Obama's Revenue Soup

Discussion in 'Budget & Taxes' started by Forum4PoliticsBot, Apr 10, 2012.

  1. Forum4PoliticsBot

    Forum4PoliticsBot New Member

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    [TD="class: alt2"] [HR][/HR] Obama's Revenue Soup
    A history lesson on capital gains taxes.

    (Wall Street Journal) - In "Annie Hall," Woody Allen tells the joke of two women complaining about a restaurant. The first says the food here is awful and the second replies, yes, and they serve such small portions. Sounds like President Obama's proposal to raise the capital-gains tax: It will hurt the economy and it won't raise much new revenue.

    Mr. Obama's plan would raise the capital-gains rate on January 1 to 20% on those who earn more than $200,000 ($250,000 for couples), plus a 3.8% investment surtax to finance ObamaCare. That 23.8% rate amounts to a nearly 60% increase from the 15% rate in effect since 2003. And that's without his new "Buffett rule," which would take the rate to 30% for many taxpayers.

    This and other rate hikes aimed at higher-income earners are supposed to raise about $700 billion in tax revenues over the next decade. Fat chance. Ever since the famous 1978 bipartisan capital-gains tax cut sponsored by the late William Steiger of Wisconsin, the same pattern has repeated itself: raising the capital-gains rate reduces revenues, and lowering it leads to revenue increases.

    The nearby chart shows the 35-year trend in capital-gains revenue and tax rates—through 2008, the last year data are available. The Steiger amendment cut the top rate to 28% from nearly 40% in what was a watershed moment in U.S. tax policy and a preview of the Reagan era. Revenue from capital gains quickly jumped to $11.8 billion in 1979 from $9.1 billion the year before.

    [​IMG]

    Congress cut the rate again in 1981 to 20% as part of the Reagan tax cuts, and the striking fact is that revenues didn't fall in 1982 despite the steep recession. By 1983 they were rising again, to $18.7 billion, and they kept rising along with the Reagan boom.

    The next policy break came in 1986, when Congress returned the capital-gains rate to 28% as part of tax reform. A funny thing happened: Revenues soared in 1986 to $52.9 billion as investors cashed in their gains before the tax increase hit in 1987. But then revenues plunged, despite the higher tax rate, to $33.7 billion. They rose slightly in 1988 but then stayed flat for nearly another decade.

    In 1997, Bill Clinton and the Gingrich Republicans cut the rate back to 20%, and revenues really took off—doubling to $127.3 billion in 2000 from $66.4 billion in 1996. These were also the years of a stock-market boom, and investors cashed in their gains along the way.

    Capital-gains revenues fell amid the dot-com bust, but in 2003 George W. Bush and Republicans in Congress chopped the rate to 15%. Even at that lower rate revenues started to climb again (along with the economy), rising from $51.3 billion in 2003 to $137.1 billion in 2007. They understandably fell again in 2008 as the recession hit and stock values fell.

    The data clearly show that the overall economy is the single biggest factor in capital-gains realizations and revenue. But the data also show that time and again revenue has multiplied despite a lower rate, and arguably because of it.

    The capital-gains levy is an elective tax on owners of stock and other assets. Investors only pay the tax when they sell their assets, so they can hold unrealized gains until the tax rate falls. This is called the "lock-in effect" of high capital-gains tax rates. It reduces economic efficiency because at a higher tax rate capital hibernates in older companies with lower growth potential and isn't available to new ventures with higher returns. A higher capital-gains tax also makes equity ownership less valuable (because of the lower after-tax returns), so there is less appreciation in stock values when the tax rate is higher.

    Congress shouldn't be fooled by government forecasters who predict a revenue boom from a higher capital-gains rate. They have blown this call every time. After Bill Clinton signed the 1997 cut, revenues came in about one-third higher than the government had predicted from 1997-99. The same thing happened with the 2003 rate cut. The government's forecasts of tax collections were too low for 2003, 2004, 2005, 2006 and 2007. From 2005-2007 tax collections from capital gains were at least 40% higher than originally predicted.

    In our view the optimal capital-gains tax rate is one that leads to the most capital investment, jobs and wealth gains for American workers. That economically optimal rate is somewhere close to zero and would lead to more overall tax revenue as the economy grew faster. But if Congress wants a capital-gains tax, history suggests the revenue maximizing rate is closer to 15% than to 23.8%.

    As John F. Kennedy put it in 1963 when he endorsed a cut in this tax: "The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital" as well as "the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy."

    Today's Democrats in Washington are no Jack Kennedys. As President Obama told Charlie Gibson of ABC News in 2008, whether or not a higher capital-gains tax raises more revenue is irrelevant to him. He wants a higher rate as a matter of "fairness." The soup may be lousy but he wants more of it. [HR][/HR] [/TD]
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    It's really baffling as to why President Obama and his supporters insist on a nebulous "fairness"-based tax policy. Shouldn't sustainable economic growth be the basis for tax policy instead? I really hope the next President has more respect for free enterprise and limited government than Obama. It would help our economy a great deal.


    Thread started at Forum 4 Politics on 04-09-2012 11:24 PM
     
  2. waltky

    waltky Well-Known Member

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    Granny says, "Dat's right - people figurin' out ol' Fearless W knew what he was doin' all along...
    :cool:
    WH: Federal Revenue Hit All-Time High of $2.57T—In 2007 Under Bush
    October 15, 2012 - According to data published by the White House Office of Management and Budget and the U.S. Treasury, federal revenues hit an all-time high of approximately $2.57 trillion—back in fiscal 2007 under President George W. Bush.
     
