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Post by judes on Nov 2, 2008 10:30:59 GMT -6
I have a question I was hoping someone with more knowledge then myself can help clear up. I just saw Obama being interviewed on tv where he said he may raise capital gains to 20% (from the current 15%). Then the interviewer said wouldn't that hurt some middle income workers in their 401k plans? Ok, my understanding is that 401k gains are treated as income and taxed as such when withdrawn, and they are not treated as capital gains. Can anyone else confirm this or am I missing something? Then the next question is how is that fair that they aren't treated as capital gains, at least in some portion, and are taxed as income, while hedge fund managers are making a killing on their investments and only paying a 15% capital gains tax. Again this seems like backwards tax policy.
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Post by graybeard on Nov 2, 2008 11:19:47 GMT -6
You got it, Judes. Any withdrawal from a 401K/IRA contributed with pre-tax dollars is taxed as simple income; no lower capital gains rate, even though most of the value might have derived from gains, in addition to contributions.
Nobody has given me a convincing argument why earnings from investing money should be taxed at a lower rate than earning money from sweat. Obama has promised to fix that.
All I have heard is the trickle down excuse. What we need is trickle-up economics.
McPain is railing against more taxes on the rich, but his hero, Teddy Roosevelt, a very rich man, started the progressive income tax.
GB
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Post by judes on Nov 2, 2008 11:47:40 GMT -6
Thanks for the help graybeard. I can't seem to find a convincing argument either. I mean if trickle down economics worked so good, how in the heck did we end up in this mess we are in now? When do they finally admit defeat, how much more proof is needed to show that economic rewards are not flowing down to the people working their asses off to keep this country functioning. More corporations have moved overseas and invested overseas since the Bush tax cuts for the rich were implemented. I thought tax cuts for corporations and the wealthy were supposed to create jobs, what happened?
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Post by judes on Nov 2, 2008 12:30:31 GMT -6
And I just realized another inconsistency in a 401k plan, you can not deduct losses from your tax liability, like you can on other capital losses, like hedge fund managers do.
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Post by graybeard on Nov 2, 2008 15:03:50 GMT -6
The pre-tax IRA was never intended to help the saver, but Wall Street, and then the govt. It's a pact with the devil. Wall Street or the govt get to use your money until you withdraw it, and you won't withdraw it until really needed, as then you lose 1/4-1/2 of it in taxes.
Yeh, I got suckered into the pre-tax IRA 30 years ago, or whenever it started.
GB
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Post by nieguy on Mar 4, 2010 1:02:50 GMT -6
Nobody has given me a convincing argument why earnings from investing money should be taxed at a lower rate than earning money from sweat. Obama has promised to fix that. All I have heard is the trickle down excuse. What we need is trickle-up economics. Here is one: investment capital is highly mobile and more productive than "sweat" income. Lower rates for capital gains incentivize investment in entrepreneurial activity. The problem with trickle-up economics is that you end up choking those who have the means to facilitate production and growth. Auto workers are not going to lay down the capital to throw a factory together. Once you get too progressive, you end up shooting yourself in the foot. In this day and age when capital is so mobile, those with the resources for large-scale production are going to move to more favorable economic environments.
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Post by agito on Mar 4, 2010 18:47:06 GMT -6
hope you stick around nieguy, but you're going to have to do better than that in your arguments.
people don't move their based on taxation, they move it based on oppurtunity for growth.
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Post by nieguy on Mar 5, 2010 3:26:00 GMT -6
And you think the two are unrelated?
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Post by unlawflcombatnt on Mar 5, 2010 16:04:11 GMT -6
Assuming the same total amount of taxes will ultimately be collected, reducing capital gains taxes means raising them somewhere else. That somewhere else will be on lower income earners, who are the prime source of production demand. Shifting the tax burden downward on to the demand creators, and away from investors, reduces the production demand that creates investment demand.
At the current time, the economy is suffering a huge decline in production demand, due to massive unemployment, wage stagnation, and consumer credit contraction.
The current lack of lending, and any reduced investment, is due to lack of demand for the production that investment would facilitate. In other words, the lack of lending--and the lack of productive investment--is due to the lack of demand, not from lack of "supply."
Yes, there is a lack of incentive to invest--from the lack of consumer spending power that exists at present. Reducing taxes on investors is not going to help any in this case. And if it comes at the expense of higher taxes on non-investor consumers, it will REDUCE investment incentive.
The huge amount of $$ flowing into stocks and bonds at present suggest more than ample capital. In contrast, most evidence indicates consumer spending is weak.
It's not the investors who need help. It's the demand creators--the consumers.
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