Unfortunately I have not been as up to date as I would like for this election period (and I was a little tired of the bickering between Obama and Hillary). This is really interesting. I didn't know that obama was giving tax breaks to the middle class.
You are right Jesse. The tax completely ignores inflation. That is one thing that bothers me about Obama's definition of "the rich", too. We have a crazy AMT system in place right now because back in the 60's the government considered a group of people as rich and then NEVER indexed it for inflation so now the AMT is hitting many middle income families while congress passes very expensive yearly "patches" to remedy the situation. I'm afraid the same thing is going to happen if we single out another group as rich without accounting for inflation, but that's an entirely different discussion.
I wonder what would happen if we eliminated the capital gains tax completely? How would that affect the amount of capital available in our markets? How would that fuel further entrepreneurial ventures and growth? Could the growth attributed to tax-free capital gains then be used to further aid society? Instead of depending on government programs to attempt to aid the same society?
The biggest flaw I see in the capital gains tax as it stands now is that it doesn't take inflation into account at all. Inflation is built into every every asset's future price, and the fact that it's completely ignored when calculating the base is beyond me.
I completely agree. Even though, I don't believe that Marrying into wealth or inheriting wealth are the only two alternatives. I believe that hard work is definitely an important factor in owning and operating your own business, however I don't think you put enough emphasis on luck. Most people who start up their own business are going into a market that isn't saturated yet, so it makes it very difficult to get research on that niche. Luck has a lot to do with business.
You are amazingly naive if you think Obama will take this new tax revenue and invest in social programs.
The president, no matter who it is, simply can't make congress spend oour tax dollars responsibly. I see an increasse in taxes as just more of my money wasted by congress.
Look, most of the public is ignorant when it comes to economics. Plain truth is that people have better things to do - like survive.
Our economy today is a socialist/fascist mix. Before you get your panties in a knot, I'll explain.
Communism - means of production & distribution OWNED by the state.
Socialism - means of production owned by the state.
Fascism - means of production & distribution heavily regulated by
the state.
The entire tax situation is Kafka-esk (absurd) and every time it's tweaked, complexity is added. The U.S. founders were brilliant men but the constitution they crafted contained a fatal flaw. The document did not link liberty with responsibility. They made an attempt - only wealthy landowners had a vote (in the beginning). These were the movers, the shakers, the doers. But this changed quickly.
They assumed everyone had a sense of responsibility and, in their time, they were right. In today's world, there's is precious little individual responsibility. As a result, everyone expects to be taken care of and failure impossible.
The age of Big Nanny Government is here. Folks, you don't have to look too far out to see the system is going to fail.
Obama's tax increase will indirectly affect all of us. By taxing the upper income families more you are basically affecting their amount of spending. Whoever said the rich only get richer is probably right, however it doesn't mean that they don't spend that money as well.
Also Obama's plan for universal healthcare sounds a lot like socialized medicine. If anyone has lived in the United Kingdom, you know how difficult it is to see a doctor. I do realize that something needs to be done about medical costs, however I don't believe that this is the way to do it.
yep, you are right Meg, it does go beyond stocks and bonds. I didn't include real estate because there is a fairly large capital gains tax exclusion on that particular asset class, but the capital gains increase would hurt business owners who want to cash out. A lot of these business owners are small business owners who want to sell their businesses for retirement.
Capital gains taxes apply to the sale of EVERY asset, not just stocks and bonds but also houses, businesses, collectibles, etc. Nearly doubling the long term capital gains tax will hurt the economy tremendously. The stock market will sink, investment activity (incl mergers and aquisitions and startups) will decline, and average Americans - especially retirees - will see their portfolios decline in real value.
Millions of Americans invest in taxable accounts, not only because not all have access to tax-deferred retirement accounts but also because such accounts are a relatively new phenomenon. Many fewer boomers utilize 401ks and IRAs than use taxable investment accounts. Plus the use of those accounts has increased dramatically since the capital gains tax IS so low - much lower than the typical income tax rate.
I am also one of those people Xin refers to -- moderate income with investments in non-tax-advantaged accounts (though I do have IRAs, etc.) so I am concerned about capital gains taxes. These taxes have been reduced lately but are set to revert to previous levels (see my post on Certainties: Death, Taxes, and Change).
It looks to me that Xin was not saying that 401ks would receive capital gains tax treatment but rather that retirees would need to supplement their income with investments, and thus would incur higher taxes on these "extra" investments at a time in their lives when no more income will be coming in---ever.
However, it is a good point to consider when planning that many retirement assets will be taxed at ordinary tax rates; though the Roth is not to be taxed at all. I know many don't think that the Roth provision will last, but here's hoping that it will.
