentives to work (i.e. income taxes). Why not just make all corporate-related taxes 0% and increase the income tax by 15%? That will show the rabble.

[GGT]

Why not just make all corporate-related taxes 0% and increase the income tax by 15%? That will show the rabble.

That would catch millions of workers in the cross-hairs...unless there's a new "profit-sharing" model that benefits employees just as much as its Corporate or Banking/Financial overlords.

The only people who want to return to the sub-prime lending crisis (that led to the global financial meltdown) belong to groups with lots of money. Tons of money. Not just billions but trillions.

Hillary Clinton's "political problem" isn't related to her stance on capital gains taxes.....it's that most of her financial support comes from large banking/financial industries who "expect" preferential treatment in exchange for their support.



<BTW, I think that's why Bernie Sanders has gotten so much support, and "surprised" the DNC and political pollsters.>