Comments on: Taxing Growth

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By: Brian Despain

Brian Despain — Thu, 28 Jun 2007 02:15:16 +0000

Sure. I doubt we will. On the other hand I believe we are probably both advocates for a much cleaner tax system such as a flat tax. It would allow you to eliminate much federal bureaucracy and undoubtedly increase federal revenues. While some people might be saddened by the loss of the tax preparation industry, the simple fact is it solely exists because the current tax system is inefficient.

By: Jeff

Jeff — Wed, 27 Jun 2007 18:21:16 +0000

Brian,
We can argue about this but the fact is that you and I are never going to agree. Having said that, I appreciate your comments, perhaps because you do disagree with me.

By: Brian Despain

Brian Despain — Wed, 27 Jun 2007 17:26:26 +0000

“Ultimately, I want capital gains and other highly progressive tax measures rescinded because Iâ€™m self interested. Any system that relies on 5% of the population for over half of the tax receipts is not a healthy one in the long run.”

The top 5% of the population owns roughly 60% of the wealth Jeff. That means their tax burden is proportional to the assets and income they have. It’s more a reflection of income and asset inequality than “socking it to the rich”

Sorry for the late reply I have been consulting with a software startup for the last two weeks and have been putting in long hours.

By: Jeff

Jeff — Sun, 24 Jun 2007 17:18:04 +0000

Paul,
I think the capital gain tax measures that Germany took were very enlightened.

Dennis,
I think you need to tread carefully when you start throwing around “tax evasion”. I can only speak to the U.S., and here when I avail myself of a legal tax exemption or some activity that induces a tax advantage, I am doing exactly what the tax code intends, embarking on a behavior because of a favorable tax treatment.

Granted there are abuses and that will always be a fact irrespective of how progressive or flat the tax code is. Greed is universal and persistent.

Your comments about offshoring take us into a separate discussion, but insofar as private equity is concerned, locating one’s fund in the Caymans is not likely to result in a wave of crime and human suffering. What it will do is shelter the income that fund is generating from U.S. taxes, or at least shelter the true income from prying eyes. A tax structure that encourages these funds to remain U.S. based will only be a good thing for both government regulators and for tax receipts.

Insofar as taxing growth, it’s common sense to encourage policies that encourage investment in growth producing activities, like R&D and business expansion. The resulting business activity will spur tax receipts that will exceed what would have been generated by the cap gains tax.

Lastly, in a global finance marketplace the lower taxes on capital gains will encourage inflows of capital into the U.S. because of the tax adjusted return advantage.

Ultimately, I want capital gains and other highly progressive tax measures rescinded because I’m self interested. Any system that relies on 5% of the population for over half of the tax receipts is not a healthy one in the long run.

By: Brian Despain

Brian Despain — Sun, 24 Jun 2007 16:48:10 +0000

Actually Jeff is also parroting the same Chicken Little argument we heard with the Clinton tax increases and deficit reduction efforts in 1994. We heard that the Clinton tax increase “would destroy the economy” from the WSJ and others. The simple fact is people who run hedge funds are taking advantage of a loophole so their effective tax rate is far lower than someone who say earns $150,000 per year.

By: Dennis Howlett

Dennis Howlett — Sun, 24 Jun 2007 09:03:07 +0000

Jeff: you’re treading in very dangerous territory. The PE tax breaks are just the tip of a very nasty iceberg. There is rampant tax evasion among the richer countries of the world, the corporation tax gap alone runs to $/Â£billions and there is nowhere near enough being collected to fund sorely needed social programs.

I’m not a fan of tax and spend or generally high rates of tax but governments around the world – especially UK/US are under severe pressure to put an end to the egregious practices of the Big Four in promoting offshore. And rightly so.

What you may not know is that offshoring is proven to foster corruption, money laundering and crime. Ad despite the case made for it in social terms, the reality is that the offshored nations DON’T benefit. Housing is the first issue.

But to the logic of your point – can you explain why growth should not be taxed if there is already a general system of taxation? What makes growth ‘special?’

By: Paul J.

Paul J. — Sun, 24 Jun 2007 08:50:14 +0000

Jeff, I’m floored. You saying “like in Germany” in a positive light!!!

On a serious note, the same tax discussion is going on here, for more than a year at least. Soon our carry will be taxed…I am convinced.

By: Jeff

Jeff — Sun, 24 Jun 2007 02:09:48 +0000

Brian,
I think that the cap gains tax should be like it is in Germany, 0%.

Considering that corporate income is taxed twice, I disagree that it isn’t onerous.