My understanding is that business capital gains are taxed at ordinary tax rates; whereas housing gains are virtually tax-free (up to a certain amount). I would love to see securities' gains taxed the same way that housing gains are, or at least to see that saving/investing is a good way to build wealth as housing investment.
I made no comments about why I'm voting for Obama, and you assume I'm voting for him because he's popular?
Call me a naive idealist, but I plan on voting for Obama because I believe he has a better vision for the direction this country should be taking. If a single fault in a politician's views or policies was enough reason to not vote for someone, no politician would ever get elected. Though I don't look forward to paying more taxes, I'm willing to do it if it provides more revenue for beneficial programs.
Besides, taxes are going to have to go up at some point regardless of who gets elected. We're spending a huge sum of money in Iraq, and the government is going pretty far into the red. Money to pay back the growing debt is going to have to come from taxes (either that or we will have to severely cut back or eliminate a lot of government programs and hope the cost savings is enough).
@Jeff - You said that you don't know many people you in the sub-$150k range we can put away more than $19,000 a year. I know many people who do. I am one of them, and my parents have done it for many years. We may not be the majority, but I don't think it's wrong to say that raising capital gains taxes will make a significant impact on our savings.
@Jason - Obama has suggested up to 28% when he said that he won't raise it more than Reagan, but he also suggested 20 to 25%.So it could go up to 28%. Nevertheless, it's higher. And as to whether this tax will only be for "the rich" it seems kind of nebulous and the definition of "rich" changes all the time. Sometimes I hear 75k is rich according to Obama, sometimes 150k, sometimes 250k. It's still unclear where he will draw the line so I assume that everyone's capital gains will be affected in writing this article.
Please remember folks, although you may not agree with the article it doesn't reflect the opinions of the other writers at Wisebread. I'd hate to see anyone stop reading their articles because of my piece.
Is that both the McCain and Obama plans offer certain cuts that are relatively permanent, and some that will be increased or phased out altogether. The amount that will be "extra" in my pocket on my 2008 tax returns (or 2009 - if it takes that long to be approved) is not the same amount I will get in 2010, 2011, or beyond. Temporary relief of anything isn't really relief, IMHO.
Terrific post, Philip. And a wonderful illustration to go with it.
I'll be interested in seeing the rest of the comments. When you get somebody threatening to cancel a subscription--to a free service!-- you must have hit a nerve. Obviously it's a subject well worth talking about.
Your article is interesting and provocative, but I think it makes the mistake of just assuming much "evil" where none may exist. I'm not going to go into a point by point retribution of your article, except to simply say that for every "evil" of industry you imply, there are a thousand problems that can only be solved by those industrious enough to see profitable solutions in the worlds problems.
For instance, there were several paragraphs noted above which indicated that businesses intentionally wreck the environment for the sake of profits. People who engage in criminal activity aside, for the most part, past pollution problems were due to weaknesses in rapidly emerging technologies of the day, and ignorance which can only be corrected by experience - and sometimes even tragedy. The fact is America's air today is the cleanest it has been since the beginning of the industrial age, and large businesses with the help of gifted inventors, solved those problems.
Let's look at the looming gas crisis. Mark my words, it will be solved within this decade, probably sooner in this country and Japan, because of a trait we share - business friendly climates. A Japanese corporation just invented - are you ready? - the first car the runs on water. And it can run on ANY type of water, even rain water, sewage water, etc., the emission is totally pollution free, and is then recycled back into the atmosphere. But it's a start, and this problem will not be solved by government intervention, and cannot be solved by people simply "cutting back", on what they use. It will be solved by someone with a great idea who wants to profit from that idea - and he should be able to.
And while I would certainly like to see businesses engage in radical generosity to the people who make their dreams possible, I would also like to see the employees more content with what they have in life general, rather than seething with resentment toward the people who make it possible for them to feed their families.
I would like to see a radical shift in mindset in this country from distrust and resentment of business to distrust of government. I say, trust your government less than you trust your local Walmart. Walmart may have strayed far from Sam Walton's beginnings, but Walmart can't kick down your door if you decide to shop at Kroger instead. We can't survive by doing less business, but we can do just fine with less self-important government bureaucracies stifling real advancement in this country, and the world.
With Agape' love to my brothers and sisters,
Beau
Screen Printer for the Blogs :) www.screensplinters.com
Obama's economic strategy is based on spending. His current tax plan will not be able to support his plans to spend the economy out of the recession.
Therefore, he will likley increase taxes on everyone, while spending like a mad man. It's that what most politicians do? Bush cut taxes, but increased the debt.
