Obama on Capital Gains Tax

[nohmaan]

When he starts his term in office, Obama's first order of business will be to address the floundering economy.  While neither candidate had a strong economic plan, Obama has stated that he plans to increase the capital gains tax by 5%.  This is one policy that I hope to see smashed to dust.

The average American seems to agree with him on this issue, largely due to a misunderstanding of how the capital gains taxes work, and effect the economic structure of our country. 

With a the economy in the state it's in right now, a higher capital gains tax will:

• Stunt economic growth as investors reduce the amount of capital being injected into the economy
• Have little to no effect on the revenue generated by the tax increase
• Discourage lending and company expansion
• Ultimately lead to a decrease in available jobs by a small margin

I am curious to see how others weigh in on the issue.

 

[Incognitus]

    * Stunt economic growth as investors reduce the amount of capital being injected into the economy
    * Have little to no effect on the revenue generated by the tax increase
    * Discourage lending and company expansion
    * Ultimately lead to a decrease in available jobs by a small margin

But all of that is going to continue to happen anyway. I take issue with your second point, which is the only one which I am not sure will happen.

I'd been interested to know what you think should be done instead.

 

[nohmaan]

Well, capital gains taxes are taxes on profit made from selling an asset for a higher price than you purchased it, which is pretty much the stocks, bonds, properties that people buy and trade in open markets.

When you increase capital gains taxes, then the cost of acquiring assets increases- even if it's a 5% increase in tax then that's less capital that people can spend in the markets.  As a result investment stalls and money is removed from circulation in the economy.  So by increasing the capital gains tax, there is less money being injected into the economy and thus less money to tax on.  That means the government still pretty much breaks even as the amount invested is proportional to the tax rate.

While it's nearly impossible to gauge what will set the economy back in the right direction, there are some things I might try instead.  I would peel back the capital gains tax to around 10% for one year but I probably wouldn't give tax cuts for households.  It would also be worth our time to take another look at NAFTA- which I believe is one of Obama's policies as well.  It may also be advisable to apply tax breaks to small businesses making less than $650,000- aside from that I would try and get another small stimulus passed to the credit sector of the economy.

I definitely would not seek to raise the gains tax though.

 

[FlippyD]

It seems the increase will only effect those making more than $250,000 http://blogs.abcnews.com/politicalradar ... ifies.html

It appears to be a move that seeks to compensate having more money going into the government due to tax cuts for the middle class. Obama is also already looking into NAFTA and tax breaks for small businesses.

 

[nohmaan]

People making over $250,000 yearly are mostly the ones who need to be putting their money into the markets.  The majority of people (making under $250k) who invest in markets and properties have such a minimal amount invested that it's not that important.  The investors who can put large amounts of money into the economy are the ones we need to attract.  If professional investors aren't filling the market then the "main street" investors don't either- typically because the market's returns will be much lower.

I'm aware of Obama's economic polices as well, I was merely answering the question of the things I would do to kick start the economy.  Though I doubt much will be done to NAFTA.  Each one of the countries in the agreement already thinks that they are the loser in the deal (honestly Mexico has seen the most benefit though), I don't see what more could be successfully amended with Canada and Mexico's agreement.

 

[___]

I'm all for reducing corporate and capital gains tax, if in exchange we eliminate all corporate subsidies, tax breaks, and other methods of abusive, coercive tax policies. It would be a net loss for most of the country's largest corporations and some of its wealthiest people however, since they lobbied to engineer those tax policies in a way that would subsidize them and penalize their competitors, both at the expense of the average taxpayer.

Until you really understand the faintest thing about how the tax system operates it's very difficult to have any useful opinion about tax policy. Obama is probably fairly well informed, but he's not the type to rock the boat, and cleaning out our tax policies and truly deregulating things that have no place being regulated is not the platform he ran on anyway. So rather than fix the broken system and apply a truly just tax policy, he is offering to patch it up a little bit and use an across-the-board tax increase to compensate for the losses incurred through these subsidies and distorted tax policies. This is, IMO, slightly less unfair to small businesses who can't afford to buy pet politicians.

