hi seattlelou, i tried to follow up and found this from the non-partisan Congressional Research Service:

http://www.policyarchive.org/handle/...eams/19358.pdf

Let me try to summarize what I read. First, start with the economic impact. They conclude that reducing CGT would have little to no impact on long-run economic growth. There are references to other papers I didnt follow up on, but part of the argument is based on a behavioral rather than a life-cycle model of individual savings.

So ok whatever, not iron-clad convincing, but putting that aside lets look at the claim that revenue-maximizing CGT is <10%. Their review of the economic literature is follows. An early study claiming an elasticity of 10% is criticized cause it used data only from 1973 when there was a large CGT change thus making it hard to separate transitional from long-term effects. Subsequent research has tried to separate out the transitional and long-term effects and generally found permanent elasticities 0.5 and lower but large transitional elasticities. indeed: "The general trend has been to estimate elasticities closer to zero than to 1.0 as data and estimation methods improve, though there are exceptions". Conclusion:"..the bulk of the evidence suggests that reducing the CGT reduces tax revenues."

Really? For a married person with typical deductions, say a home mortgage with $18K in interest for the year and 2 kids, you have to earn over $250,000 before you pay an effective rate 20% in federal income taxes. For a single person with no deductions or kids, about $125,000.

I guess you and your buddies are doing well, congrats.

So you think the Joint congressional committee has it wrong?

It's clear that this thing would have not brought in anywhere near enough to put any dent in the US debt.

Thanks.

I haven't read this study but I will. Thanks for posting.

Well 1) I reject your premise but 2) taxing carried interest income at capital gains rates doesn't even fall under the traditional arguments for lower capital gains taxes (encouraging risk)

I didn't mean to argue anything regards to carried interest, just capital gains.

So minute as to be meaningless. (As opposed to , say, national defense) But keep on posting strawmen.

Taxes on capital and taxes on income are not the same thing. Mitt Romney pays 15% CG, 35% corporate, and the inflation tax twice the rising stock prices due to inflation and the cash replenishment corporations must do. For every dollar the government taxes off earned income, about 50% of that will come higher prices and 50% from lower wages.

If you end earned income taxes on capital, wages will rise.
If you end the income tax on labor, earned income will rise.

To make you happy we should just end the corporate tax. Then you can tax Romney at 45% and he would be happy because he would be paying less tax. The problem is foreigners and ex-pats would own the U.S. stock market because they would pay zero cg tax.

The solution is to end the cg tax and the dividend tax and give poor residents a break on their cg/div. Thus, if you make less than 50K, you might get a 25% rebate on your cg/dividends and cg would be inflation adjusted. There are already treaties to tax dividends worldwide.

Rehaul tax code (Throw Warren Buffet rule in there on page 300)

Cut down defense (offense) and social spending.

Profit.

F) it's Ronald Reagan. Your arguement is invalid.

Quite a bit more than just minute. But hey, let's triple the defense budget cause it's so meaningful and needs more funding.

b

Let's say the capital gains tax goes from 15% to 30%. Will there be loopholes to get around it for rich people living off investments? For example, moving to another country? Investing in foreign ventures? What will professional securities traders do?

They already do.

Cheap, coercive, exploitable labor, ftw!

b

Disagree on both points. Why dont you tell me what my indirect benefits from welfare are that werent provided pre welfare and couldnt handled by the private sector.

Have you two met?

They're taxed the same

Quiet you! The liberal agenda is not interested in pertinent details such as how much, where it goes, cause and effect. Don't you get it? TAX THE RICH! Now get back in line and conform already.

Fact liberals ignore in this awesome example of the socialist Reagan:

Reagan was closing massive loopholes in order to LOWER taxes. Essentially flattening out the tax code on the wealthiest so people like Immelt that snuggle up to Obama can't speak out of both sides of their mouth.

And essentially the Romney tax plan...limit deductions (I object to the use of loopholes, no matter which party is spewing forth) for the wealthy and lower tax rates overall.

Reagan did inherit real loopholes, not just deductions that were working they way they intended, and was therefore able to cut tax rates much deeper and still increase revenues.

Romney's tax plan could actually piss off some of the more fiscally conservative types. He's creating a tiered structure which lends credence to Obama's class warfare approach.

I understand that part. I don't know if the carried interest rule that allows the income to be taxed like capital gains is good policy. Riverman created a thread about it and there was a pretty good discussion from someone with expertise that it may not be the scam that it seems like on its face. It's not a ton of money and I don't really have much of an opinion.
The study that was posted by silverbail was one of the first arguments that I have read that supported a higher than 10 percent CGT. Didn't study economics but it was a topic in my MBA studies. I guess MBA students at Booth being taught that low taxes on CG is a good thing is not surprising.

It is a fallacy that "carried interest" automatically gets capital gains treatment, and a fallacy that there arent other ways to achieve the same tax effect. Funds can allocate their different types of income however they choose. If all investors were taxable entities, in fact, then the treatment of carried interest wouldnt change the total taxes paid. The reason income allocation provides tax opportunities is because the investors are primarily non-taxable pension funds or deferred-tax trusts.

The bottom line is that managers ultimately face the same risks as investors, and if favorable tax treatment is approrpriate for investors due to risk characteristics, then its approrpiate for managers as well.

I never really hear an argument for why capital gains should be taxed at a different rate from other income other than vague platitudes about encouraging investments or risk-takers.

http://www.mpls.frb.org/research/qr/qr2331.pdf


There are a bunch of other studies that SL_72 posted that support a CGT of between zero and 10 percent.

They arent "vague platitudes". Do you think poker players are the only ones who do EV calculations, and do you think its not AFTER TAX EV that investors are concerned with?

Of all the political boards on otherwise unrelated sites I would have expected this one to at least understand the economics of risk taking and how taxes factor into decisions.