Obama's plans will not work because the country is broke. Their is no more money to tax, print or borrow for Obama to spend. It's doesn't matter what he says, he does not have a good economic plan. Tax and spend is not a good economic recovery strategy.
The Chinese sure have nice thoughts about money. In China the average salary for a worker is 25 cents an hour.They work 12 to 14 hour days, 6 days a week!!!!
Thank you China for putting 45 thousand USA factories with good paying jobs out of business. Thank you China for paying slave wages so we Americans can't compete anymore. Thank you China for such wonderful proverbs about money. I will study them as I continue my search for a low paying job because my 20 dollar an hour factory job was sent to China.
To suggest that only the Uber-rich pay capital gains taxes frankly defies the facts and logic. Jeff's comments do not consider that EVERY income group has individuals that report capital gains on their tax returns. (Source-- http://www.irs.gov/taxstats/indtaxstats/article/0,,id=133414,00.html ) IRS.gov. On the lower end of the scale those individuals pay zero capital gains taxes. Building finacial security by those who choose to make a positive move in their life should be encouraged not penalized!
It is also interesting to me that the dollar amount of revenues from capital gains taxes has risen significantly since tax rates have decreased. Why? Because there is less reason to put off the sale of assets. Carefully researched history will show that tax increases do not increase revenue. Individuals will either put off transactions or seek other ways to reduce their tax liability. The global trend for taxation has been to reduce taxes and increase the revenues. A great example is Ireland.
The Tax Policy Center is funded by two liberal think tanks in Washington D.C. the Urban Institute and Brookings Institution. You should use more sources for an unbiased article.
I would seriously have to re-examine your thinking on your post.
Why are you voting for this individual if you don't want to pay the higher taxes? If you're voting for someone because he's the "flavor of the month" or because "you want to be a part of history", then you're voting for the wrong reasons.
Voting is about casting your voice onto the person who best represents your values and beliefs, regardless of what the "popular" thing to do is. I mean, this isn't high school. You're not a lemming, following what everyone else is doing so that you can be accepted as "normal". Even trendsetters have to get inspiration from somewhere.
Unfortunately I have not been as up to date as I would like for this election period (and I was a little tired of the bickering between Obama and Hillary). This is really interesting. I didn't know that obama was giving tax breaks to the middle class.
You are right Jesse. The tax completely ignores inflation. That is one thing that bothers me about Obama's definition of "the rich", too. We have a crazy AMT system in place right now because back in the 60's the government considered a group of people as rich and then NEVER indexed it for inflation so now the AMT is hitting many middle income families while congress passes very expensive yearly "patches" to remedy the situation. I'm afraid the same thing is going to happen if we single out another group as rich without accounting for inflation, but that's an entirely different discussion.
I wonder what would happen if we eliminated the capital gains tax completely? How would that affect the amount of capital available in our markets? How would that fuel further entrepreneurial ventures and growth? Could the growth attributed to tax-free capital gains then be used to further aid society? Instead of depending on government programs to attempt to aid the same society?
The biggest flaw I see in the capital gains tax as it stands now is that it doesn't take inflation into account at all. Inflation is built into every every asset's future price, and the fact that it's completely ignored when calculating the base is beyond me.
I'm not a big cat fan by the way and the picture on the post provoked me to read the article.
I completely agree. Even though, I don't believe that Marrying into wealth or inheriting wealth are the only two alternatives. I believe that hard work is definitely an important factor in owning and operating your own business, however I don't think you put enough emphasis on luck. Most people who start up their own business are going into a market that isn't saturated yet, so it makes it very difficult to get research on that niche. Luck has a lot to do with business.
You are amazingly naive if you think Obama will take this new tax revenue and invest in social programs.
The president, no matter who it is, simply can't make congress spend oour tax dollars responsibly. I see an increasse in taxes as just more of my money wasted by congress.
Look, most of the public is ignorant when it comes to economics. Plain truth is that people have better things to do - like survive.
Our economy today is a socialist/fascist mix. Before you get your panties in a knot, I'll explain.
Communism - means of production & distribution OWNED by the state.
Socialism - means of production owned by the state.
Fascism - means of production & distribution heavily regulated by
the state.
The entire tax situation is Kafka-esk (absurd) and every time it's tweaked, complexity is added. The U.S. founders were brilliant men but the constitution they crafted contained a fatal flaw. The document did not link liberty with responsibility. They made an attempt - only wealthy landowners had a vote (in the beginning). These were the movers, the shakers, the doers. But this changed quickly.
They assumed everyone had a sense of responsibility and, in their time, they were right. In today's world, there's is precious little individual responsibility. As a result, everyone expects to be taken care of and failure impossible.
