Business owners planning to bail on obama

Discussion in 'Economy' started by Katzndogz, Nov 1, 2012.

  1. Katzndogz
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    Katzndogz Diamond Member

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    Looming Tax Hike Motivates Owners to Sell - WSJ.com

    A looming increase in the capital-gains tax rate next year is fueling sales of some privately-held businesses.

    Many business owners—mostly founders who could gain a lot from a sale—are looking to close deals before next year, when the maximum tax on investment income is scheduled to rise from 15% currently to at least 23.8% on most capital gains, at least for higher-income households. Many sellers intend to convert their equity into retirement funds or just start anew.

    That start anew thing. It won't be in the US.
     
  2. Moonglow
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    Moonglow Diamond Member

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    Nothing new
     
  3. oldfart
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    oldfart Older than dirt

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    Now let me make sure I have this argument straight. An American citizen owning a business in the United States decides he does not want his capital gains rate to increase by 8.8% of the net gain so he or she decides to sell out now before the rates go up. OK so far, he or she saves $88,000 in taxes for every million dollars of long-term capital gain, ceteris parabis.

    Said "job-creator" then decides to invest the proceeds of such sale in another business venture in another country. If this other business venture involves a higher rate of return, would he or she not have made the transfer already, in which case the tax change is not the cause of the move, the differential rate of return is. So assume that the differential rate of return is negative; that he or she would make more money staying with the current investment. How much lower rate of return would make this move unprofitable? Not much it turns out.

    Take an example. The business sold has a selling price of $ one million dollars, a tax basis of zero, and therefore generates a LTCG of a million dollars. At the current tax rate on LTCG this results in a tax of $150,000 leaving $850,000 to reinvest. Suppose the IRR on the existing business is 10% and the ROI of the new project is 9%. After 20 years the investor would have $1,963,751 LESS than if he had not moved his business. In fact moving an investment is never a good idea, for whatever reason, unless the rate of return increases.

    Further, suppose our investor gives up US citizenship. His or her worldwide income remains subject to US income tax for the following ten years. So whatever he or she takes out of the investment is still taxed at US rates for the first ten years.

    I really wonder that the WSJ is either sufficiently ignorant (which I doubt) or craven to put out this kind of obvious wrong bullcrap. You, on the other hand, have the intelligence and integrity to see through the error and reject the nonsensical argument.
     
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  4. uscitizen
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    uscitizen Senior Member

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    Many boomer owners are retiring.
    Someone will be buying their business.
     
  5. EdwardBaiamonte
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    EdwardBaiamonte Gold Member

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    as a liberal you lack the IQ to understand that all business transactions must take place for business reasons, not for liberals to steal money. Business efficiency and economic growth are harmed when liberals interfere to create mal-investments like the mal-investments in housing or Solyndra or A123 Systems that caused and maintain Barry's current depression.

    Now you know why the USSR failed and why Red China switched to capitalism. Isn't learning your ABCs fun??
     

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