Post by blueneck on Apr 14, 2008 17:59:11 GMT -6
Just who is this economic charlatan raymond keating anyway ?- again no real economics to back up his supply side talking points.
we already have the lowest capital gains taxes in our country's history - yet we are tetering on financial collapse of great depression proportions.
The problem is that the capital is not reinvested back into the US labor, infrasturcture or equipment, but invested offshore or squrreled away. If the wealthy want more tax cuts than they already get the there should be major strings attached
Obama Wants to Hike the Capital Gains Tax
by Raymond J. Keating
U.S. Senator Barack Obama (IL) is the frontrunner for the Democratic Party's presidential nomination. Unfortunately, he also has called for some economically destructive tax increases.
For example, Obama stands willing to increase the top personal income tax rate from 35% to 39.6%. The dividend tax rate also would rise under an Obama presidency, as would the capital gains tax.
None of this is good news for entrepreneurs, investors or the U.S. economy in general. But let's focus on the capital gains tax here.
Over the past several months, Obama has not been shy in expressing his willingness to increase the capital gains tax. Specifically, the Illinois senator has said that he favors raising the tax rate from the current level of 15% to between 20% and 25%, or even as high as 28%.
Does Senator Obama understand the impact of such a tax hike? Apparently not. According to a recent CNBC interview, Obama is asking people like Warren Buffet - who seems to favor all kinds of tax increases - if a higher capital gains tax would "distort ... economic decision making." Apparently, Mr. Buffet doesn't think a higher capital gains tax matters very much. Perhaps it doesn't matter to the so-called Oracle of Omaha, but it certainly does to others and to the nation's overall economic well-being.
It's really simple, straightforward economics.
Capital gains taxes have a major impact on the economy because they directly affect the returns on and incentives for investing and entrepreneurship. Investing and entrepreneurship are the high-risk undertakings that drive the economy forward. Raise the tax, and you diminish potential returns and wind up with less economic risk taking.
It also must be recalled that since capital gains are not indexed, inflation raises the real, effective capital gains tax rate. For example, using returns for the S&P 500, a $1,000 investment made at the end of 2003 would be sold for $1,307 at the end of 2007. With inflation averaging 3.3 percent a year over that period, while the nominal capital gains tax rate was 15%, the real capital gains tax rate jumped to 25.7%. At a 4 percent annual inflation, the real tax rate would be 39.3%. And at 4.8%, the real rate hits 55.4%.
Obviously, increasing the nominal tax rate means increasing the real, effective tax rate as well. And given the Federal Reserve's rather poor performance on the inflation front of late, investors and entrepreneurs could be in for a rather dire double hit on the real capital gains tax rate.
There are additional points to consider regarding a potential capital gains tax hike. The competition for capital, of course, is a global phenomenon. So, while some nations that we are competing with do not tax capital gains at all - such as German, Switzerland, Austria and New Zealand, according to the Wall Street Journal - Senator Obama is talking about raising the U.S. tax rate.
In addition, Obama is proposing a higher capital gains tax in order to pay for more government spending and other tax breaks. But as history shows, a higher capital gains tax rate often translates into a reduction in capital gains realizations, and therefore less tax revenue to the government. That was the case with the capital gains tax increase in the 1986 tax reform, while capital gains tax cuts in 1997 and 2003 actually resulted in higher capital gains tax revenues.
For good measure, no one escapes the negative fallout from a capital gains tax increase. Less capital investment and entrepreneurship mean slower economic growth and reduced job creation. In addition, through 401ks and mutual funds, this is now, more than ever before, a nation of investors. All investors are impacted by how capital gains taxes affect economic decision-making and growth.
So, Senator Obama wants to know if a higher capital gains tax distorts economic decisions. His advisers most certainly are wrong, as basic economic common sense makes clear that a higher capital gains tax is bad economic policy.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council
www.sbsc.org/news/display.cfm?ID=2648
No Sir, Obama's advisors are right on this one
we already have the lowest capital gains taxes in our country's history - yet we are tetering on financial collapse of great depression proportions.
The problem is that the capital is not reinvested back into the US labor, infrasturcture or equipment, but invested offshore or squrreled away. If the wealthy want more tax cuts than they already get the there should be major strings attached
Obama Wants to Hike the Capital Gains Tax
by Raymond J. Keating
U.S. Senator Barack Obama (IL) is the frontrunner for the Democratic Party's presidential nomination. Unfortunately, he also has called for some economically destructive tax increases.
For example, Obama stands willing to increase the top personal income tax rate from 35% to 39.6%. The dividend tax rate also would rise under an Obama presidency, as would the capital gains tax.
None of this is good news for entrepreneurs, investors or the U.S. economy in general. But let's focus on the capital gains tax here.
Over the past several months, Obama has not been shy in expressing his willingness to increase the capital gains tax. Specifically, the Illinois senator has said that he favors raising the tax rate from the current level of 15% to between 20% and 25%, or even as high as 28%.
Does Senator Obama understand the impact of such a tax hike? Apparently not. According to a recent CNBC interview, Obama is asking people like Warren Buffet - who seems to favor all kinds of tax increases - if a higher capital gains tax would "distort ... economic decision making." Apparently, Mr. Buffet doesn't think a higher capital gains tax matters very much. Perhaps it doesn't matter to the so-called Oracle of Omaha, but it certainly does to others and to the nation's overall economic well-being.
It's really simple, straightforward economics.
Capital gains taxes have a major impact on the economy because they directly affect the returns on and incentives for investing and entrepreneurship. Investing and entrepreneurship are the high-risk undertakings that drive the economy forward. Raise the tax, and you diminish potential returns and wind up with less economic risk taking.
It also must be recalled that since capital gains are not indexed, inflation raises the real, effective capital gains tax rate. For example, using returns for the S&P 500, a $1,000 investment made at the end of 2003 would be sold for $1,307 at the end of 2007. With inflation averaging 3.3 percent a year over that period, while the nominal capital gains tax rate was 15%, the real capital gains tax rate jumped to 25.7%. At a 4 percent annual inflation, the real tax rate would be 39.3%. And at 4.8%, the real rate hits 55.4%.
Obviously, increasing the nominal tax rate means increasing the real, effective tax rate as well. And given the Federal Reserve's rather poor performance on the inflation front of late, investors and entrepreneurs could be in for a rather dire double hit on the real capital gains tax rate.
There are additional points to consider regarding a potential capital gains tax hike. The competition for capital, of course, is a global phenomenon. So, while some nations that we are competing with do not tax capital gains at all - such as German, Switzerland, Austria and New Zealand, according to the Wall Street Journal - Senator Obama is talking about raising the U.S. tax rate.
In addition, Obama is proposing a higher capital gains tax in order to pay for more government spending and other tax breaks. But as history shows, a higher capital gains tax rate often translates into a reduction in capital gains realizations, and therefore less tax revenue to the government. That was the case with the capital gains tax increase in the 1986 tax reform, while capital gains tax cuts in 1997 and 2003 actually resulted in higher capital gains tax revenues.
For good measure, no one escapes the negative fallout from a capital gains tax increase. Less capital investment and entrepreneurship mean slower economic growth and reduced job creation. In addition, through 401ks and mutual funds, this is now, more than ever before, a nation of investors. All investors are impacted by how capital gains taxes affect economic decision-making and growth.
So, Senator Obama wants to know if a higher capital gains tax distorts economic decisions. His advisers most certainly are wrong, as basic economic common sense makes clear that a higher capital gains tax is bad economic policy.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council
www.sbsc.org/news/display.cfm?ID=2648
No Sir, Obama's advisors are right on this one