The age of Big Nanny Government is here. Folks, you don't have to look too far out to see the system is going to fail.
Obama's tax increase will indirectly affect all of us. By taxing the upper income families more you are basically affecting their amount of spending. Whoever said the rich only get richer is probably right, however it doesn't mean that they don't spend that money as well.
Also Obama's plan for universal healthcare sounds a lot like socialized medicine. If anyone has lived in the United Kingdom, you know how difficult it is to see a doctor. I do realize that something needs to be done about medical costs, however I don't believe that this is the way to do it.
yep, you are right Meg, it does go beyond stocks and bonds. I didn't include real estate because there is a fairly large capital gains tax exclusion on that particular asset class, but the capital gains increase would hurt business owners who want to cash out. A lot of these business owners are small business owners who want to sell their businesses for retirement.
Capital gains taxes apply to the sale of EVERY asset, not just stocks and bonds but also houses, businesses, collectibles, etc. Nearly doubling the long term capital gains tax will hurt the economy tremendously. The stock market will sink, investment activity (incl mergers and aquisitions and startups) will decline, and average Americans - especially retirees - will see their portfolios decline in real value.
Millions of Americans invest in taxable accounts, not only because not all have access to tax-deferred retirement accounts but also because such accounts are a relatively new phenomenon. Many fewer boomers utilize 401ks and IRAs than use taxable investment accounts. Plus the use of those accounts has increased dramatically since the capital gains tax IS so low - much lower than the typical income tax rate.
I am also one of those people Xin refers to -- moderate income with investments in non-tax-advantaged accounts (though I do have IRAs, etc.) so I am concerned about capital gains taxes. These taxes have been reduced lately but are set to revert to previous levels (see my post on Certainties: Death, Taxes, and Change).
It looks to me that Xin was not saying that 401ks would receive capital gains tax treatment but rather that retirees would need to supplement their income with investments, and thus would incur higher taxes on these "extra" investments at a time in their lives when no more income will be coming in---ever.
However, it is a good point to consider when planning that many retirement assets will be taxed at ordinary tax rates; though the Roth is not to be taxed at all. I know many don't think that the Roth provision will last, but here's hoping that it will.
My understanding is that business capital gains are taxed at ordinary tax rates; whereas housing gains are virtually tax-free (up to a certain amount). I would love to see securities' gains taxed the same way that housing gains are, or at least to see that saving/investing is a good way to build wealth as housing investment.
@Diana
I made no comments about why I'm voting for Obama, and you assume I'm voting for him because he's popular?
Call me a naive idealist, but I plan on voting for Obama because I believe he has a better vision for the direction this country should be taking. If a single fault in a politician's views or policies was enough reason to not vote for someone, no politician would ever get elected. Though I don't look forward to paying more taxes, I'm willing to do it if it provides more revenue for beneficial programs.
Besides, taxes are going to have to go up at some point regardless of who gets elected. We're spending a huge sum of money in Iraq, and the government is going pretty far into the red. Money to pay back the growing debt is going to have to come from taxes (either that or we will have to severely cut back or eliminate a lot of government programs and hope the cost savings is enough).
@Jeff - You said that you don't know many people you in the sub-$150k range we can put away more than $19,000 a year. I know many people who do. I am one of them, and my parents have done it for many years. We may not be the majority, but I don't think it's wrong to say that raising capital gains taxes will make a significant impact on our savings.
@Jason - Obama has suggested up to 28% when he said that he won't raise it more than Reagan, but he also suggested 20 to 25%.So it could go up to 28%. Nevertheless, it's higher. And as to whether this tax will only be for "the rich" it seems kind of nebulous and the definition of "rich" changes all the time. Sometimes I hear 75k is rich according to Obama, sometimes 150k, sometimes 250k. It's still unclear where he will draw the line so I assume that everyone's capital gains will be affected in writing this article.
Shanel--that's an awesome story--I love how you went for it, no matter what it meant for the rest of your lifestyle.
Carol--I love those gold coins, too, but I'd never thought of using them like that. Fab idea, girl.
Please remember folks, although you may not agree with the article it doesn't reflect the opinions of the other writers at Wisebread. I'd hate to see anyone stop reading their articles because of my piece.
Jungle-Search.com offers a good filler finder as well as a few other ways to search Amazon.com.
Is that both the McCain and Obama plans offer certain cuts that are relatively permanent, and some that will be increased or phased out altogether. The amount that will be "extra" in my pocket on my 2008 tax returns (or 2009 - if it takes that long to be approved) is not the same amount I will get in 2010, 2011, or beyond. Temporary relief of anything isn't really relief, IMHO.
