[SK in CV]

[quote=pri_dk]This is an oversimplification. True, trading shares that have already been issued do not directly provide additional capital. What it does provide is liquidity – something that is essential in capital markets.

If there were not an active market for a security, investors would be reluctant to buy it because they would be concerned that they may have trouble selling it later. IPOs and other offerings would be much more difficult, and happen far less often.

A big reason that publicly-traded companies can issue stock/bonds/whatever to raise capital is that the buyers of these securities are confident that they are purchasing a liquid investment. The existence of active markets is what gives them this confidence.

So the vast majority of trading does not directly raise capital, but it does very much “have an effect on whether Ford expands their workforce or opens a new plant.” The liquidity of Ford’s stock makes it possible for Ford to issue more.

Securities markets do not exist simply to provide a venue for gambling. This is a popular myth, but completely incorrect.

One of the biggest reasons that the US is the most prosperous economy in history is that we have the most established and, in fact, transparent markets that have ever existed. These markets give companies the ability to easily raise capital, expand their business, and (this one’s for you CAR!) hire more employees.[/quote]

Agree with all of this. And should not have ignored in my comment. But my point was (which I also confess, I totally ignored in my comment) that lowering taxes (or raising them) on those with the highest income has virtually no effect on expansion of capital or creation of jobs. There is no shortage of capital for those purposes. The relatively highly efficient markets ensure that.

[SK in CV]

[quote=pri_dk]This is an oversimplification. True, trading shares that have already been issued do not directly provide additional capital. What it does provide is liquidity – something that is essential in capital markets.

If there were not an active market for a security, investors would be reluctant to buy it because they would be concerned that they may have trouble selling it later. IPOs and other offerings would be much more difficult, and happen far less often.

A big reason that publicly-traded companies can issue stock/bonds/whatever to raise capital is that the buyers of these securities are confident that they are purchasing a liquid investment. The existence of active markets is what gives them this confidence.

So the vast majority of trading does not directly raise capital, but it does very much “have an effect on whether Ford expands their workforce or opens a new plant.” The liquidity of Ford’s stock makes it possible for Ford to issue more.

Securities markets do not exist simply to provide a venue for gambling. This is a popular myth, but completely incorrect.

One of the biggest reasons that the US is the most prosperous economy in history is that we have the most established and, in fact, transparent markets that have ever existed. These markets give companies the ability to easily raise capital, expand their business, and (this one’s for you CAR!) hire more employees.[/quote]

Agree with all of this. And should not have ignored in my comment. But my point was (which I also confess, I totally ignored in my comment) that lowering taxes (or raising them) on those with the highest income has virtually no effect on expansion of capital or creation of jobs. There is no shortage of capital for those purposes. The relatively highly efficient markets ensure that.

[SK in CV]

[quote=pri_dk]This is an oversimplification. True, trading shares that have already been issued do not directly provide additional capital. What it does provide is liquidity – something that is essential in capital markets.

If there were not an active market for a security, investors would be reluctant to buy it because they would be concerned that they may have trouble selling it later. IPOs and other offerings would be much more difficult, and happen far less often.

A big reason that publicly-traded companies can issue stock/bonds/whatever to raise capital is that the buyers of these securities are confident that they are purchasing a liquid investment. The existence of active markets is what gives them this confidence.

So the vast majority of trading does not directly raise capital, but it does very much “have an effect on whether Ford expands their workforce or opens a new plant.” The liquidity of Ford’s stock makes it possible for Ford to issue more.

Securities markets do not exist simply to provide a venue for gambling. This is a popular myth, but completely incorrect.

One of the biggest reasons that the US is the most prosperous economy in history is that we have the most established and, in fact, transparent markets that have ever existed. These markets give companies the ability to easily raise capital, expand their business, and (this one’s for you CAR!) hire more employees.[/quote]

Agree with all of this. And should not have ignored in my comment. But my point was (which I also confess, I totally ignored in my comment) that lowering taxes (or raising them) on those with the highest income has virtually no effect on expansion of capital or creation of jobs. There is no shortage of capital for those purposes. The relatively highly efficient markets ensure that.

[SK in CV]

[quote=pri_dk]This is an oversimplification. True, trading shares that have already been issued do not directly provide additional capital. What it does provide is liquidity – something that is essential in capital markets.

If there were not an active market for a security, investors would be reluctant to buy it because they would be concerned that they may have trouble selling it later. IPOs and other offerings would be much more difficult, and happen far less often.

A big reason that publicly-traded companies can issue stock/bonds/whatever to raise capital is that the buyers of these securities are confident that they are purchasing a liquid investment. The existence of active markets is what gives them this confidence.

So the vast majority of trading does not directly raise capital, but it does very much “have an effect on whether Ford expands their workforce or opens a new plant.” The liquidity of Ford’s stock makes it possible for Ford to issue more.

Securities markets do not exist simply to provide a venue for gambling. This is a popular myth, but completely incorrect.

One of the biggest reasons that the US is the most prosperous economy in history is that we have the most established and, in fact, transparent markets that have ever existed. These markets give companies the ability to easily raise capital, expand their business, and (this one’s for you CAR!) hire more employees.[/quote]

Agree with all of this. And should not have ignored in my comment. But my point was (which I also confess, I totally ignored in my comment) that lowering taxes (or raising them) on those with the highest income has virtually no effect on expansion of capital or creation of jobs. There is no shortage of capital for those purposes. The relatively highly efficient markets ensure that.