The alternative that McCain was offering would simply increase everyone's tax burden in exchange for giving the big guys bigger breaks so it's really a tossup on who's worse. His policy would have reduced the effective tax paid by some extremely wealthy, extremely profitable companies from around 7% to around 2%, while the average small business continued to pay 25% or more. Obama's plan offers tax cuts to the small businesses and an increase in taxes overall, but in a way that mostly hurts the upper crust.

So yeah neither policy was good, they're both stupid, but given the two alternatives you can hardly fault anyone, including many expert economists, for preferring Obama's. In the end the inevitable result with either would have been more taxes and more government, something we really can't afford and will end up paying for sometime in the rapidly approaching future. Don't like that? Try getting involved in an alternative political party and educating yourself on policy.

 

[nohmaan]

As an update to the economic struggle- it looks like stocks are being stalled by another big fear which is the deflation of consumer goods which we've started to see.  Basically the last time consumer good deflation occurred was under Hoover- before the big collapse that led to the Great Depression.  Even if the consumer good deflation was only 1%- it's still a very bad sign especially considering how fearful investors are acting still (for example the stimulus package is not being used now the way it was presented to congress.  most of the $300B used so far has been for bailing out AIG and paying dividends to banks) it looks like CG deflation is going to be a big problem.

As an addendum to what I feel the Fed should do about capital gains, I think at this point (or in the very near future) printing more money may be a good idea to combat the deflation before it gets out of control.

 

[___]

*gasp* The executive branch has lied to congress in order to execute another stunningly massive power grab? Congress was stupid enough to buy it after PATRIOT, Iraq, torturegate, and a barrage of signing statements have proved exactly how much respect this administration has for a representative government or the rule of law? Gee whiz, you guys, I didn't see this coming.

I still don't think a capital gains tax increase is the correct solution, but I don't have any better offer. Raising income tax is clearly not a solution when we're seeing deflation and massive losses in consumer goods, and cutting spending - what spending are they going to cut? No politician can get away with cutting spending on any of the oh-so-critical things they've been barking so loudly about for the past two decades, whether it be education, defense, the drug war, etc. That's political suicide, and even in this climate the public is too deeply propagandized to see spending cuts as anything but "surrender" and "defeat" on the problem the massive spending is supposed to address.

As an addendum to what I feel the Fed should do about capital gains, I think at this point (or in the very near future) printing more money may be a good idea to combat the deflation before it gets out of control.

Seriously? That's a terrible, terrible idea. Printing funny money during economic crises has never been anything but a coup de grace. If you don't believe me, take Zimbabwe or Iceland as a recent example. My personal take is that we should just let this play out and stop trying to interfere; nonaction by the government is looking like a pretty good alternative to the destructive action they've been taking so far.

 

[nohmaan]

Printing money in an economic crisis is a terrible idea, yes, unless you are trying to generate controlled inflation.  African countries are in a league of their own there(merely printing more money continuously), and the amount of money we would print to stop deflation of about 1% is marginal.  Besides, the reason why they were in trouble is because they printed more money to combat inflation itself, which is the opposite of our problem.  But deflation spirals are dangerous, like ships that are taking on water- it happens quite exponentially until it's too late and the ship has sunk.  It would be wise to wait and see how consumer goods act in the coming weeks/months- but adding more money to create marginal inflation may be advisable.

I agree also letting it play out without too much government intervention- but a serious possibility of collapse is there, so they can't stay completely hands free now- regardless of how poor their past decisions were.

 

[___]

1% of a multi-trillion dollar economy is a massive amount of money. Besides, we are deflating right now precisely because our economy has been greatly inflated for quite a while, and we're already pledged to generate nearly a trillion dollars in new debts and funny money in order to bail out failed institutions. Increasing the amount of currency without increasing the amount of production causes further devaluation in currency, and our production is going to be muted for a while now no matter how much money we print. With reduced production, increased unemployment and reduced competitiveness in international markets, and prospects of repairing these problems as much as a decade off, a short-term injection of currency in order to combat the deflation of an inflated market is using exactly what you just said results in hyperinflation - using inflation to fix problems caused by inflation.

