Tax cuts

[Crazy Cooter]

http://www.msnbc.msn.com/id/10385222/

The "need" for the investment tax-breaks just don't make sense to me.  Income should be income.  I thought we were moving towards an easier way to do this tax-crap anyhow?

I can't believe it's almost that time of year again...

[Samstag]

The point behind lower rates for capital gains is that it works as an incentive to keep money invested in business, at least for a longer term.  Without going into details of economics, the overall effect is a more stable economy.

So while it may not seem to benefit you directly, it does tend to keep your employer from laying you off during market scares.

[duffjr]

that only works when investment is low.

[Crazy Cooter]

How does low capital gain taxes keep money in a business?  IMO, it makes it more attractive to take out because you're not paying "full" taxes on it.  I don't see how dividends on an individuals income tax keeps anyone from being laid off?  Of the business owners & investors in my family, I know for a fact very little of that money is going back into the economy.  It's all being put into non-US investments for retirement purposes.  I'm sure a small percentage will go into the economy for a new TV here and there, but some of those companies are non-US as well.

Capital gains is a joke too, ideally, a company isn't *supposed* to have any.  They are supposed to be reinvesting into the company, not pocketing money (that gets distributed as dividends).

There's a big issue looming on the horizon regarding our spending.  Take a look at this:
http://www.federalreserve.gov/releases/bulletin/1105assets.htm
Notice the steady decline of the assets of the Federal Reserve?  We've lost 10% of it's worth since 2002.  Our SDR's haven't kept up with the declining value of the dollar because coutries are moving away from our currency.  Also, look at the total assets of the Federal Reserve during the recession of 2000-2001.  That's when it dipped below 70 billion.  Right now we're at... 70 billion.

We need to stop spending.  That means no tax cuts.  Unless there's a strategy at play that I'm not aware of?

[ChadTower]

It's another way to cut taxes for the upper class.  Very few people at or below the middle class ever have much in the way of capital gains.

[Hoopz]

How does low capital gain taxes keep money in a business? IMO, it makes it more attractive to take out because you're not paying "full" taxes on it. I don't see how dividends on an individuals income tax keeps anyone from being laid off? Of the business owners & investors in my family, I know for a fact very little of that money is going back into the economy. It's all being put into non-US investments for retirement purposes. I'm sure a small percentage will go into the economy for a new TV here and there, but some of those companies are non-US as well.

Capital gains is a joke too, ideally, a company isn't *supposed* to have any. They are supposed to be reinvesting into the company, not pocketing money (that gets distributed as dividends).

There's a big issue looming on the horizon regarding our spending. Take a look at this:
http://www.federalreserve.gov/releases/bulletin/1105assets.htm
Notice the steady decline of the assets of the Federal Reserve? We've lost 10% of it's worth since 2002. Our SDR's haven't kept up with the declining value of the dollar because coutries are moving away from our currency. Also, look at the total assets of the Federal Reserve during the recession of 2000-2001. That's when it dipped below 70 billion. Right now we're at... 70 billion.

We need to stop spending. That means no tax cuts. Unless there's a strategy at play that I'm not aware of?

I don't understand what you mean about retirement dollars going into foreign investments.  Typically, most retirement dollars are invested in more secure investments and that has traditionally meant fixed income, cash equivalents and higher rated equity investments.  I have some of my retirement funds in foreign investments but thats because I am younger.  As people age, they take less risk with those dollars and move them into the more secure investments.

Chad's point is more accurate.  Most of the people who are concerned about the differences between short v. long term capital gains are in the upper class.  I spent 10 years as an Options broker and had some middle class clients.  Most though, were upper class.

[ChadTower]

I'm firmly middle class.  I have never had capital gains.  I had tax once on a 401k that got reaped and given back to me.  They took like 60% of it, making it a net loss compared to what I had put in, and the stupid account had actually appreciated a small amount over its life.  Basically, I contributed to a 401k for three years, didn't lose any via investments, and then lost much of it via taxes when the company maintaining the 401k shut down.

Nice job.

[Hoopz]

Someone at your company in HR or benefits should have told you what your options were.  Taking the cash was obviously the worst thing you could do.  Rolling it over to another 401k or a brokerage firm to hold it would have prevented it from being taxed as income. 

