A 69% Capital Gains Tax Hike . . .

DOGS THAT BARK

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http://online.wsj.com/article/SB10001424052748704402404574527781844595304.html

Our job is to read bad legislation so you don't have to, and on that score we may demand combat pay for plowing our way through the House health-care bill that passed on Saturday. This thing has economic booby traps everywhere, such as favors for the tort bar (see below) and the largest capital gains tax increase in at least a half-century.
House Democrats are funding their new entitlement with a 5.4% surtax on incomes above $500,000 for individuals and above $1 million for joint filers. The surcharge is intended to snag the greatest number of taxpayers to raise some $460.5 billion, and so the House has written it to apply to modified adjusted gross income. That means it includes both capital gains and dividends.
That surtax takes effect on January 1, 2011, or the day the Bush tax rates of 2001 and 2003 expire. Today's capital gains tax rate of 15% would bounce back to 20% because of the Bush repeal and then to 25.4% with the surtax. That's a 69% increase, overnight. The last time investors were hit with anything comparable was 1986, when the capital gains rate jumped to 28% from 20%, a 40% increase, as part of the Reagan tax reform that lowered income tax rates.
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The 1986 experience was not a happy one. Tax revenues from capital gains surged before the increase took effect in 1987, as investors moved to cash in at the lower rate. Revenues then plummeted. Total realized capital gains didn't again reach their 1985 level of $172 billion until 1996. By 1992, the federal government was barely getting more in revenue ($29 billion) at the 28% rate than it did in 1985 ($26.5 billion) at the 20% rate.
Rate reductions, as in 2003 when Republicans cut the rate to 15% from 20%, have typically had the opposite effect. Treasury receipts from capital gains climbed to an estimated $117.8 billion in 2006 from $49 billion in 2002.
While the rising stock market through this period played a role, so did the "unlocking" effect from a lower rate that reduces the friction of taxes on decisions to buy or sell and thus report a capital gain. Both the economy and the Treasury also benefitted when Bill Clinton agreed to reduce the rate to 20% from 28% as part of his budget deal with Newt Gingrich in 1997.
Candidate Obama acknowledged this reality in April of 2007, when he backed away from his original proposal to nearly double the capital gains rate to 28%, and instead suggested 20%. He also promised to eliminate the tax entirely for small business. "I'm mindful that we've got to keep our capital gains tax to a point where we can actually get more revenue," he said at the time.
While families of all income levels realize capital gains, Internal Revenue Service data from 2007 show that 58% of overall capital gains revenue was reported by taxpayers with adjusted gross income above $1 million?and would be subject to the new 25.4% rate. The actual percentage of revenue subject to the penalty would be higher when counting individuals with income above $500,000.
Some readers may think that this 5.4% surtax can't possibly make it into a final Congressional bill due to Senate opposition, but we wouldn't be so sure. Mr. Obama hasn't said so much as a discouraging word about the House bill. And we've seen in the past 10 months that when Mr. Obama's campaign promises clash with the priorities of House liberals, the liberals always win.
 

hedgehog

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most people I know that make that kind of money are slowly taking their money and investing it tax free. Imagine the huge sucking sound at the end of next year as Bushes tax cuts go away. If I made that kind of money, I would be hiding it right now in other investments such as land, commercial property, tax free bonds, etc. Although the change does not affect me, it certainly affects a few people that I know. We have to vote these rats out in 2010. Marxism at work just like Obama wants, spread the wealth :rolleyes:
 

DOGS THAT BARK

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the key is-- Those that have the means will cut him to the bone--avoiding capital gains is no prob if one wants to--the effect on economy will be gut wrenching--he'll find he has to look elsewhere to remotely pay for the interest on his spending spree--will end up being consumption tax on everyone--probably VAT tax. He's past point of no return--already spent more in 9 months than Clinton did in eight.

-His Rhetoric " we need fiscal responsiblity
-The reality- He'll be asking congress to raise the 12.1 trillion debt limit before years end --


++++++++++++++++++++++
The 1986 experience was not a happy one. Tax revenues from capital gains surged before the increase took effect in 1987, as investors moved to cash in at the lower rate. Revenues then plummeted. Total realized capital gains didn't again reach their 1985 level of $172 billion until 1996. By 1992, the federal government was barely getting more in revenue ($29 billion) at the 28% rate than it did in 1985 ($26.5 billion) at the 20% rate.
Rate reductions, as in 2003 when Republicans cut the rate to 15% from 20%, have typically had the opposite effect. Treasury receipts from capital gains climbed to an estimated $117.8 billion in 2006 from $49 billion in 2002.
 

THE KOD

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Two More Myths About Business In China
Shaun Rein,

What you believe about how Chinese save, and their one-child policy, is probably wrong.

More from Shaun Rein

When President Barack Obama arrives in China for his first official visit next week, he will find a very different nation from the one President George W. Bush first went to almost a decade ago. No longer is China a net recipient of aid. On Sunday it promised $10 billion in loans to Africa and forgave the debts of several countries. Another hundred million Chinese have been pulled out of poverty, and the nation is now the world's second-largest market for luxury items. Consumers buy $6.5 billion worth every year.

The desperation that marked the lives of many Chinese over the last century is gone. The Pew Center recently found that 86% of Chinese are happy with the direction in which the government is taking the country. My firm, the China Market Research Group, has found that 80% of Chinese under the age of 32 are confident and optimistic about their futures, despite the financial crisis, and they say they expect to spend at least 10% more in the next six months than they did in the last half year.

