Why Capital Gains cuts my cost jobs

[The Rabbi]

Therein lies the contradiction of the op. The premise is that it's better to invest overseas, so they will use the tax code to prevent people from selling their US assets so they won't be taxed. Which is absurd other then as a temporary short term measure. In the long run, if overseas is better, the money will go there. We need to stop using the tax code to punish US companies, that will create jobs.

No the premise is the average investor is massively under-invested in overseas markets based on both the Harvard Portfolio and the foreign markets share. By eliminating capital gains tax, US investors will move massively to balance their portfolio since any friction will be gone. The result will be a disaster for US jobs.

If you really want to help US companies and grow jobs you would raise the capital gains tax to the level of the personal income tax and you would reduce Corporate income taxes by an equal amount.

Strangling movement of capital is not the way to produce more jobs. Making the climate here congenial for investing and working is.
If anyone were stupid enough to do what you suggest you would see stagnating industries producing meagre returns, often bailed out with taxpayer money. E.g. France.
I dont want to see us become France.

 

[Sactowndog]

The US markets over the last decade have been relatively flat. That has not been the case in emerging markets. By no measures has returns been the same.

You are measuring returns by the DJIA or S&P. That isn't the kind of investment anyone is talking about. Look at foreign investment in companies, factories, and facilities here and it tells a different story.

I am talking about US markets versus foreign markets and debt instruments.

 

[The Rabbi]

You are measuring returns by the DJIA or S&P. That isn't the kind of investment anyone is talking about. Look at foreign investment in companies, factories, and facilities here and it tells a different story.

I am talking about US markets versus foreign markets and debt instruments.

How are you measuring returns on US markets?

 

[Sactowndog]

Strangling movement of capital is not the way to produce more jobs. Making the climate here congenial for investing and working is.
If anyone were stupid enough to do what you suggest you would see stagnating industries producing meagre returns, often bailed out with taxpayer money. E.g. France.
I dont want to see us become France.

Captial gains have been historically at the rate of income taxes for many years and it didn't cause the strangling you predict earlier.

The positive effects of the reduction of the corporate income tax would far outweigh the negative effects of raising the capital gains tax.

 

[The Rabbi]

Captial gains have been historically at the rate of income taxes for many years and it didn't cause the strangling you predict earlier.

The positive effects of the reduction of the corporate income tax would far outweigh the negative effects of raising the capital gains tax.

No actually that was later, under Clinton.
Weren't you the one pointing out returns have been low over the last 10-20 years? Ithink you've figured out why.

 

[bripat9643]

No my basic argument is when you reduce the capital gains tax it will cause portfolio investment to shift overseas and will increase the rate of labor arbitrage plays both will cause US jobs to decline.

I yes I did quite well in Econ and Finance.

Why would a lower capital gains rate cause investors to shift their funds overseas?

 

[The Rabbi]

No my basic argument is when you reduce the capital gains tax it will cause portfolio investment to shift overseas and will increase the rate of labor arbitrage plays both will cause US jobs to decline.

I yes I did quite well in Econ and Finance.

Why would a lower capital gains rate cause investors to shift their funds overseas?

The aergument is that it would unlock capital, which would be free to move to places of better return. And these historically have been overseas. Greek municipal bonds and Portugese general obligations, etc

The argument is flawed in any number of ways. It runs afoul of the most basic tenet of classical liberalism (now conservatism): free movement of labor and capital.

 

[Sactowndog]

No my basic argument is when you reduce the capital gains tax it will cause portfolio investment to shift overseas and will increase the rate of labor arbitrage plays both will cause US jobs to decline.

I yes I did quite well in Econ and Finance.

Why would a lower capital gains rate cause investors to shift their funds overseas?

The aergument is that it would unlock capital, which would be free to move to places of better return. And these historically have been overseas. Greek municipal bonds and Portugese general obligations, etc

The argument is flawed in any number of ways. It runs afoul of the most basic tenet of classical liberalism (now conservatism): free movement of labor and capital.

Actually it would move merely to accomplish greater diversification.

