Reducing Capital Gain for S.B. Should Bring Tears Of Sorrow To Americans’ Eyes

[JimofPennsylvan]

It has been reported that President Obama in his State of the Union Address will propose the initiative to lower the capital gain’s tax for small businesses in the hope to create jobs because small business are America’s biggest job creators. This is a super stupid, super dumb and super foolhardy decision because it will be very expensive to the Federal government, create few jobs and these monies could be used in a thousand times better manner to create jobs. It deserves to be said that the White House’s plan to give small businesses a tax credit for every genuine new job they create is a home run as well as is their plan to continue the accelerated depreciation allowances for capital expenditures by businesses.

The problem with this capital gains tax idea is the problem with many ideas often proposed in the political arena which is the practical effect won’t meet the theoretical effect. The theoretical rationale for the capital gain’s tax reduction for small business is that American investors or even Americans toying with the idea of starting a business when they hear, for sake of argument, that lets say the Federal Government will lower the capital gain’s tax rate to zero they will be motivated to invest money in or start small businesses because when they sell this investment they won’t have to pay any tax on the profit which is very appealing and by making this investment or starting this small business jobs will be created to fulfill these small businesses staffing needs. The problem with this theory is that investors or people interested in investing in or starting a business where a significant number of jobs will be created know that they will need to invest in the business for a medium or long length of time in order for them to increase the value of the business where they can sell it and recognize a good capital gain and regardless of what the politicians say by that sale time the capital gain’s tax will have returned to the higher level or gone to twenty or twenty-five percent (many American’s hope for the permanent capital gain’s tax rate) because long-term America needs to increase tax revenue to balance the budget and hopefully reduce the national debt (to bring the debt into historic levels in relation to GDP) – these budget and national debt concerns are of untrumpable importance long-term. Therefore, since this capital gain’s tax reduction will almost certainly only be short-term its job creating effect will be minimal.

To what should be for all good Americans’ alarm what will likely happen from this capital gain’s tax reduction is that widespread throughout America investors and business owners will sell their investments and businesses to take advantage of this once in a life time opportunity for a super low or zero tax rate and the American people will lose shocking amounts of money compared to what they could have gotten long-term if the capital gain’s tax rate was left untouched. Moreover, like what often happens when the federal government creates a tax advantage in the tax code, tax and investment professionals will exploit it and create capital gain tax shelters where investors can realize income short-term which will result in mostly wealth Americans getting a financial windfall at the expense of America’s treasury.

What the White House should do if it wants to spur significant job creation from small businesses is listen to the experiences of small business owners that comes right out of their mouths. Many small business owners say and it really has the ring of truth to it is that if they could get a break on their health insurance costs they could use that savings to hire one or a couple or a few more workers and/or they could in some other way expand their business in a way that would create job growth. Why doesn’t the White House propose giving small businesses a tax credit for one-third of their costs for health insurance for their employees and commit to this tax credit for five years so it makes sense for small business to make a long-term investment in a new employee. And so wrongful outcomes don’t occur where people that don’t deserve the tax break get it, why doesn’t the Federal government limit the tax break so that businesses where an employee earns over $200,000 dollars per year the business doesn’t get a tax credit for that employee’s health insurance premium costs and if the small business has a net income (that is their gross income minus their expenses) exceeds ten million dollars per year they are not eligible for this tax credit. Just think of the potential of this tax credit. Let us say a small business has fifteen employees and provides health insurance for those employees and that business’s health insurance cost per employee is say $6000/year a reasonable number, this tax credit would provide that small business with an additional thirty thousand dollars per year that is a yearly salary for many workers. The American people are tired of promises they want results on creating jobs and this health insurance tax credit idea will deliver!

 

[Baruch Menachem]

I don't see how a small business can benefit from this, either. It is one more 0bama shell game, offering a tax break to someone who can't use it. It is not quite so stupid as passing out pregnancy test kits on the Castro... But it is getting close.

 

[Oddball]

Total shell game form the Chicago Shyster.

Small bidnesses derive their primary incomes from profits, not cap gains.

 

[Toro]

Lower capital gains taxes are good for capital formation and investment but do virtually nothing in the near-term.

 

[Baruch Menachem]

While in general I think Capital Gains taxes are counterproductive (they don't raise enough revenue to justify arguing about them, and the costs they impose are way too heavy) I think the way 0bama worked this is typical. He is giving away a tax benefit to those who can't and won't use it. That way he can say he is doing a favor for the middle class, but the actual gain to anyone else is less than nothing.

 

[Vast LWC]

What about venture capital investments in smaller startup companies?