I recently wrote "Three Myths About Business in China," about things almost everyone mistakenly believes are true: that China's economy is export-led, that the country has a limitless supply of cheap labor and that connections mean everything there. China is changing quickly. As President Obama arrives, he and America's business leaders need to keep in mind two more myths about business in China that no one should fall for:

Myth No. 4: Chinese are culturally heavy savers.

Obama will likely press China to implement policies to reduce its savings rates, following the line taken by Treasury Secretary Timothy Geithner when he visited in May. However, Chinese people are already saving less and less.

Many economists argue that Chinese people are culturally bred to be heavy savers. They say that Chinese tuck away 40% of their incomes and refuse to buy on credit. But that just isn't true anymore.

It is true that Chinese over the age of 50 often save 50% or more of what they make, because they worry about soaring medical costs and weak pension systems. However, younger Chinese like to spend. China's traditional high savings rates are more a function of poverty than of a cultural aversion to spending. The lack of buying on credit results more from a weak consumer finance system than anything else.

The number of credit cards in use in China rose from 13 million in 2005 to 180 million by the end of 2009, and that growth was fueled largely by younger consumers. Despite the financial crisis, we expect the number of cards to grow 25% a year for the next three years, as consumers demand them and the financial system becomes more consumer-oriented and less reliant on servicing state-run enterprises.

We have interviewed several thousand Chinese under the age of 32 in 15 cities about savings. Our findings suggest they have savings rates near zero. A combination of optimism about their futures and impatience to enjoy life now leads many to buy on credit.

Take Anna, a typical 24-year-old Shanghai woman we tracked. She earns $700 a month as a marketing analyst and has three credit cards. She lives at home with her parents, who provide her food and housing. Because she has few costs at home, she spends her entire salary "enjoying life." She dines with friends in restaurants like Yum Brands' Pizza Hut (a higher-end chain in China than in the U.S.) and gets pedicures weekly. She buys cosmetics from Est?e Lauder and clothes from Zara and Uniqlo. She has a cracked Apple ( AAPL - news - people ) iPhone. She travels twice a year on vacation, both within China and abroad to places like Malaysia. She saves nothing, because, as she says, "I want to enjoy life now before I get old. My salary keeps rising, and spending will help me get the career I want."

Companies need to understand that their core target markets may be years or even decades younger in China than elsewhere. China's overall household savings rate is staying the same so far, but that is because of the elderly. The situation will change as younger Chinese take on more and more consumer credit.

Myth No. 5: Chinese hate the one-child policy.

Inevitably, as Obama arrives, he will be pressured to criticize China on human rights matters, including the one-child policy it implemented in the late 1970s. Though the policy caused difficulties in the early years, when people relied more on their offspring in old age and when premature death among children was common, it is now largely supported by urban Chinese. It remains less popular in poverty-stricken rural areas, however.

In fact, the government, worried about an aging population, is encouraging urban couples who are both only children to have two children themselves. Yet there have been few takers. Many parents don't want to assume the costs of private schools and extracurricular activities like piano lessons for multiple kids. They would rather focus on rearing and spoiling one child, as they were reared and spoiled when they grew up.

Moreover, many women no longer want to take a break from their careers, and many are too spoiled themselves to make the sacrifices necessary to care for multiple children. Grandparents commonly take care of grandchildren while both parents work.

Part of the reason for this is that the one-child policy created gender equality in urban areas. Families now place their love and hopes on daughters, not just on sons who can till the fields. As I wrote in "China's New Purchasing Powerhouse: Women," women now bring in nearly 50% of household income. Many are so focused on their careers that they don't want to be homemakers. Nannies cost only $200 a month; therefore much child-rearing is outsourced while mothers work late and party.

Younger Chinese tend to be optimistic and idealistic. They have very different saving and spending habits from older Chinese. It is almost as if there were two countries within one, a country that vividly remembers the receding horrors of the past and another land that has seen nothing but three decades of unparalleled economic growth. As Obama comes to China, it is the latter group's attitudes and hopes that he--and all of American business--should watch most carefully
...............................................................

I thought this was interesting.

Thinking about moving to China myself.
 

Chadman

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Nice, I love it how you continue to misinform the situation. The Bush tax scenario, as drawn up by his administration is going away. HIS plan. So things will refer back to what they were before - nothing at all to do with Obama, the democrats nothing.

The only difference is the surcharge, not the whole amount. So your headline is a falsehood, and you attribute the whole thing to Obama - or your idea is to do that.

We understand what's happening. Nice try.
 

DOGS THAT BARK

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Gary If you really believe it-there a place on tax form that you can pay extra taxes if you choose.

Your prob is as with most liberals--you want someone else footing your bill--sheez

So either tell us how more more you plan to contibute or tell us which one of below you most resemble- :)


HIGHER TAXES--:00hour
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DOGS THAT BARK

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Nice, I love it how you continue to misinform the situation. The Bush tax scenario, as drawn up by his administration is going away. HIS plan. So things will refer back to what they were before - nothing at all to do with Obama, the democrats nothing.

The only difference is the surcharge, not the whole amount. So your headline is a falsehood, and you attribute the whole thing to Obama - or your idea is to do that.

We understand what's happening. Nice try.

Exactly which part of this is difficult to comprehend?

Would you like me to break it down in simpler terms.

I need your help on several areas I am having prob with.

to start with--

Could you explain to me in simple terms I can comprehend--how era of responsiblity and raising limit on debt go hand and hand?
 

THE KOD

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Exactly which part of this is difficult to comprehend?

Would you like me to break it down in simpler terms.

I need your help on several areas I am having prob with.

to start with--

Could you explain to me in simple terms I can comprehend--how era of responsiblity and raising limit on debt go hand and hand?
............................................................

Its bullshit in China and its bullshit in America.

nothing changes but the changes anyway
 
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