We need deflation right now, that's the problem. This is the price an economy pays for lying to itself about how much it's worth. A recession or depression should be instructive in why inflation is bad and how to prevent it, not in how to (fail to) maintain inflation, which is what happened in the Great Depression. It was no secret back then that there was a problem before the chaos hit, people were just turning a blind eye and trying to make their buck before it all fell apart, exactly the way the housing markets are behaving now. Back then it was mostly commodities. Make no mistake though, if we prevent deflation and recession right now we will have to deal with more deflation and recession in the eventual future where these methods fail. We can work to ease the transition a little bit with a deep and broad grasp of economics and the work of the smartest economic minds of our time. We're not hiring economists to fix the problem though, we're hiring asshole politicians and their billionare buddies who know how to exploit government intervention for their personal gain and how to run a profitable business and nothing about how to balance an economy. People like Paulson know and care as much about macroeconomics as "Joe Sixpack", they're just a lot better than Joe at exploiting microeconomic bubbles.

 

[Incognitus]

*gasp* The executive branch has lied to congress in order to execute another stunningly massive power grab? Congress was stupid enough to buy it after PATRIOT, Iraq, torturegate, and a barrage of signing statements have proved exactly how much respect this administration has for a representative government or the rule of law? Gee whiz, you guys, I didn't see this coming.

LOL

Seriously? That's a terrible, terrible idea. Printing funny money during economic crises has never been anything but a coup de grace. If you don't believe me, take Zimbabwe or Iceland as a recent example. My personal take is that we should just let this play out and stop trying to interfere; nonaction by the government is looking like a pretty good alternative to the destructive action they've been taking so far.

Even worse is the fact that the Federal Reserve have already been firing up the printing presses above all those crappy Monetarist or Friedmanite suggestions. It's like Clinton raiding the Social Security to balance the books: if you have to do that in the "good times"....

Frankly, The Powers that Be [Retards] are probably very glad they're building police states: It's the only thing that can protect them from the wrath of the people.

I want to see at least one economist* explain to me how any of these plans are supposed to work, or more precisely, what do they think will happen when Chinese workers, now rapidly going unemployed as the Chinese productive economy slows due to lack of demand, begin dipping into their savings. I mean, the phrase "Fiscal Apocalypse" springs to mind.

*I say "economist", but I'd prefer someone who understands what they're talking about.

 

[___]

These plans aren't supposed to work, that's the thing. No sane person involved even thinks they're going to work, especially not the people implementing them. The only hope for us is that they won't make it measurably worse, but what's happening here is people shoring up their own personal defenses against an inevitable recession and buying time to move investments around to places they're going to loose the least. It might rescue a few financial institutions, but even if it keeps them alive in some zombified incarnation their reputation and credit is irreparably damaged - which is one of the big reasons why you don't do this kind of thing, you let the company die.

It's not like the assets just *POOF* disappear, like houses and mortgages are going to suddenly vanish off the face of the planet. All that happens is that solvent investors that have been properly managed buy them up at their proper value and incorporate them into their existing assets, where they can again become valuable and start producing profits. The losses incurred by the transaction are taken by the bad bank, the bank goes bankrupt, and its shareholders lose money according to the difference between the total sale price of their assets and the total debt of the company. In other words, business as usual, some people win, some people loose, the market adjusts itself and we all go on living our lives. People that made poor choices pay for them and (hopefully) adjust their behavior accordingly, thus improving themselves and those who depend on them.

 

[mike669]

An Effective Way to live through the Harsh "winter"-Financial Depression for Foreign Trade Enterprises

Recently I read a lot of articles about "winter is coming", in which many corporations are looking for "cotton-padded jackets" to defend the coldness. Some try to reduce the staff, some process to a brand operation, some shift to the domestic market, while there are some others even carry forward the "Shanzhai Spirit" (Shanzhai, like one of the senses of the word "ghotto" in English-connoting that something is kind of a poorly done, low-class approximation of another thing). So far, I would like to put forward some measures to live through the "winter" for foreign trade enterprises, especially for the CEOs of these companies.