And it does run afoul of the most basic tenet of conservatism which has proven to be an abject failure at creating US jobs in an international economy. Especially when the other countries aren't playing by the same rules and actually care about jobs for their citizens.

 

[The Rabbi]

Why would a lower capital gains rate cause investors to shift their funds overseas?

The aergument is that it would unlock capital, which would be free to move to places of better return. And these historically have been overseas. Greek municipal bonds and Portugese general obligations, etc

The argument is flawed in any number of ways. It runs afoul of the most basic tenet of classical liberalism (now conservatism): free movement of labor and capital.

Actually it would move merely to accomplish greater diversification.

And it does run afoul of the most basic tenet of conservatism which has proven to be an abject failure at creating US jobs in an international economy. Especially when the other countries aren't playing by the same rules and actually care about jobs for their citizens.

During the Reagan/Bush years the US created more new jobs than the country of Germany has. For most of the 21st century the jobless rate was well under 6%.
But keep peddling that sack of shit. Maybe someone will mistake it for shinola.

 

[Sactowndog]

During the Reagan/Bush years the US created more new jobs than the country of Germany has. For most of the 21st century the jobless rate was well under 6%.
But keep peddling that sack of shit. Maybe someone will mistake it for shinola.

During the Reagan years virtually nobody invested overseas. All investment was virtually 100% domestic. In the 1980's an overseas telephone call cost 25 cents a minute and can now be done for a fraction of a penny.

The whole world has moved to an international paradigm except you and other Republican conservatives who are still stuck in a 1980 world that doesn't exist any longer.

 

[The Rabbi]

During the Reagan years virtually nobody invested overseas. All investment was virtually 100% domestic. In the 1980's an overseas telephone call cost 25 cents a minute and can now be done for a fraction of a penny.

The whole world has moved to an international paradigm except you and other Republican conservatives who are still stuck in a 1980 world that doesn't exist any longer.

Simply untrue. There was plenty of overseas investment going on.
And you conveniently ignore the fact that unemployment was under 6% for most of the Bush years, after NAFTA.

 

[The Rabbi]

Your argument is a failure, a sad travesty of economics, which I suspect you never took.

 

[mudwhistle]

Smaller govt means Capitol loss.

Ha, ha.

No dummy.

Smaller government leads to less debt.

 

[mudwhistle]

The primary damage taking place to the economy is new ridiculous governmental regulations, many that are just now being put in place.

The damage and the extra expense is going to be immense.

Capital gains is small-change compared to this.

The job losses are going to be unbelievable, thanks to Cass Sunstein's new regulations.

 

[kaz]

No my basic argument is when you reduce the capital gains tax it will cause portfolio investment to shift overseas and will increase the rate of labor arbitrage plays both will cause US jobs to decline.

I yes I did quite well in Econ and Finance.

Well, that's because you didn't make arguments like this when you did it. The Rabbi was correct, your basic argument is more efficient use of capital will result in less economic activity and it's ignorant. I don't have to have a degree in Finance to know that, I just have to not be an idiot. Though bonus, I do have an MBA, I'm in the Financial Management Honor Fraternity for my Finance grades and I spent a good chunk of my career in finance. You lose on logic, but if you want to trot out degrees I'm game as well.

If the more efficient use of capital by eliminating capital gains causes the average investor to disinvest in US equities and bonds and shift to foreign equities and bonds, what happens to demand? Demand falls.

As demand falls because capital has left the US market, US stock prices fall and interest rates rise. Both of these things would be damaging to the US jobs market.

If you truely are in the financial management Honor Fraternity you should be able to figure this out.

Here is the difference, for me this topic is logic and for you it's religion. There is no way you've ever taken a finance class. I just specifically addressed this. And the answer as I told you is to stop punishing companies with the highest taxes in the Western world. Your solution of not addressing that but trying to tax people for taking their money out seeking a better investment is DOA to a critical mind.

Liberalism, wow. Socialism is the magic elixir, it's more capitalist then capitalism. Problem is we keep following your path more and more and the economy gets worse and worse. If it's the magic cure all, why can't it cure anything?

 

[8537]

I'm unclear as to what you mean. Maybe you can explain it a little.

