Capital Gains tax increasing soon.

[cptacek]

I just had an issue with how you worded that one sentence. You implied that the capital gains tax rate decrease had an inordinate effect on the deficit. You provided an example that shows that all tax rate decreases had somewhat of an effect, but I don't quite understand how tax cuts that expire this year will increase the deficit for the next 10 years, and be an even bigger share of that deficit at the end of that 10 years, even if you do believe that higher taxes means more revenue coming in for the government, which I don't.

Your example didn't show that capital gains tax rate reductions explicitly had an effect...it was rolled into the other tax cuts. So you are asking me to come up with something that you yourself didn't produce.

My article does show, however, that raising the capital gains rate won't help with the deficit because it won't bring in any more money.

[feh]

I just had an issue with how you worded that one sentence. You implied that the capital gains tax rate decrease had an inordinate effect on the deficit.

Yes, I misspoke. When I typed that, I was thinking about all the tax cuts, not just the capital gains reductions. I don't know what percentage of the overall decline in revenue was caused by the reduction in capital gains taxes vs overall tax cuts.

You provided an example that shows that all tax rate decreases had somewhat of an effect, but I don't quite understand how tax cuts that expire this year will increase the deficit for the next 10 years, and be an even bigger share of that deficit at the end of that 10 years, even if you do believe that higher taxes means more revenue coming in for the government, which I don't.

I assume that graph indicates what would happen if the tax cuts were renewed, although I don't know for sure.

Regardless, I stand by my statement that the tax cuts enacted from 01-05 were a major factor in the increase of the national debt over the last 9 years, and that they were especially irresponsible given how much money was being spent.

[jpg7n16]

Since I still can't post links yet...

Please Google the phrase "bush tax cuts raise revenue." Click 1st result.

Please read myth #4

Myth #4: Capital gains tax cuts do not pay for themselves.
Fact: Capital gains tax revenues doubled following the 2003 tax cut.

As previously stated, whether a tax cut pays for itself depends on how much people alter their behavior in response to the policy. Investors have been shown to be the most sensitive to tax pol*icy, because capital gains tax cuts encourage enough new investment to more than offset the lower tax rate.

In 2003, capital gains tax rates were reduced from 20 percent and 10 percent (depending on income) to 15 percent and 5 percent. Rather than expand by 36 percent from the current $50 billion level to $68 billion in 2006 as the CBO projected before the tax cut, capital gains revenues more than doubled to $103 billion.[10] (See Chart 2.) Past cap*ital gains tax cuts have shown similar results.



By encouraging investment, lower capital gains taxes increase funding for the technologies, busi*nesses, ideas, and projects that make workers and the economy more productive. Such investment is vital for long-term economic growth.

Because investors are tax-sensitive, high capital gains tax rates are not only bad economic policy, but also bad budget policy.

[jpg7n16]

...Also, does this tax only apply once your money is taken out of the market? Or do they tax gains on paper even though they have not been cashed out?

The long term capital gains rate only applies to sales of a position held for more than 1 year (12months + 1 day or longer). You are only taxed on a stock when it is sold.

And it also applies to qualified dividends. (Not all dividends, just some) You are taxed on dividends when they are paid out.

[GrimJack]

Since I still can't post links yet...

Please Google the phrase "bush tax cuts raise revenue." Click 1st result.

Please read myth #4

Yeah, do not look any deeper because you might find sites other than the Heritage Foundation have a different view.

It might be better to look further (deeper?) into the matter and take what the CBO has to say. In its conclusion, the CBO brief states that "the relationship of realizations and receipts to gains tax rates is neither predictable nor obvious."

The feedback in reducing capital gains is at best only 50% and then, only for a short period of time following the event. To keep it simple, if the lowering of capital gains tax reduces revenues by 2 billion dollars, that means a net revenue loss of 1 billion dollars. Tax cuts do not pay for themselves in any real world situation.

[cptacek]

In its conclusion, the CBO brief states that "the relationship of realizations and receipts to gains tax rates is neither predictable nor obvious."

So what you are saying is none of us (including you) know and all of us are arguing from our own prejudices? That raising capital gains taxes could increase or decrease the amount of revenue coming in, and lowering capital gains taxes could increase or decrease the amount of revenue coming in? Why are you arguing for increases, then, if you don't know (and apparently no one can know) what the effect will be?

[jpg7n16]

Yeah, do not look any deeper because you might find sites other than the Heritage Foundation have a different view.

It might be better to look further (deeper?) into the matter and take what the CBO has to say. In its conclusion, the CBO brief states that "the relationship of realizations and receipts to gains tax rates is neither predictable nor obvious."

The feedback in reducing capital gains is at best only 50% and then, only for a short period of time following the event. To keep it simple, if the lowering of capital gains tax reduces revenues by 2 billion dollars, that means a net revenue loss of 1 billion dollars.

I never said that's the only place in the world with info. But facts are facts. Revenues went up. Hard to be a leading contributor to the recession if revenues are higher.

Tax cuts do not pay for themselves in any real world situation.

Like how low prices at Wal-Mart have no impact on profits.

If you are a foreign supplier, would you rather buy goods from the US with x% tax or at x+10% tax? Obviously you'd prefer x%. So a lower tax would encourage exports, and may in fact increase total tax revenues, in the same way that a low price at Wal-Mart encourages someone to buy there rather than at the mall, and increases revenues/profits.