  3. trucker

    trucker Well-Known Member Past Donor

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    and what about the obama's soup lines in the future as the negative counter..
    [video=youtube;bfv523Axo8g]http://www.youtube.com/watch?v=bfv523Axo8g[/video]
     
  4. waltky

    waltky Well-Known Member

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    All dat money an' we's still in debt...
    :omg:
    $3,248,723,000,000: Federal Taxes Set Record in FY 2015; $21,833 Per Worker; Feds Still Run $438.9B Deficit
    October 15, 2015 - The federal government took in a record of approximately $3,248,723,000,000 in taxes in fiscal 2015 (which ended on Sept. 30), according to the Monthly Treasury Statement released today.
    See also:

    +107%: Federal Debt Held by Public Has More Than Doubled Under Obama; Up $57,431.65 Per Household
    October 15, 2015 - The portion of the federal government’s debt that is held by the public—as opposed to the portion that is borrowed out of government trust funds such as the Social Security and Medicare trust funds—has more than doubled during President Barack Obama’s time in office, according to official data published by the U.S. Treasury.
     
  5. The Mello Guy

    The Mello Guy Well-Known Member

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    You are hilarious. I love it when you bump and old thread just so you can show how off base your old posts are lol
     
  6. waltky

    waltky Well-Known Member

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    Obama signs off on budget...
    :cool:
    Obama Signs New Budget Deal After Congress Approval
    December 19, 2015 | WASHINGTON — U.S. lawmakers sent President Barack Obama Friday a $1.1 trillion budget full of federal spending and tax breaks, which the president quickly signed before leaving Washington for his annual holiday vacation.
     
  7. OldManOnFire

    OldManOnFire Well-Known Member

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    I wish there was some way to get more Americans involved in capital gains investments. Although tens of millions of Americans are directly or indirectly involved with stocks, bonds and property ownership, I think most of them don't understand the tax consequences, and instead let the dogma of politics lead them to focus on sensationalism created which pits the so-called haves against the so-called have-nots. As if taxing the so-called 'haves' another 10-50% will somehow create a better life for the have-nots? When a nation is $18 trillion in debt, with deficit spending for years to come, if the nation was to force a capital gains windfall tax revenue, it must be used to pay down debt and not be given as wealth redistribution in lower or no taxes for the masses. The end result will be less investment in the US, less tax revenues due IMO to diminishing returns, and a more expensive government...non of which will benefit the nation...
     
  8. papabear

    papabear Active Member

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    The OP is mistaken.

    Even the graph he shows, shows his mistake.

    More CGT is paid in times of economic properity, ie improving economy = increasing value of assets = increasing CGT revenues the actual rate has not changed the trend, only the economic environment has.
     
  9. waltky

    waltky Well-Known Member

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    Uncle Ferd says he can't count dat high...
    :icon_jawdrop:
    Obama’s 2017 Budget: Record $3,643,742,000,000 in Taxes; Record $4,147,224,000,000 in Spending; $503,482,000,000 Deficit
    February 9, 2016 | President Barack Obama released a fiscal 2017 budget proposal today that calls for the federal government to take in a record of $3,643,742,000,000 in taxes while spending a record $4,147,224,000,000—and running an deficit of $503,482,000,000.
    See also:

    $365,694,500,000: U.S. Merchandise Trade Deficit With China Hit Record in 2015
    February 9, 2016 | The merchandise trade deficit that the United States ran with China in 2015 hit a record high of $365,694,000,000, according to data released Friday by the U.S. Census Bureau and the Bureau of Economic Analysis.
     
  10. waltky

    waltky Well-Known Member

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    Granny says, "Dat's right - Obama taxin' us to death...
    :grandma:
    Obama Has Collected $18,764,164,000,000 in Taxes--$124,003 Per U.S. Job
    April 15, 2016 | Over the course of the 86 full months that President Barack Obama has completed serving in the White House—from February 2009 through March 2016--the U.S. Treasury has collected approximately $18,764,164,000,000 in tax revenues (in non-inflation-adjusted dollars), according to the Monthly Treasury Statements issued during that period. (President Obama was inaugurated on Jan. 20, 2009.)
    See also:

    Obama tax inversion rules may overstep authority: U.S. lawmaker
    Apr 15 2016 | WASHINGTON - President Barack Obama's proposed rules to stop U.S. companies from reincorporating abroad, if only on paper, to avoid U.S. income taxes appear to overstep legal authority, a top Republican lawmaker said on Friday.
     
  11. OldManOnFire

    OldManOnFire Well-Known Member

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    Mainstream America is not interested in tax increases to reduce deficit spending and/or debt. And wealthier people/corporations today when pushed will move their money and business to more friendly locations outside of the US which equals diminishing tax revenues. And, the federal government lacks the cojones to suddenly become fiscally responsible. Where this all leads I don't know...
     
  12. Iriemon

    Iriemon Well-Known Member Past Donor

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    So first you say W knew what he was doing all along cutting the cap gains tax because revenues hit $2.57 trillion.

    Then you point out after Obama raised the cap gains tax revenues hit $3.64 trillion.

    Doesn't look like Granny was right about W being right, does it?
     

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