capital gains taxes
There’s no evidence that a low capital gains tax rate boosts the stock market, investment, or the economy [New]
There is no sound evidence that cutting capital gains taxes to levels far below ordinary income tax rates contributes to economic growth at all — let alone enough to outweigh the significant economic cost of doing so.
- - Federal Reserve economists concluded in 2005 that the 2003 capital gains and dividend tax cut had little effect on the stock market: European and U.S. stocks performed similarly both after the announcement of the tax cut and after the tax cut itself, as this chart shows. As the Wall Street Journal stated, the study “concludes that the tax cut … was a dud when it came to boosting the stock market.”
- - “[T]here is no evidence that links aggregate economic performance to capital gains tax rates,” according to University of Michigan tax economist Joel Slemrod.
- - There is no statistically significant correlation between the top capital gains rate and economic growth (see chart).
- - As Len Burman, Syracuse University tax professor and former director of the Urban-Brookings Tax Policy Center (TPC), has explained of this chart, “Many other things have changed at the same time as [capital] gains rates and many other factors affect economic growth. But the graph should dispel the silver bullet theory of capital gains taxes. Cutting capital gains taxes will not turbocharge the economy and raising them would not usher in a depression.”
- - There is also no statistically significant correlation between the capital gains rate and the amount of real business investment.
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In a single sentence:
Private equity partnerships: a ‘socialize the risk, privatize the profits’ scheme.
But this is Barack Obama, whose idea of negotiating is to give away half the house before he’s even asked the other side for the bathroom sink.
Apparently Obama will propose that people earning more than $1 million a year pay at least the same tax rate as middle-class earners. That’s aiming mighty low.
America’s median income is about $50,000. The typical taxpayer at that level pays approximately 20 percent in taxes.
Granted, that’s a higher rate than most of today’s super rich pay because of countless deductions, credits, and loopholes – including, especially, their ability to take their incomes in the form of capital gains, taxed at 15 percent. That’s a big reason Buffett’s hundreds of millions a year are taxed at just over 17 percent — a lower rate than his secretary faces, as Buffett often says.
But a 20 percent rate is still ridiculously low compared to what millionaires and billionaires ought to be paying. Officially, income over $379,150 is supposed to be taxed at 35%.
And even 35 percent is a pittance compared to the first three decades after World War II. Before Ronald Reagan slashed taxes on the rich in 1981, the highest marginal tax rate was over 70 percent. Under Dwight Eisenhower it was 91 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.
I’m not entirely sure what this says about either myself or the president, but I was shocked to hear that his proposal for paying for the American Jobs Act out of existing spending will come entirely from cuts in “tax giveaways.” That is to say, he wants to raise taxes on the plutocrats and their various pseudo-monopolies.
White House budget director Jack Lew outlined Obama’s proposals for paying for the plan, targeting the rich and corporations as the president has in the past to no avail.
The biggest item would raise $400 billion by limiting deductions and exemptions on individuals who earn more than $200,000 per year and families who earn more than $250,000.
He also proposed raising $18 billion by treating the earnings of investment fund managers as ordinary income rather than taxing it at lower capital gains rates.
He would eliminate many oil and gas industry tax breaks to raise $40 billion and change corporate jet depreciation rules to bring in another $3 billion.
According to Lew, The Hill notes:
[T]he total measures proposed by the administration would bring in $467 billion, $20 billion more than the cost of the bill.
Previously the leftist consensus seemed to be (and I would say I agreed) that he would look to cut spending from areas that were a sure thing with Republicans, like the American welfare state. This would have offset any good that his plan did by an equal amount of evil distributed elsewhere. Instead, it turns out he’s targeting tax loopholes, an unjust tax code, and corporate welfare. Whatever the reason for this shift, I’m pleasantly surprised. The Anarcho-Militarist Party, the president’s primary opposition, will not be.