Rate of Stock Returns verus Cap Gains Tax
Republicans can decry the cap gains tax raise, but if you compare the yearly rate of returns of the DOW during the Clinton term to either Bush I or II, investors, especially small investors are better off under democrats. Higher cap gains encourages long term investing. High volatility of the stock market syphons money out of the middle class pocket. Long term investing is the backbone of our economy... not day and insider trading.
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Should be obvious. Higher rates on high incomes would help, too. This would return us to valuing long-term growth over windfall.
The adoration of wealth is the reason income and work are belittled.
September 15, 2008 7:16 PM | Reply | Permalink
High cap gains discourages investing at all. If the rate of return is less than the risk, people will just park the money. High short term and very low/zero long term is a different matter, but it hurts small guys who can't afford to tie up money for a long time. It does stop real estate flipping.
September 15, 2008 7:43 PM | Reply | Permalink
There is a valid point to acknowledge in this post.
It's possible to achieve a capital gains tax rate that won't discourage investing altogether, yet will encourage more long-term investing and benefit the economy.
A lot of Democrats seem to have learned that setting capital gains taxes too high does in fact slow investing. We need to have an economy that provides sufficient reward for financial risk, or else venture capital would be harder to come by. However, where many Republicans often lose the argument (they lose me, anyway) is in insisting that all tax cuts and more tax cuts are good, good, good (and there seems to be no limit). There are limits, and liberals and conservatives would have far more productive debates if both sides would acknowledge those limits.
September 15, 2008 8:14 PM | Reply | Permalink
"If the rate of return is less than the risk, people will just park the money"
So you're saying that it was the low cap-gains that encouraged investors to accept the risks inherent in the market since Phil Gramm's deregulation took affect?
I'm not sure it would hurt to have investors value the risk a little higher.
September 15, 2008 8:15 PM | Reply | Permalink
I'm basically saying that under Democrat rule the US has a significantly higher rate of return on stocks than under Republicans, so a higher capital gains tax DOES NOT = lower profit. Republicans think the Americans are so stupid they don't know the dif. between NET and GROSS.
Under Clinton - 19% average rate of return... under Bush 0.22%.
Where did all the money go under Bush? just like vegas - to the house.
http://finance.yahoo.com/expert/article/futureinvest/104492
on the DOW... "However, a closer look tells a far different story. Over that same 120 year period, the average annual stock market return has totaled only 8.25% under Republican rule, while it has returned 10.85% with Democrats in power.
Over the past 60 years, this trend has been more pronounced. The Democrats have held the presidency only 41% of that time, but under their rule the average annual return has been 15.26%, more than six percentage points higher than the 9.01% return under Republicans."
Good and Bad Presidencies
Returns during the last two administrations support these conclusions. The return on the market under the Clinton administration (1992-2000) was 19% per year, the highest of any president since Calvin Coolidge led the country in the mid 1920s.
On the contrary, the real return so far under G.W. Bush has been a measly 0.22%, and an even worse minus 2.69% return once inflation is subtracted. This return is the second worst of the postwar period, exceeded only by the negative 7% real return under the Nixon administration. In fact the Nixon and Bush Republican administrations were the only two periods since The Great Depression when shareholders suffered after-inflation losses in the stock market.
September 15, 2008 9:55 PM | Reply | Permalink