Posted on 07/25/2015 6:39:48 AM PDT by SeekAndFind
The worst sectors of the worst recovery since World War II are business investment in new plants and equipment and new business start-ups. These are the biggest job-creators, and their slump is a key reason for the sub-par labor recovery, with low participation rates and high numbers of involuntary part-time workers.
So if investment is the problem, what does Hillary Clinton go out and do? She proposes jacking up the tax on investment. It’s almost inconceivably stupid.
In her latest economic speech, Clinton proposes doubling the capital-gains tax rate on the profit made from asset sales (stocks, bonds, real estate) held a day less than one year up to two years. Right now, if you take a capital gain a day more than one year, you are taxed at a 20 percent rate. Actually, it’s 23.8 percent when you include the health-care surtax. So under Clinton’s brilliant new play, you’d be taxed at 43.4 percent — the top individual cap-gains rate of 39.6 percent plus the 3.8 percent Obamacare surtax.
That means, instead of keeping 80 cents on the additional dollar of profit, you’d only keep 56.6 cents — a 30-percentage-point reduction in the take-home-pay reward for taking an extra dollar’s investment risk.
This will create a tall barrier to investment — what we don’t need. If you tax something more, you get less of it.
Clinton complains about too much “short-termism” in the economy. But her program might well create more of it. That’s because she has a sliding tax-rate scale, whereby assets held two to three years would be taxed at 39.8 percent and assets held three to four years at 35.8 percent. And you don’t get back to the statutory 20 percent cap-gains rate unless you hold an asset for six-plus years.
Who’s going to lock themselves into that? What if new investment opportunities arise? Want to convert your current holding into cash so you can invest in your brother-in-law’s start-up? Maybe it’s the next Facebook. Who knows? The point is, the Clinton plan exacts a huge tax penalty on the movement from old capital to new.
The late Jude Wanniski called this re-oxygenating the economy. Ms. Clinton would snuff that out. Her short-termism fear will lock us into long-term economic stagnation.
By the way, the numbers are actually worse, because capital gains are already taxed as corporate profits. What investors pay is a double tax.
So let’s go back to Hillary’s top cap-gains rate of 43.8 percent. The government takes 35 percent of your profit in corporate taxes, leaving 65 cents to be taxed a second time as capital gains at the new 43.8 percent rate. That results in a take-home profit of 37 cents on the dollar.
Is that enough to reward the risk of investing in the next Uber? Except for Mayor Bill de Blasio, who hates Uber, most people would say no.
But that’s Hillary’s plan.
How powerful is the capital-gains tax? The non-partisan Tax Foundation rates it among the top three economic-growth influences on the economy, along with full cash expensing for new investment in plants and equipment and the corporate tax. And compared with the rest of the world, the U.S. has fallen far behind in terms of this investment-tax-penalty grouping.
This is government tinkering at its worst. The reality is that Hillary Clinton is attempting to punish success and redistribute income.
Did someone say tax the rich? Clinton proposes an income threshold of $484,850 for married couples filing jointly. Oh my gosh! Successful economic activists! Let’s get ’em!
Ironically, history shows that periods of higher capital-gains tax rates produce less revenue as a share of all federal revenue and as a fraction of GDP. Hillary’s not even redistributing efficiently.
And then there’s what some call the “Charles Gibson effect.” Gibson interviewed then-Senator Obama in 2008 for ABC News. Obama said he’d raise the cap-gains tax from 15 to 28 percent. But Gibson reminded Obama that when Bill Clinton and George Bush lowered cap-gains tax rates, revenues actually increased. In other words, the Laffer curve. But Obama said it didn’t matter because he wanted to be “fair.”
It also doesn’t matter to Hillary. She wants to beat Bernie Sanders, or at least cuddle up to the Vermont socialist. What nonsense. Bad economics and bad politics. Voters will understand this.
Goofy ideas like this make me yearn for a 15 percent flat-tax rate on everything. Personal income, corporate profits, capital gains, dividends — everything. But that still leaves me with a double-tax problem for investment and savings. So it’s probably time to blow up the corporate-tax code altogether. That would get us to the 4-percent-plus growth path advocated by some of the Republicans on the campaign trail.
And that would get us some “long-termism” economic growth — just what the country yearns for.
Hmmm...Her entire campaign is inconceivably stupid.
Does anybody here understand the phrase, “Don’t eat the seed corn”?
When the capital that grows more capital is diminished or even destroyed, for extremely short-term benefit, self-destruction takes on a whole new meaning. It rises by an exponential factor.
Herself, Madame Benghazi, the Cold & Joyless, is so fully insulated from the realities of Planet Earth, it is astonishing ANY oxygen ever penetrated that far. And if said oxygen had existed, Herself has certainly breathed it all up already, leaving NOTHING in the room for anybody else.
Why should any of this surprise us? Hillary’s attitude about a great many things including this is basically the product of being brought up by a very wealthy and successful but very demanding father who was also neither warm or supportive towards her and her siblings.
The idea that she wants to soak the rich as part of her way of looking out for the less fortunate can be seen through so easily also due to the very profitable investments she alone made going back to the Arkansas years. So she was permitted to do all of this, but we peons would be forbidden if she becomes President?
Excluding all her elitist friends form Hollywood and the donors that gave the “DC” cow campaign money.
Me, me! I get it!
I'd also like to offer the corollary, "It's always a party when you're eating the seed corn." Meaning: it's easy to confuse earned consumption with capital consumption.
Here's an example from medicine: I'd bet a wad that the first few years of Single Payer, with price controls and doctor wage controls, would actually feel rather pleasant, until it became obvious that doctors who had seen their educational investment appropriated left in droves, and new ones of limited talent and experience were brought in to partially replace them.
She’s directly pandering to all the jealous members of the Dem constituency who hate the fact that some people have more money than they do. They hate people who deferred gratification, worked hard, invested their money wisely, and ended up making a bundle. That’s just so not fair dude. /s
While millions and millions of dollars are literally misplaced and wasted by the government, and corrupt payouts to political cronies like Solyndra cost us millions and millions more, she says the government needs more of OUR money. Incredible.
Will these rules apply to investing in things like CATTLE FUTURES?
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