Social Security to See Payout Exceed Pay-In This Year

You can't demonstrate this. I would say the inverse is true. The sharpe ratio indicates that lower cap gains rate leads to a greater spread, and opens more investment oppurtunities to the middle class.

A higher rate would lead to fewer realizations which would widen the deficit.

 

I'm sorry. Did you not say that low capital gaines rates hurt the middle class?

 

why is it that people get penalized (by not getting tax breaks) for not wanting to gamble their money away on the stock market? All the stock market is is Vegas on Wall St.

I always wondered that, along with why homeowners get breaks, and renters don't. So i get a break if i am gambler, but i don't if i am not? What kind of backwards sh!t is that?

guess its kind of like going to vegas and getting your room comped if you are a high stakes roller?

 

Sorry for the delayed response. Had other things to do, and as you can see I'm also a wordy basterd...

Yes, if I have two investments (A and B) with the same fundamental return and I arbitrarily take some of the profits from A and give it to B, then B will be more attractive. But is it because B has actually performed better or is it because B is subsidized? The answer should be obvious. But you say...

Is there really more wealth? Yes and no. Over the long haul yes. Stock markets historically go up over time (although there is no guarantee for any particular situation). The problem is the time between here and there. They are called unrealized gains for a reason; they could disappear tomorrow. If they were completely real, we should be taxing on the basis of market value each year and not on realized value when sold. But when the stock market goes up, people who have stocks feel wealthier, but at the same time when it goes down they feel poorer even though their shares haven't changed. The point is that there is a pyschological component that plays an important role.

Wealth doesn't create jobs. Spending on goods and services creates jobs. The poor spend all that they have (more on this in a moment); the middle class spends or saves depending on their desires; and the rich accumulates because they spend what they want regardless because...you know...they're rich. Your bet is that because the middle class feels wealthier they will spend enough to justify the investment subsidy. I don't think this is a good bet for mulitple reasons.

First there is the problem with the starting place. The rich take the lion share of the subsidy and don't spend it, as evidenced by their increasing share of overall wealth.

Second, as already discussed, in the short term the wealth is created psychologically. When the market goes up, people feel wealthier and are more likely to spend more than they should, but the opposite is also true. When the market goes down, people feel poorer and they are more likely to less than justified. The point here is that this subsidy is injecting variability into the market (i.e. creating risk). This risk creates a lot of variablility in the job market. Is it a net plus? Probably, but does it justify the subsidy? Doubtful.

Third, the subsidy has to be financed. This is done by artificially lowering the returns on bonds and savings and reducing labor income (i.e. income taxes must be increased). One of the bad side effects of artificially lowering the returns on bonds and savings is that you encourage people to take more risk than many should. Risk taking is for people with long time horizons (i.e. the rich and the young). But by definition, the middle class is not rich, and the majority of the middle class assets are held by the older classes. There can be some very bad outcomes because of this. Yes there is a personal responsibily component, but if you don't believe that this exacerbates things, then you don't believe in free market principles.

WRT labor, everyone who is paid on the books pays income tax on every dollar. SS, despite the bull****, is an income tax. Receipts are put in the general fund to pay ongoing expenses. All the surpluses that generated the tax cut fever were entirely due to SS pay-ins exceeding payouts. The rest of the operating budget was in the red. There is no trust fund, no lock box, and republicans go ape-**** at the thought of paying back what is due (2.5 Trillion). For some reason they thought that the idea of giving the surplus back to the people who paid for it was a bad idea. What could have happened if they did?

The poor, without raising labor costs, would have more income and spend it on goods and services, or at least need less social services. The middle class would have spent some and saved some, and the rich would have been annoyed, but not worse off in any meaningful way. The money spent on goods and services would create jobs and wealth. Stock prices would increase because of real value creation and not subsidy. The psychological aspects of wealth creation would be tempered because of increased income and real value creation. The middle class would make better risk assessments of their portfolios. Overall there would be more stability in the job market and everyone would be better off.

Of course if you increase capital gains taxes now (i.e. take away the subsidy), you are going to see a negative adjustment. And they will scream and fearmonger relentlessly. But the important point is that this trickle down give me your money and I will make you rich is pure bull****; it's give me your money and I'll get richer. How on earth the middle class can't see this is beyond me.

All this said, I am not against giving tax deferrment breaks (bill due upon death of husband and wife) to direct capital investment. I just object to giving breaks to paper shuffling.

 

im pretty sure its to encourage business---loaning and borrowing money. you subtract interest you pay back on loans from your gross income. although only mortgage and student loans, i think, maybe business loans too.