Driving Out the Successful
Fred Dooley is looking at the consequences of tax hikes over at the Maciver Institute.
There is a decidedly different approach being taken by the Institute for Wisconsin’s Future. They are calling for a moratorium on all tax breaks.
In fact, the IWF is calling for Capital Gains to be raised to 100%.
Yes, you read that right, these big government fans think that if anyone actually manages to earn a profit on their investment that government should take all of it.
They aren’t done though, they also want the death tax brought back, the state sales tax raised by 1% and to remove exemptions from everything currently left off of that tax; including your funeral.
The IWF is also asking for the top income tax bracket in Wisconsin to be raised by 2% to a total of 8.75%.
Perhaps the IWF should look to Maryland. Maryland recently took the same soak the rich attitude increasing their top income tax bracket to 6.5% (Still lower than Wisconsin’s current top rate).
Well, people have options, and in Maryland they are picking up and moving to Pennsylvania and Virginia where tax climates are more favorable. Projections had this tax increase bringing in an additional $330 million, instead Maryland is now facing a $130 million shortfall.
Thanks for the mention Owen.
Posted by Fred on May 18, 2009 at 1014 hrs
Just to clarify where Fred badly misunderstands and muddies the waters, IWF is calling for 100% of long-term capital gains to be taxed, and not for capital gains to be taxed at 100%. I’m not advocating either, only pointing out that there’s a huge difference between the two. Too bad someone writing for a think tank can’t comprehend the basics of Wisconsin’s tax policy.
If you are going to steer your readers to outside sources, please make sure the outside sources are at least accurate. There’s enough misinformation out here on the internet without the responsible bloggers linking to it.
Posted by Recess Supervisor on May 18, 2009 at 1037 hrs
Noted and updated RS. (Without your level snark I might add)
Posted by Fred on May 18, 2009 at 1057 hrs
Noted and updated RS. (Without your level snark I might add)
Funny, there was a lot of snark in this sentence
Yes, you read that right, these big government fans think that if anyone actually manages to earn a profit on their investment that government should take all of it.
Here’s some more. It takes 2 seconds to realize how ridiculous it would be for a group to be advocating a 100% tax rate on any earnings. Yet the glee to spread such inane BS never seems to stop the modern day “conservative” from making outlandish and asinine accusations when it resembles their personal beliefs of what the other side must be professing.
Posted by .(JavaScript must be enabled to view this email address) on May 18, 2009 at 1203 hrs
Seeing every other tax that group advocated, it was not a large stretch, I corrected the posting.
Posted by Fred on May 18, 2009 at 1209 hrs
Good timing on this proposal. Now go read the WSJ on the Princeton study that showed that when NJ put a “millionaire’s tax” on its residents it lost millionaires to lower tax states.
http://online.wsj.com/article/SB124260067214828295.html#mod=djemEditorialPage
Posted by .(JavaScript must be enabled to view this email address) on May 18, 2009 at 1350 hrs
No Fred, it’s not snark to point out when someone is completely careless with the facts because they’re in such a hurry to validate their own position. Lefty bloggers do it too and it’s no better coming from them.
The internet is chock full of people who are heavy on opinions and light on facts. That you would even believe that someone would propose a 100% tax rate on capital gains shows only that when you read, you’re more concerned about seeing what you want to see than reading what’s actually there.
“Not a large stretch?” Are you kidding me, Fred? I mean, at 100%, there’d be zero incentive to invest and zero incentive to save. We could just shut the stock market down tomorrow and tell everyone to go home. Do you actually believe that’s a realistic position, even from the most liberal of liberals?
Posted by Recess Supervisor on May 18, 2009 at 1453 hrs
Do you actually believe that’s a realistic position, even from the most liberal of liberals?
Depends. I think there are a number of liberals who would support a tax very close to 100% for the “wealthy.” It wasn’t that long ago that our income tax was well above 70% for the “wealthy.”
Posted by Owen on May 18, 2009 at 1507 hrs
I should have said they are reeecommending a 150% increase, everything else was accurate, and I did make a correction.
Why not speak to that RS?
Probably because you support it.
(Owen, it was over 90%)
Posted by .(JavaScript must be enabled to view this email address) on May 18, 2009 at 1712 hrs
You seem to have to make lots of corrections, Fred. Not what one would expect from the “top blogger” of a policy institute.
Hope you’re well.