You probably would have had to pay a yearly fee (~$30 or so) but beats the hell out of the IRS situation.

[ChadTower]

Didn't have time, they gave me 3 days' notice to find a place to put it and I was working 80 hour weeks.   

[Hoopz]

They were/are idiots.  You have/had 60 calendar days to move it.  You could have taken the check, cashed it, and went to any firm within 60 days and given them the money. 

[ChadTower]

The company closed down without warning... not like the HR person was going to care about quality of her work.

[Samstag]

How does low capital gain taxes keep money in a business?

[ChadTower]

During a big negative stock swing, CEOs tend to cut costs by reducing headcount.

It is funny when a CEO cuts a million in payroll by laying off 25 people, but retains his own $5 millon annual bonus.

Well, funny to him.

[Samstag]

During a big negative stock swing, CEOs tend to cut costs by reducing headcount.

It is funny when a CEO cuts a million in payroll by laying off 25 people, but retains his own $5 millon annual bonus.

Well, funny to him.

That's pretty much the case.  And my next thought was "and when they fire him/her, they get a $10 mil severence package which includes lifetime use of the company jet..."

...which reminded me that I should probably mention that I work in the business aviation industry which is extremely sensitive to market fluctuations because company jets are cut right after the payroll.

[fredster]

Aren't Government revenues up from projections because of the tax cuts?  Didn't cutting the taxes and keeping them cut actually increase the amount of money spent and stimulate the economy?

Cooter, isn't there still two levels of capital gains taxes based on how long you keep the stock?  If you keep GE for 15 years and sell it you are taxed less than if you are day trading?

And that daytrading rate has remained the same, so the stability of the stock is as protected as it ever was?

[ChadTower]

Taxes are one of the few things for which I only care about how it affects ME and MY FAMILY.

Most of the money we make, eventually, gets taken in taxes.  Property, excise, sales, income, etc etc... it ALL goes to the gov't.  I sure as hell don't get $60,000 in services from my gov't every year.

[Hoopz]

Long term capital gains (positions held a year or more) are taxed differently than short term capital gains (held less than a year).

[Hoopz]

Taxes are one of the few things for which I only care about how it affects ME and MY FAMILY.

Most of the money we make, eventually, gets taken in taxes. Property, excise, sales, income, etc etc... it ALL goes to the gov't. I sure as hell don't get $60,000 in services from my gov't every year.

The costs of road repairs, the library in your community, the police/fire fighters etc are all paid by your taxes.   I see true value in those areas.  Dont forget schools, the armed services etc. 

Now, social security payments are another matter....

[ChadTower]

The costs of road repairs, the library in your community, the police/fire fighters etc are all paid by your taxes.

[Hoopz]

Not that way here.  Our roads may not be great but there is always work on them.  The library is paid off property taxes, some turnover in police/fire but not as much as yours. 

[Crazy Cooter]

I don't know if the capital gains cuts apply to both short & long term or not.  It goes back to my arguement about not knowing what goes on in congress.  They don't explain anything they do.  It's only refered to as "capital gains".

The problem is that once you get into the highest tax bracket (35%), instead of salary, you take dividends.  They're included in this bill and are taxed at 20%.  That's how it's been for the past couple years and they're looking at extending this policy.  That's why you see CEO's getting paid $500k salary and then $4 million in other "stuff".  It's a tax-dodge.

fredster, you can argue that the tax-cut stimilated the economy, or you can argue that record low interest rates and a war stimulated it.  But basically, we used every trick we had in order to try and get it back on track, but it's costing us a BUNDLE.  To get an idea of the general "health" of the US economy, look at the assets of the Federal Reserve: http://www.federalreserve.gov/releases/bulletin/1105assets.htm
Compare where we are now with the recession we just had.  What tools do we have now to help the economy?  We're still at war, so that won't work.  We can't lower interest rates because other countries won't buy American money as it is.  We have a huge trade deficit, we have a huge budget deficit... so we want to cut taxes?  Seems to me we need to cut spending.

Not all foreign investments are as risky as people think.  You just need to account for a few more variables.  Companies are moving money out of the US by the boatload as we speak.  Look at Dubai, it's a HUGE investment "place".  Watch how DIFX evolves over the next two-years.