How about returns on investments in small companies that need capital to expand?

Far be it from me to encourage further decreases in Capital Gains taxes, but at least this would do what such reductions are supposed to do, rather than rewarding giant corporations for outsourcing half their workforce to India.

If it were up to me, I would INCREASE Capital Gains taxes on large companies, rather than decrease those on small companies, but that's just me.

 

[Baruch Menachem]

I would eliminate the tax altogether. But this is just a shell game. Venture Capital is encouraged and makes money on capital gains, but venture capital is not small business.

Small business is 10 guys in a shop building stuff, or a small restaurant. or a gas station. There are no capital gains there.

This is just bait and switch.

 

[MaggieMae]

Lower capital gains taxes are good for capital formation and investment but do virtually nothing in the near-term.

I hadn't heard he was going to propose that in any event. What I have heard is that he will extend the tax credit for new investments in business equipment and expansion.

But I do think it's fascinating that less than a year ago when there was debate over Obama even suggested tinkering with capital gains, there was such an uproar from the right you would have thought it was a death knell for small businesses. Now that there's a hint that Obama might lower the capital gains tax to help small businesses, there is an... uproar from the right. Go figure.

 

[MaggieMae]

I would eliminate the tax altogether. But this is just a shell game. Venture Capital is encouraged and makes money on capital gains, but venture capital is not small business.

Small business is 10 guys in a shop building stuff, or a small restaurant. or a gas station. There are no capital gains there.

This is just bait and switch.

There are a number of methodologies determining what constitutes a "small business," and the number of employees is just one of them.

 

[Vast LWC]

I would eliminate the tax altogether. But this is just a shell game. Venture Capital is encouraged and makes money on capital gains, but venture capital is not small business.

Small business is 10 guys in a shop building stuff, or a small restaurant. or a gas station. There are no capital gains there.

This is just bait and switch.

Yes, but small businesses often form BECAUSE of venture capital.

Thus, if it is more profitable for venture capital to invest in small businesses, they will tend to do so, creating more small businesses.

 

[Vast LWC]

Lower capital gains taxes are good for capital formation and investment but do virtually nothing in the near-term.

I hadn't heard he was going to propose that in any event. What I have heard is that he will extend the tax credit for new investments in business equipment and expansion.

But I do think it's fascinating that less than a year ago when there was debate over Obama even suggested tinkering with capital gains, there was such an uproar from the right you would have thought it was a death knell for small businesses. Now that there's a hint that Obama might lower the capital gains tax to help small businesses, there is an... uproar from the right. Go figure.

It's always the same. I'm really tired of the partisan bickering, it's killing the country.

Let's take the deficit for instance.

If Obama does nothing about the deficit, he gets attacked for the size of it, which of course was pretty much the same before he got into office as it is now.

If Obama raises taxes to help pay the deficit, he gets attacked for that.

If Obama cuts programs to help the deficit, he gets attacked for that.

It's a no-win situation with these people, they'll just jump on anything the Democrats do, or don't do.

But of course, the situation is often nearly the same when Democrats are in power, but it is just a bit more pronounced with the current minority crop than usual.

 

[Oddball]

What about venture capital investments in smaller startup companies?

How about returns on investments in small companies that need capital to expand?

That comes from and goes to those eeeeevviiilll rich people, that witless ignorant leftists demonize and tear down.

In any case, the guy running the business at street level still makes his way with profits.

 

[Vast LWC]

That comes from and goes to those eeeeevviiilll rich people, that witless ignorant leftists demonize and tear down.

In any case, the guy running the business at street level still makes his way with profits.

Now, now, I don't think rich people are evil... I just think right-wingers are.

Kidding, I kid the right wingers. You're all not really evil, just misinformed. LOL.

 

[Oddball]

Speaking of misinformed, you seem to be oblivious of how businesses are built and taxed.

 

[Vast LWC]

So, Venture Capitalists don't provide money for start-ups?

Or is it that capital gains from such start-ups wouldn't be considered to be from "small businesses"?

 

[Toro]

What about venture capital investments in smaller startup companies?

How about returns on investments in small companies that need capital to expand?

Far be it from me to encourage further decreases in Capital Gains taxes, but at least this would do what such reductions are supposed to do, rather than rewarding giant corporations for outsourcing half their workforce to India.

If it were up to me, I would INCREASE Capital Gains taxes on large companies, rather than decrease those on small companies, but that's just me.

There's too much venture capital now. Venture capital returns have been atrocious the past ten years. In only two years of the past ten, I believe, has venture capital made a profit.