Terrific post, Philip. And a wonderful illustration to go with it.
I'll be interested in seeing the rest of the comments. When you get somebody threatening to cancel a subscription--to a free service!-- you must have hit a nerve. Obviously it's a subject well worth talking about.
Your article is interesting and provocative, but I think it makes the mistake of just assuming much "evil" where none may exist. I'm not going to go into a point by point retribution of your article, except to simply say that for every "evil" of industry you imply, there are a thousand problems that can only be solved by those industrious enough to see profitable solutions in the worlds problems.
For instance, there were several paragraphs noted above which indicated that businesses intentionally wreck the environment for the sake of profits. People who engage in criminal activity aside, for the most part, past pollution problems were due to weaknesses in rapidly emerging technologies of the day, and ignorance which can only be corrected by experience - and sometimes even tragedy. The fact is America's air today is the cleanest it has been since the beginning of the industrial age, and large businesses with the help of gifted inventors, solved those problems.
Let's look at the looming gas crisis. Mark my words, it will be solved within this decade, probably sooner in this country and Japan, because of a trait we share - business friendly climates. A Japanese corporation just invented - are you ready? - the first car the runs on water. And it can run on ANY type of water, even rain water, sewage water, etc., the emission is totally pollution free, and is then recycled back into the atmosphere. But it's a start, and this problem will not be solved by government intervention, and cannot be solved by people simply "cutting back", on what they use. It will be solved by someone with a great idea who wants to profit from that idea - and he should be able to.
And while I would certainly like to see businesses engage in radical generosity to the people who make their dreams possible, I would also like to see the employees more content with what they have in life general, rather than seething with resentment toward the people who make it possible for them to feed their families.
I would like to see a radical shift in mindset in this country from distrust and resentment of business to distrust of government. I say, trust your government less than you trust your local Walmart. Walmart may have strayed far from Sam Walton's beginnings, but Walmart can't kick down your door if you decide to shop at Kroger instead. We can't survive by doing less business, but we can do just fine with less self-important government bureaucracies stifling real advancement in this country, and the world.
With Agape' love to my brothers and sisters,
Beau
Screen Printer for the Blogs :)
www.screensplinters.com
Obama's economic strategy is based on spending. His current tax plan will not be able to support his plans to spend the economy out of the recession.
Therefore, he will likley increase taxes on everyone, while spending like a mad man. It's that what most politicians do? Bush cut taxes, but increased the debt.
Obama's plans will not work because the country is broke. Their is no more money to tax, print or borrow for Obama to spend. It's doesn't matter what he says, he does not have a good economic plan. Tax and spend is not a good economic recovery strategy.
The Chinese sure have nice thoughts about money. In China the average salary for a worker is 25 cents an hour.They work 12 to 14 hour days, 6 days a week!!!!
Thank you China for putting 45 thousand USA factories with good paying jobs out of business. Thank you China for paying slave wages so we Americans can't compete anymore. Thank you China for such wonderful proverbs about money. I will study them as I continue my search for a low paying job because my 20 dollar an hour factory job was sent to China.
To suggest that only the Uber-rich pay capital gains taxes frankly defies the facts and logic. Jeff's comments do not consider that EVERY income group has individuals that report capital gains on their tax returns. (Source-- http://www.irs.gov/taxstats/indtaxstats/article/0,,id=133414,00.html ) IRS.gov. On the lower end of the scale those individuals pay zero capital gains taxes. Building finacial security by those who choose to make a positive move in their life should be encouraged not penalized!
It is also interesting to me that the dollar amount of revenues from capital gains taxes has risen significantly since tax rates have decreased. Why? Because there is less reason to put off the sale of assets. Carefully researched history will show that tax increases do not increase revenue. Individuals will either put off transactions or seek other ways to reduce their tax liability. The global trend for taxation has been to reduce taxes and increase the revenues. A great example is Ireland.
The Tax Policy Center is funded by two liberal think tanks in Washington D.C. the Urban Institute and Brookings Institution. You should use more sources for an unbiased article.
No wonder you are poor. Go back to your old job, at least you'll get a paycheck.
@ Johnny:
I would seriously have to re-examine your thinking on your post.
Why are you voting for this individual if you don't want to pay the higher taxes? If you're voting for someone because he's the "flavor of the month" or because "you want to be a part of history", then you're voting for the wrong reasons.
Voting is about casting your voice onto the person who best represents your values and beliefs, regardless of what the "popular" thing to do is. I mean, this isn't high school. You're not a lemming, following what everyone else is doing so that you can be accepted as "normal". Even trendsetters have to get inspiration from somewhere.