Obama Pushes for Higher Investment Taxes

The difference between profit and wealth creation

Generally are disregarded in arguments like this. The assertions that lowering taxes is good for the economy are more or less a theological assertion on the part of Republicans. When it does not work they have to come up with new arguments as to why it did not work, but tax cuts have not yielded the economic growth claimed for them since the early 20th Century

Since World War I, every tax cut has been followed either by a recession, or an economic bubble followed by a crash, followed by bank failures, while periods of high taxation usually have resulted in extended periods of economic growth.

During World War I marginal tax rates went up into the mid 70 percent area, but in 1922, a series of cuts started. The market started heating up, a bubble followed, then depression, bank failures, and so on.

A lot of effort had gone into attempting to prove that FDR's actions did not get the economy moving again, but rather it was Hoover. This is partially true. In 1932 he raised the top marginal rates to over sixty percent and the economy had its best year since the crash. Between 1933 and the start of WWII Roosevelt instituted another two tax increases, and during those years the economy grew by about 58 percent.

During this time Roosevelt also accomplished to create one of the smallest ratios of government spending to GDP as well, a bit over 18 percent.

The economy went along pretty well during the Truman and Eisenhower years with top marginal rates as high as 91 percent. Kennedy started talking tax cuts but it was Johnson who instuted them. From then until Reagan, the econony really did not go anywhere. A recession during the Nixon administration.

Reagan came along cut taxes to 50 percent in 1981 and a recession ensued. Of course this was blamed on Carter, but Reagan stuck to his tax cutting guns and cut the top marginal rates in 1987 the year of Black Monday. This was a period of all sorts of methods of making quick profits which included junk bonds, hostile takeovers, greenmail.

Bush I raised taxes a bit and things started improving but Clinton came along raised the top marginal tax rates again

Finally George H. Bush took the Clinton economy gave his first tax cuts, followed by an immediate recession, and then his second tax cut which was followed by a bubble created in a single sector, the financial sector and a crash. Bank failures and like Reagan, bailouts.

Lowering the capital gains tax does not necessarily result in the creation of new businesses. In fact when taxes are high, businesses do not pay those taxes but choose to put those profits back into them.

Easy profit taking does not grow wealth but creates profits for a small select group of investors. High capital gains taxes create the incentive to long term planning an growth. Low taxes send people to the markets looking for hot investments. Fast money and easy profits. Instead of making money the slow old way starting a business and growing it.

Chernevog of GA @ Nov 18, 2008 16:08:59 PM

captial gains

The first president elected, that I've actually worried about. Swept up like a "messiah", I don't think so. Since its such an obvious thing to overlook, it just rings IDIOT!

It sounds like he plans to abuse his executive power whenever he can:

"One of Mr Obama’s first acts could be to use the power of executive authority – which enables presidents to take action without an Act of Congress – to block the expansion of oil drilling in the Utah wilderness authorised by Mr Bush. He is also looking to use the same power to lift the limits on stem cell research imposed by the current Administration."

http://www.timesonline.co.uk/tol/news/world/us_and_americas/us_elections/article5126528.ece

f005 of MN @ Nov 13, 2008 10:43:08 AM

Obama vs Economic Slowdown

Thank you Mr President Elect. Raising capital gain taxes to 28% should give our country's limping economic condition a real boost.

Joe Franck of IL @ Nov 10, 2008 06:26:23 AM

Capital Gains Tax will not effect me

I am not a rocket scientist, and I get it. It is simple math. If I am going to pay commissions at 2 to 3 % and a capital gains tax of 28% why would I invest in a unpredictable market knowing any gains on my investment will come at such a high price.

Phil Dalrymple of WA @ Nov 07, 2008 17:11:50 PM

capital gains on home

Me and my wife and two boy live in Alaska and are planning on moving to the lower 48 states. We had bought our home in June 2003. Bought our house for $157.500.00 and are planning to sell it for $350.000.00 will we be charged on capital gains and can roll it over to another house with out penalties. Worried on Obamas plan on capital gains. Can you enlighten me on this issue.

Frank Conrad of AK @ Nov 05, 2008 18:33:05 PM

capital gains tax

I am against raising capital gains tax as many seniors have invested in a piece of property as an investment for their later years the same as people who have other investments. I think this really targets many middle class folks, seniors particularly.

Maureen Szal of MA @ Oct 29, 2008 18:36:54 PM

Obama doesnt get it

Obama needs to really take a look at what he considers rich. For someone who made 4 million last year, he is definitely not struggling, so he wouldn't care about higher taxes. Living in California, especially in the Bay Area, making 250,000 definitely isn't rich. After a 5,400 mortgage every month along with savings and kids college, I do consider myself rich. I am not struggling either, but definitely do not like the idea of the fed taking another 6% or so from my paycheck.

People who's home is worth well over 500,000, but make less then 250K, need to realize that the little bitty tax break Obama is promising you with your INCOME doesn't help. He always fails to tell crowds that his Capital gains taxes affect a lot more people then he thinks. If you are in this boat, and plan on voting for Obama, i hope you small tax break of 1,000 bucks or so at the end of the year, and then he rips you for possibly 50-90k more in Capital gains on your home if you need to sell.

j of @ Oct 29, 2008 01:26:15 AM

Capital gains on sale of 401K investments

Will the increase in the capital gains tax rate affect how much tax I pay when liquidating my 401K plan? We planned to retire next year. The market is so low right now, I would take a big hit if I were forced to sell my investments or be forced to hold them and pay the higher capital gains tax.

Somehow, this doesn't fit with what Obama is telling the American people. Most people in my age bracket that are considering retiring within the next four years are middle income people to which he says he will give a tax break. This doesn't compute with me and I really fear an Obama presidency.

Judy Richards of GA @ Oct 28, 2008 14:35:51 PM