1. To build up your confidence. To our foreign trade members, confidence is the most important thing for what we need at present. It is just an instant phenomenon for the reduction of orders and the less of income. In a long way, our society is progressing and the human is also developing. If winter comes, can spring be far behind? We can not be taken in by those who shouted that "winter is hard to live". Otherwise we will be the substitutes of these people. Anyhow, I believe that so long as we can take some proper measures, we are sure to get through this depressed period. So long as we can persist in, a bright future will be drawing near. Who can run first in the winter, who can run faster.
2. To save money. It's known to all that if we want to be able to survive in this harsh winter for a longer time, we have to try our best to save every penny. Here I would like to recommend Some suggestions for all my fellows.
A. Reduction of personnel is not a wise way for saving money. I find that this way is always the first choice for most managers of foreign trade company. I do think this is quite irresponsible to our employees. These employees have done a lot of contributions and paid their sweat and toil for both the bosses and our companies. While now they are dismissed by our bosses when there's a financial crisis. I think this is not only irresponsible to our employees, but also irresponsible to our society.
B. To own less "girlfriends" for most bosses. Most of the bosses usually affiliate with many girls except their own wife. And they always spend more time with these girls than to the employees in their company. My friend, the person who shares the burden and works with you at the moment is the one who sitting beside the computer and now still trying to explore new clients for you. (This suggestion is for some bosses who have a special habit.)
C. To be care of the "tragedies of preventing winter" from the internet. The person who said that "winter is coming" or those who shouted that they can help you to "live through the winter" are usually the one who intended to get through by your money. Hereby, I'm suspicious of writing this article. Never believe it easily!
Following are some recommendations to save money for my fellows.
a. Check the office rent is higher or not. If an office in the middle of the downtown is just for reputation, you'd better change another cheaper one for a while at the moment. The saved money could be enough for several employees' salaries.
b. Think about the effect of the foreign trade websites you have devoted a lot of money into. If it still didn't bring any profit for you, then you should think about to stop now. Usually the foreign trade promotion websites from internal demand much more money from their fellowmen than to foreigners. It is better to choose some foreign trade websites of high cost performance if you indeed need to get extensions from the websites.
Following are some effective ways for your business extension.http://www.okokchina.com/http://www.sz-wholesale.com/http://www.oneinhundred.com/http://www.wellpromo.com/http://www.mikesearch.com Make sure to be familiar with Skype. Try to use Skype for international phone call as far as possible. In addition, its searching function is also quite useful for finding clients.
To join into some industry associations from Europe and the United States is also a good way. The cost for joining these associations is only around several hundred dollars. And these associations from abroad are indeed aiming to offer help to people. We can establish relations with customers through their help.

3. To make money. This is the most difficult thing to do. Many articles from websites have offered a lot of ways to earn money. I would like also to suggest some of my ideas.
A. Do not try online sales. Which I would like to emphasize here is that online sales will certainly earn some money, but it is very difficult to make money if that is foreign trade. You spend a lot of time and money to set up a website while there is no any sales volume at last. I think that foreign trade companies would better to find a good number of high-level sellers from Taobao (Asia's largest and most secure online trading platform). If you do want to do online sales, then please try to build good relations with these people so that they can be your online sales agents. While you are still acting as doing foreign trade which take charge the goods and the shipping only, and then leave the sales to them. In order to develop end market from abroad, you'd better spend more on Ebay. Try to convince some excellent sellers of Ebay from abroad to help you to sell. In a word, it's better to do your own things which you are good at it. You will feel suppressed if to face real consumers when you have used to foreign trade business.

B. Do not develop emerging markets randomly. We all know that the cost for developing of a new customer is much higher than the cost of maintaining old customers. Your own products in the current foreign market have not yet done so deep penetration, it will cost more to develop new market while you are lack of money. Furthermore, financial crisis is global and its impact is widespread. Thus I would like to recommend that it's better to develop deeper and thorough in the existing market. Also we can try to build business relations with second-class distributors from abroad. We can find these customers through a lot of these foreign industry associations or whole-sale websites.