Posted by Tim on May 18, 2009 at 1738 hrs
Do the lefties intend to get on topic here?
Posted by .(JavaScript must be enabled to view this email address) on May 18, 2009 at 2107 hrs
The point is not what I believe, Fred. The point is that you can’t be bothered to take 30 seconds to fact check or proofread. And apparently nobody at MacIver bothers to check your work either.
I’m not going to defend a top rate of 70% - I think that’s far too high - but for someone who was in that bracket, there was a whole lot of income being taxed at rates far less than 70%. Worth noting. Surprised, Fred? I know your life is much easier when you make assumptions.
Here’s a question, though: what’s the argument for taxing interest income so much differently than capital gains? Both are passively earned. The only difference is when the earnings are credited. Why should we have a tax system that is effectively punitive when it comes to holding conservative investments like savings accounts and CD’s?
Posted by Recess Supervisor on May 18, 2009 at 2210 hrs
The point of the post RS is that taxes have implications.
Our taxes are already too high, deal with that.
Posted by .(JavaScript must be enabled to view this email address) on May 18, 2009 at 2302 hrs
Here’s a question, though: what’s the argument for taxing interest income so much differently than capital gains? Both are passively earned. The only difference is when the earnings are credited. Why should we have a tax system that is effectively punitive when it comes to holding conservative investments like savings accounts and CD’s?
Do you seriously want an answer? Level of return, potential rate or return and risk. I would say there is a big difference between earning 2.5-3.75% in a year vs. the 10-14% life average that the stock market has gotten. It is one of those progressive liberal things. Both are ‘free money’, but the more you make the more they can get away with taking.
Posted by .(JavaScript must be enabled to view this email address) on May 19, 2009 at 0743 hrs
Which is why we tax interest income at a higher rate relative to the rate one is paying on their income? Individuals get a substantial discount on their long-term capital gains but not on simple interest income.
So a savings account or CD at 3% gets taxed fully, but the 10-14% annual rate of return that the investor class makes deserves a huge tax break if you hold the investment for more than a year? Why is that warranted? Yes, there’s risk involved, but that’s a choice an investor wishes to make. Why should there be a government policy to reward it?
Posted by Recess Supervisor on May 19, 2009 at 0905 hrs
RS, I am not an investment banker so this is only my guess, but the longer money is left in the system, the better it works for the economy so the Government rewards that. It may be a factor in stemming short term ‘profit-taking’.
Interest rewards are pretty much safe sources of income. It is an addition/extension of money you have already presumably paid income taxes on so it gets the same rate. Interest really is ‘free money’ from a risk sense so the Governement feels it should get the same or about the same rate as the income tax that made the original money in the first place. Investing in the market carries significant risk, but it helps the economy exponentially the longer it can be used at a time. It is good business sense to reward the risk takers who are helping the economy the most.
When the market free fell for approx. six months, it wasn’t the poor who lost significant portions of their wealth and retirement funds.
Posted by .(JavaScript must be enabled to view this email address) on May 19, 2009 at 0954 hrs
Remember that the risk associated with any particular investment is tied to the likelihood of success. For example, government bonds have lower interest rates, but the likelihood of the money being paid back is very high. An investment in a start-up pharmaceutical or technology company carries a much higher risk, but also potentially much higher rewards. Government policy should not discourage either kind of investing. We need that bridge repaired, but we also need people who are willing take the risk to capitalize those who push the boundaries of our knowledge.
What high levels of taxation on investment income does is make the potential reward less valuable and investors less likely to invest. For example, let’s say that company X is working on a new widget that will revolutionize the widget market. As an investor, the potential reward could be to triple my investment. But it carries a substantial risk. As I do my internal calculations, I decide that the potential to triple my money is worth the high risk and put in $10,000. That calculation changes when the taxation comes into play. At a 33% tax rate, my upside potential is now only to double my money. That may not be enough to justify the risk of the investment. Now, for the same company to receive my money, they have to either reduce the risk or find a way to make the potential reward much higher.
Taxing income from investments is acceptable in my mind, but if anything, I think it should be taxed at a much lower rate than income. As a matter of government policy, we should encourage people to put their money into the economy instead of stuffing it in an offshore account.
Posted by Owen on May 19, 2009 at 1024 hrs
OK, my math is a bit off there, but you get the point
Posted by Owen on May 19, 2009 at 1044 hrs
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