Real world situation. Check.

I mean, how often would you go shopping if there was a 40% sales tax? Only when absolutely necessary. The car industry would be even worse off with high sales tax rates. "would you like this new Suburban? Only 38k + 15.2k in tax"

But no one complains that low sales tax rates are hurting the economy. Only low capital gains rates.

And cap gains rates have nothing to do with the fact that someone took out more mortgage than they could afford, and a bank approved a loan without proper verification of sustainability of income, and that investment firms created derivatives to protect investors against people not paying on mortgages they couldn't afford, and encouraging home developers so that the market was too saturated with more new homes than people who wanted to buy them.

Yeah - it was the tax cuts that did it.

[GrimJack]

So what you are saying is none of us (including you) know and all of us are arguing from our own prejudices? That raising capital gains taxes could increase or decrease the amount of revenue coming in, and lowering capital gains taxes could increase or decrease the amount of revenue coming in? Why are you arguing for increases, then, if you don't know (and apparently no one can know) what the effect will be?

Actually, what I was saying is look deeper and do not stop when you find someone who agrees with your/my prejudices. I am offering 2 more points of view that differ from each other and the original premise. Is that a problem?

[GrimJack]

I never said that's the only place in the world with info. But facts are facts. Revenues went up. Hard to be a leading contributor to the recession if revenues are higher.

hunh? Show me the facts; show me the data over time - don't make claims like that unless you point to your source of data

Like how low prices at Wal-Mart have no impact on profits.

Unsure of what your point is here: whose profits are you talking about? How many metrics do you use when considering profits - heck, what metrics are you using?

If you are a foreign supplier, would you rather buy goods from the US with x% tax or at x+10% tax? Obviously you'd prefer x%. So a lower tax would encourage exports, and may in fact increase total tax revenues, in the same way that a low price at Wal-Mart encourages someone to buy there rather than at the mall, and increases revenues/profits.

You still aren't using very good metrics nor are you actually offering anything but a matrix with only 2 or 3 dimensions that mirrors nothing in the real world so this is kind of pointless:

Real world situation. Check.

This I do not understand

I mean, how often would you go shopping if there was a 40% sales tax? Only when absolutely necessary. The car industry would be even worse off with high sales tax rates. "would you like this new Suburban? Only 38k + 15.2k in tax"

But no one complains that low sales tax rates are hurting the economy. Only low capital gains rates.

And cap gains rates have nothing to do with the fact that someone took out more mortgage than they could afford, and a bank approved a loan without proper verification of sustainability of income, and that investment firms created derivatives to protect investors against people not paying on mortgages they couldn't afford, and encouraging home developers so that the market was too saturated with more new homes than people who wanted to buy them.

Yeah - it was the tax cuts that did it.

Sorry this just sound like a rant you borrowed from a different thread

[jpg7n16]

hunh? Show me the facts; show me the data over time - don't make claims like that unless you point to your source of dataUnsure of what your point is here: whose profits are you talking about? How many metrics do you use when considering profits - heck, what metrics are you using?You still aren't using very good metrics nor are you actually offering anything but a matrix with only 2 or 3 dimensions that mirrors nothing in the real world so this is kind of pointless:
This I do not understandSorry this just sound like a rant you borrowed from a different thread

haha ... why oh why did I jump in this argument?? oh well I'm here now.

Data over time... okay there was that site I quoted earlier. And here's a new one: I still can't post links so...

if you google "Federal tax revenues from 2003 to 2006" it's the first link. You'll find a memo from the Congressional Budget Office (a decently unbiased source) that reads like so:

Growth in Federal Tax Revenues From 2003 to 2006
Total federal revenues grew by about $625 billion, or 35 percent, between fiscal
year 2003 and fiscal year 2006.

That happens to be right in the middle of the Bush tax cut period, so... still don't see my point?

It's not rocket science... If people have more money to spend (due to reduced income taxes) then they will either spend more money (which increases corporate taxes) or invest more money (which would increase capital gain taxes). Is that too simple for you?

When you read the CBO memo - referenced above - you'll notice that revenues from income tax went down .5% of GDP; revenues from capital gains went up .3% of GDP; and revenues from corporate income tax went up 1.5% of GDP. That data confirms my little theory even if you think it's too simple to be true. Complexity doesn't necessarily mean accuracy. (Lower income taxes gave people more money to invest with - which raised the capital gains taxes; and more money to spend - which raised the corporate taxes)

Sorry if that doesn't have enough "metrics" to get you going.

[Landlord Greg]

And here I thought were were trying to ENCOURAGE investment in real estate and other vehicles to create stronger investment markets?
I've had just about enough of paying taxes for projects I don't believe in, like wars and welfare.

__________________
Brian
EZ Landlord Forms

[gambler2075]

Yeah, this pretty much blows... last year I had to pay ~80,000$ in short term capital gains taxes for my trading profits and with the increased rates it's probably going to be alot more... What can ya do...

g

[Tonyall]

Yeah, this pretty much blows... last year I had to pay ~80,000$ in short term capital gains taxes for my trading profits and with the increased rates it's probably going to be alot more... What can ya do...

g

That is a nice problem to have! Enjoy what you can keep!