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capital gains tax Archive

Monday

3

September 2012

2

COMMENTS

In Need of Capital Day

Written by , Posted in Economics & the Economy, Free Markets, Taxes

The Department of Labor cites Labor Day as “dedicated to the social and economic achievements of American workers,” adding that “it constitutes a yearly national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.” Celebrating the hard work of Americans with a yearly day off is fine with me, but there are additional forces contributing to the “strength, prosperity, and well-being of our country” also worthy of recognition. Perhaps the time as come, for instance, for a Capital Day.

Hard work is important. Americans have long considered a strong work ethic a virtuous quality, and this has been to our advantage. But hard workers are all over the world, and the US hardly leads the world in average hours worked. Yet America is consistently at or near the top in worker productivity. What accounts for this discrepancy? Simply put, capital.

Another way to look at American prosperity is this: hard work is a necessary, but insufficient, condition for achieving prosperity. Give even the hardest worker a spoon, and it will take a long time to build a ditch. Give that same worker a shovel, and it will take less time. Now give that worker an expensive digging machine and that ditch will be completed exponentially faster. That is where growth in worker productivity comes from.

The mixing of capital and labor is where the true magic happens, and American prosperity is due to our once unique devotion to an economic system – the free market – that most efficiently matches these two ingredients.  Unfortunately, America today is no longer the most devoted to economic freedom, and the trend is heading in the wrong direction. A less free economy, generally speaking, will mean more inefficient distributions of capital and labor, resulting in a less productive workforce and thus a less prosperous economy.

In order to invest capital in our workers, we first need capital to invest, and that means savings. Unfortunately, neo-Keynesian economic thought can be reasonably accurately summed up as “savings = bad; spending = good.” Just consider the examples of politicians asserting that unemployment checks or food stamps boost economic growth because the recipients are more likely to spend it.  And then there’s the many government policies which reduce or inhibit capital formations, like direct taxes on capital such as the capital gains tax or death taxes, financial regulations and laws which discourage US investment, and other costly burdens on business – such as Obamacare.

So while we celebrate the contributions of hard working Americans of all stripes, we should keep in mind the importance of capital in achieving prosperity, a fact all too often forgotten by policymakers. Perhaps a yearly reminder in the form of a Capital Day is needed to do the trick.

Saturday

25

June 2011

0

COMMENTS

We Don’t Need an Investor-in-Chief

Written by , Posted in Economics & the Economy, Taxes

How was anything ever invented before government started “investing” in new technologies? One wonders these things, given the seriousness with which Keynesians seem to believe that if they don’t choose the economic winners and then throw large sums of money at them – other people’s money, of course – then there will be no innovation or growth. The latest example of this faulty attitude involves a plan by the President to spend $500 million “investing” in manufacturing, or something:

President Obama on Friday will announce the launch of the Advanced Manufacturing Partnership (AMP), an initiative that would provide more than $500 million to encourage investments in promising technologies.

It is the administration’s second initiative in less than a month intended to boost U.S. manufacturing.

…“Today, I’m calling for all of us to come together — private-sector industry, universities and the government — to spark a renaissance in American manufacturing and help our manufacturers develop the cutting-edge tools they need to compete with anyone in the world,” Obama will say, according to prepared remarks.

What do Obama and his bureaucrats know about manufacturing or what “cutting-edge tools they need to compete with anyone in the world”? He doesn’t seem to know, for instance, that we’re already in a manufacturing “renaissance”, in so far as manufacturing output continues to grow to new heights, breaking its own record, year after year.

Perhaps an even better question is: what makes Obama qualified to spend other people’s money better than they would themselves? Government “investments” are necessarily made according to political criteria, as the first priority of a politician is to get reelected, not turn a profit. And in order for these vote-seeking politicians to spend money on their schemes, it must first be removed from the productive sector of the economy, where individuals with actual skin in the game are much better suited to find investment opportunities that will pay off.

If President Obama really wants to promote investment, he should remove the existing disincentives to savings and investment, such as the capital gains, dividends and death taxes, among other destructive taxes on capital formation. Simply put, we don’t need an Investor-in-Chief to direct investment capital to promising sectors and businesses, we simply need government to get out of the way and to stop making it so difficult for private investors to do so in the first place.

Wednesday

8

December 2010

1

COMMENTS

Kamikaze Democrats

Written by , Posted in Economics & the Economy, Taxes

As has been widely publicized, the White House and Congressional Republicans have forged a compromise that will prevent tax rates from going up at the end of the year (except for the death tax which will return with a 35% with a $5 million exemption).  In exchange for extending the current individual, capital gains and dividends rates for 2 more years for all Americans, Republicans agreed to support another year’s worth of unemployment benefits (which will reduce employment) and some various tax credits, which will do nothing. Overall, compared to what would happen if capital gains and dividends rate went up, this is a good deal. It’s certainly not the best policy (permanent extension would do a lot more to reduce uncertainty), but it’s better than tax increases (even, yes, on the wealthy).

It’s hard to see what democrats can really complain about either. They get their entitlements, and even by CBO’s gimmick accounting (where keeping tax rates the same has “costs”) most of the bill’s costs still comes from their entitlements, so they cannot complain about that. So why are so many so pissed off that they’re willing to try and scuttle the deal, taking America’s economy down with it?

The only explanation that makes any sense is that they’ve backed themselves into a corner with a decades worth of nonsensical class warfare demagoguery. They’ve falsely blamed Bush’s rate cuts “for the wealthy” (I’d point out for them yet again that Bush made the tax code more progressive, and not less so, but we all know I’d be wasting my time with these people) for everything from spending induced deficits to the financial crisis. Most of them probably really didn’t even believe this crap, but class warfare sells. Why argue for policy based on principle or careful analysis when you can just get one group of Americans pissed off at another group?

Democrats weren’t always this way. JFK argued for significant tax cuts as a way to grow the economy, and he was right. But for the hard left, to not raise taxes now would be to admit that their last ten years worth of rhetoric was a lie. We all know it was, but they are desperate not to admit it. And to protect their baseless ideology, they’ll happily fly the class-warfare fighter into the American economic ship.

Friday

24

September 2010

0

COMMENTS

Completely Out Of Touch

Written by , Posted in Election Time, Taxes

Two recent stories indicate just how clueless and inept is the Democratic Party.  First, we see that Democrats are punting on the issue of taxes:

Senate Democrats huddled behind closed doors for one hour on Thursday trying to figure out what to do about the expiring Bush tax cuts. With no consensus emerging, Majority Leader Harry Reid, D-Nev., decided to postpone a vote until after the election.<

Why are Democrats refusing to address the pending tax hikes which will cripple the economy? Because they know there is majority support in their House caucus, and growing support in the Senate, for extension of all of the tax cuts. The American people want it, too. But this arrogant Democratic majority refuses to let such a vote take place.  They’d rather play class-warfare politics and prevent the tax cuts that would have the biggest economic impact from taking place than do what is best for everyone – across the board protection from rate hikes, including on crucial capital gains, dividends and death taxes.

The second story has to do with the Democratic response to the recently released GOP Pledge to America. Would they respond with a similar clear(-ish) enunciation of their positions, many asked? No. They say they’ll just run on their record.  Seriously.

If I didn’t know better I’d suspect they’re throwing the election.