Signs of the Times - and a question

[whell]

Originally Posted by finnbow

Your simplistic and one-sided analysis failed to note that the risk is mitigated somewhat by the ability to write off capital losses against the gains. Also, as any student of investing understands, over the long term, stocks nearly always outperform bonds (and bank interest, of course). Why do we need to sweeten these gains even further?

I'm just not a believer in structuring the tax code to induce people to do certain things in lieu of other things. That's how we ended up with the most cumbersome inefficient tax code in the First World. We have short term CG's, long term CG's, qualifying dividends, non-qualifying dividends ..... and each has a constituency saying that they must have these breaks to keep on investing. BS.

Sure it's simplistic. It was meant to me. For example, you don't mention that gains can only be written off against profits. If the risk is taken and results in a capital gain, but there is no profit (which is more common in production examples) then there's no write off. Or at the very least, the write offs are limited to the extent that there are (any) profits.

Why do we need to sweeten the pot further? Because right now the incentive to take risk is being depressed, which gives us the sub 3% growth rate in GDP. We need more growth to create jobs.

Also, your earlier post you talked about bonds. Of course, bonds are really loans. Therefore, the profit goes to the individual making the loan and would be taxed accordingly. However, the objective of the loan in an economic sense it to generate operating capital (or cash flow). This makes the cost (risk) of converting capital more expensive for the recipient of the loan, since the interest rate (for example) of a business loan is running around 6 - 7% right now (assuming a business could even qualify).

Your 2nd paragraph takes me back to an earlier point where we may find some agreement. Make the tax code simple and predictable. Sit it at one rate for all, and tax all profit at the same rate. You can make it progressive if you must, but tax profit not capital.