If I bought gold in 1990 at $300/oz and sell it at 1500/oz that is certainly a capital gain. Now, some of that will be due to inflation. In some cases all "gain" is really illusory because of inflation.
But are you going to argue that I should pay no tax whatsoever on that gain? Or maybe average it over the time held? What do suggest?

I'm arguing that it's income to you and should get lumped in with the income you earn digging ditches.

OK, 2 problems. The first is the inflation issue, as mentioned. The second is that is hurts capital formation, which ought to be a priority.

I agree completely with your first point. Capital gains taxes need to be indexed to some base inflation level.

On the 2nd - while the capital gains tax may hurt capital formation, it's just as true that the income and payroll taxes hurt capital formation.

 

[8537]

Well, that's because you didn't make arguments like this when you did it. The Rabbi was correct, your basic argument is more efficient use of capital will result in less economic activity and it's ignorant. I don't have to have a degree in Finance to know that, I just have to not be an idiot. Though bonus, I do have an MBA, I'm in the Financial Management Honor Fraternity for my Finance grades and I spent a good chunk of my career in finance. You lose on logic, but if you want to trot out degrees I'm game as well.

If the more efficient use of capital by eliminating capital gains causes the average investor to disinvest in US equities and bonds and shift to foreign equities and bonds, what happens to demand? Demand falls.

As demand falls because capital has left the US market, US stock prices fall and interest rates rise. Both of these things would be damaging to the US jobs market.

If you truely are in the financial management Honor Fraternity you should be able to figure this out.

Here is the difference, for me this topic is logic and for you it's religion. There is no way you've ever taken a finance class. I just specifically addressed this. And the answer as I told you is to stop punishing companies with the highest taxes in the Western world. Your solution of not addressing that but trying to tax people for taking their money out seeking a better investment is DOA to a critical mind.

Liberalism, wow. Socialism is the magic elixir, it's more capitalist then capitalism. Problem is we keep following your path more and more and the economy gets worse and worse. If it's the magic cure all, why can't it cure anything?

We don't have the highest taxes in the Western world. We happen to have one of the highest marginal rates, but effective rates (actual paymens) are quite low compared to most of the Western world.

 

[The Rabbi]

I'm arguing that it's income to you and should get lumped in with the income you earn digging ditches.

OK, 2 problems. The first is the inflation issue, as mentioned. The second is that is hurts capital formation, which ought to be a priority.

I agree completely with your first point. Capital gains taxes need to be indexed to some base inflation level.

On the 2nd - while the capital gains tax may hurt capital formation, it's just as true that the income and payroll taxes hurt capital formation.

So why aren't you in favor of lowering them?

 

[mudwhistle]

If the more efficient use of capital by eliminating capital gains causes the average investor to disinvest in US equities and bonds and shift to foreign equities and bonds, what happens to demand? Demand falls.

As demand falls because capital has left the US market, US stock prices fall and interest rates rise. Both of these things would be damaging to the US jobs market.

If you truely are in the financial management Honor Fraternity you should be able to figure this out.

Here is the difference, for me this topic is logic and for you it's religion. There is no way you've ever taken a finance class. I just specifically addressed this. And the answer as I told you is to stop punishing companies with the highest taxes in the Western world. Your solution of not addressing that but trying to tax people for taking their money out seeking a better investment is DOA to a critical mind.

Liberalism, wow. Socialism is the magic elixir, it's more capitalist then capitalism. Problem is we keep following your path more and more and the economy gets worse and worse. If it's the magic cure all, why can't it cure anything?

We don't have the highest taxes in the Western world. We happen to have one of the highest marginal rates, but effective rates (actual paymens) are quite low compared to most of the Western world.

Link please.

Explain the difference in your own words.

 

[8537]

OK, 2 problems. The first is the inflation issue, as mentioned. The second is that is hurts capital formation, which ought to be a priority.

I agree completely with your first point. Capital gains taxes need to be indexed to some base inflation level.

On the 2nd - while the capital gains tax may hurt capital formation, it's just as true that the income and payroll taxes hurt capital formation.

So why aren't you in favor of lowering them?

In favor of lowering what?