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Originally Posted by shanm
Capital gains tax rates could definitely follow the same argument. NO, THEY CAN'T.
You can say that it de-incentivizes investment but that would only be half true. You pretty much DON'T work for your capital gains, you have companies doing that for you. Would it matter to you if you paid a little more tax on something you essentially haven't worked for?
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Stop thinking like a progressive (i.e., engaging in wishful thinking) and think rationally.
Investing is NOT like work.
By and large, work is unavoidable for the vast majority of people, even the wealthy. You have to do it, so government can tax you at 40+% on the high end and there is nothing you can do about it.
On the other hand, investing is entirely elective. No one can force you to sell your property to invest in another property and skim off 50% on the transaction;
Let's pretend the capital gains rate is 50% as you said.
If a new company wants to raise $500M from a billionaire to develop a better solar panel, they have to convince the billionaire to sell $1B of his current holdings, pay half of it to the government and then give them the other half.
The new company, if it is lucky will start turning a profit after about 4 or 5 years. And that assumes it doesn't go broke, like Solyndra and a bunch of other alternative energy companies.
So, in order for the billionaire to get back JUST TO EVEN, the company has to double his original $500M investment within about 5 years so that he gets his original $1B back.
But if he had left the $1B where it was and it had continued to grow in value at a modest 5% rate, then his $1B would be more than $1.25 billion.
So, realistically, his $500 million has to grow to $1.25 billion within about 5 years, just to get the billionaire back to even.
But the investment could turn to ZERO if the company doesn't work out (like Solyndra).
So, why would he make that investment? The return would have to be MUCH higher than $1.25 billion to offset the risk of loss.
But the odds of getting back his original $1 billion (or getting to $1.25B) is a lot better if the capital gains rate is only 20% instead of 50%.
That is why high capital gains taxes can kill economic growth. If the new company isn't created in the first place, then there are no jobs or tax revenues of any kind.
But just as new billionaires are made all the time, old billionaires die all the time. And when they do, THEN you can take 60% or 80% or 95% of all of their estate over and above the first X dollars.
In the end, the government gets the tax money anyhow, but it does so without killing off the incentive to invest and take risks.
Quote:
Originally Posted by shanm
And when you say big government, you have to define it properly. You say that there are these "too big to fail" companies...well, only by government overreach will we be able to take down these companies. Government just needs to be big in the right places.
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No, you don't have to define it properly, because you CAN'T.
It is the ego of progressives that makes them think that they know what is the right place for government to be big and what is not the right place for it to be big. NO ONE has that much knowledge. Definitely NOT Barack Obama, or Hillary, or Warren or Sanders.
You don't need a big bureaucracy to prevent mergers (or take down the big companies). You simply don't allow them to merge. And you don't allow the big investment banks to expand into new areas they did not previously operate in, like housing loans.
And you don't underwrite housing loans, like with Fannie Mae and Freddie Mac.
Just break the big banks and investment houses into a lot of smaller ones that operate in segregated markets so the fire can't spread from one division to another.
And once the banks are no longer too big to fail, DO NOT bail them out. Send a message to all the other banks that they are on their own for their risky investments.
You don't need a big government to stop companies from replacing American workers with foreign workers. You simply SHUT DOWN the H1B visa program because it is horribly corrupt and always will be. No need to pay any lobbyists to tell you what the "right" level of foreign engineers is to provide skills Americans don't have, because that is pure bullshit. American workers HAVE the necessary skills, they just want more pay than their foreign replacements.
You don't need a big government to decide where we need to intervene in foreign countries, you just reduce our military substantially and stay OUT of other countries, especially Muslim ones. It is far cheaper to pick the least evil faction and sell them weapons to eradicate the jihadists.
Interesting rant by Gary Hart.
