I wonder what CuteOldGuy, Whirley and Joe Bloe will have to say about his thoughts.
Jack Bogle, the founder of mutual fund giant Vanguard, and the man who popularized index funds, is part of an older generation of financiers, including people like Warren Buffett, who believe in long-term, low-cost investing, paying their taxes, and giving away most of their money. And like many of that generation, he’s worried about how short-term thinking has corrupted the markets and endangering our economic future. His 11th book, “The Clash of Cultures: Investment vs. Speculation,” is a highly critical, numbers-driven look at how Wall Street went wrong, how it’s screwing up both the economy and our retirement prospects, and what we can do to fix things. He spoke with TIME’s Rana Foroohar about the book, and what’s rotten in the markets today.
Q: What would you say to people who claim that higher taxes on capital gains would penalize job creators?
Bogle: That’s absolutely not the case. On page 5 of my book, you can see some numbers showing how only about 1% of money in the market is going to new companies via IPOs and other issuances. 99.2% of it is going to traders.
Q: And what would you say to those who worry that higher taxes on those capitalists, as well as on financial institutions, would make our markets less liquid, and thus less safe and efficient?
Bogle: I’ll tweak a Samuel Johnson quote, and say “Liquidity is the last refuge of the scoundrel.” The fact is that most people in the financial industry, on the left, right, and center, people from Lloyd Blankfein to Mary Shapiro, all say the same thing, which is that the majority of capital should go to business [not to traders].
Q: What’s the best way to deal with speculation, from a policy standpoint?
Bogle: I think you can do a lot with tax policy. Income earned by the sweat of your brow should be taxed at the lowest rates, not the highest. Capital gains should be taxed at a higher rate. You could have a transfer tax on stocks to slow down trading. About 60% of all US stock market investment isn’t even taxed at all, because it comes from pension funds, or endowment funds, or mutual funds, which are either tax exempt or passing on taxes to customers after taking their profits. I think we should also do away with carried interest exemptions for hedge fund managers. They pay the capital gains rate [for their work], not the income tax rate.
So, you’ve got a system in which the richest capitalists are paying the lowest tax rates. That’s just wrong. It should be changed.
Read more:
http://business.time.com/2012/09/19/...#ixzz2745zsLGG
Some Thoughts From The Founder of Mutual Fund Giant Vanguard