[SK in CV]

[quote=jstoesz]Your statement about no evidence is bologna. As I stated previously, it can be hard if not impossible to tease out the effects of tax changes on the economy, but that is not the same as no empirical evidence. Anyone can plainly see that discouraging investment through increasing capital gains taxes will result in less investment. It’s not rocket science.[/quote]

No, it’s not rocket science. You are using intuition rather than evidence. I won’t dispute that your argument has intuitive logic. But history has provided little evidence it is accurate. To the contrary, there is strong evidence that maximum tax reveues are produced with top marginal rates above 60%, with no discernable decline in employment rates or availablity of capital.

[SK in CV]

[quote=jstoesz]Your statement about no evidence is bologna. As I stated previously, it can be hard if not impossible to tease out the effects of tax changes on the economy, but that is not the same as no empirical evidence. Anyone can plainly see that discouraging investment through increasing capital gains taxes will result in less investment. It’s not rocket science.[/quote]

No, it’s not rocket science. You are using intuition rather than evidence. I won’t dispute that your argument has intuitive logic. But history has provided little evidence it is accurate. To the contrary, there is strong evidence that maximum tax reveues are produced with top marginal rates above 60%, with no discernable decline in employment rates or availablity of capital.

[SK in CV]

[quote=jstoesz]Your statement about no evidence is bologna. As I stated previously, it can be hard if not impossible to tease out the effects of tax changes on the economy, but that is not the same as no empirical evidence. Anyone can plainly see that discouraging investment through increasing capital gains taxes will result in less investment. It’s not rocket science.[/quote]

No, it’s not rocket science. You are using intuition rather than evidence. I won’t dispute that your argument has intuitive logic. But history has provided little evidence it is accurate. To the contrary, there is strong evidence that maximum tax reveues are produced with top marginal rates above 60%, with no discernable decline in employment rates or availablity of capital.

[SK in CV]

[quote=jstoesz]Your statement about no evidence is bologna. As I stated previously, it can be hard if not impossible to tease out the effects of tax changes on the economy, but that is not the same as no empirical evidence. Anyone can plainly see that discouraging investment through increasing capital gains taxes will result in less investment. It’s not rocket science.[/quote]

No, it’s not rocket science. You are using intuition rather than evidence. I won’t dispute that your argument has intuitive logic. But history has provided little evidence it is accurate. To the contrary, there is strong evidence that maximum tax reveues are produced with top marginal rates above 60%, with no discernable decline in employment rates or availablity of capital.

[SK in CV]

[quote=jstoesz]Your statement about no evidence is bologna. As I stated previously, it can be hard if not impossible to tease out the effects of tax changes on the economy, but that is not the same as no empirical evidence. Anyone can plainly see that discouraging investment through increasing capital gains taxes will result in less investment. It’s not rocket science.[/quote]

No, it’s not rocket science. You are using intuition rather than evidence. I won’t dispute that your argument has intuitive logic. But history has provided little evidence it is accurate. To the contrary, there is strong evidence that maximum tax reveues are produced with top marginal rates above 60%, with no discernable decline in employment rates or availablity of capital.

[SK in CV]

[quote=AN][quote=AN]So those who prefer active income vs passive income prefer people working till they die vs being able to retire. After all, once you retire, you’re not making active income anymore.[/quote]
I don’t see how that can be a straw man argument? When you retire, do you have active income or passive income? If it’s passive, then it would be tax at a much higher rate. So, if you think it’s a straw man argument, then please clarify what one’s preference is if one prefer tax investment income at a much higher rate?[/quote]

Your assertion is uses binary assumption. If tax law shows preference for earned income, that preference must prefer people work until they die. It presumes that it is impossible to retire with preferential rates for earned income. Yet we had just those preferential rates from 1965 to 1981 and millions of people retired.

[SK in CV]

[quote=AN][quote=AN]So those who prefer active income vs passive income prefer people working till they die vs being able to retire. After all, once you retire, you’re not making active income anymore.[/quote]
I don’t see how that can be a straw man argument? When you retire, do you have active income or passive income? If it’s passive, then it would be tax at a much higher rate. So, if you think it’s a straw man argument, then please clarify what one’s preference is if one prefer tax investment income at a much higher rate?[/quote]

Your assertion is uses binary assumption. If tax law shows preference for earned income, that preference must prefer people work until they die. It presumes that it is impossible to retire with preferential rates for earned income. Yet we had just those preferential rates from 1965 to 1981 and millions of people retired.

[SK in CV]

[quote=AN][quote=AN]So those who prefer active income vs passive income prefer people working till they die vs being able to retire. After all, once you retire, you’re not making active income anymore.[/quote]
I don’t see how that can be a straw man argument? When you retire, do you have active income or passive income? If it’s passive, then it would be tax at a much higher rate. So, if you think it’s a straw man argument, then please clarify what one’s preference is if one prefer tax investment income at a much higher rate?[/quote]

Your assertion is uses binary assumption. If tax law shows preference for earned income, that preference must prefer people work until they die. It presumes that it is impossible to retire with preferential rates for earned income. Yet we had just those preferential rates from 1965 to 1981 and millions of people retired.

[SK in CV]

[quote=AN][quote=AN]So those who prefer active income vs passive income prefer people working till they die vs being able to retire. After all, once you retire, you’re not making active income anymore.[/quote]
I don’t see how that can be a straw man argument? When you retire, do you have active income or passive income? If it’s passive, then it would be tax at a much higher rate. So, if you think it’s a straw man argument, then please clarify what one’s preference is if one prefer tax investment income at a much higher rate?[/quote]

Your assertion is uses binary assumption. If tax law shows preference for earned income, that preference must prefer people work until they die. It presumes that it is impossible to retire with preferential rates for earned income. Yet we had just those preferential rates from 1965 to 1981 and millions of people retired.

[SK in CV]

[quote=AN][quote=AN]So those who prefer active income vs passive income prefer people working till they die vs being able to retire. After all, once you retire, you’re not making active income anymore.[/quote]
I don’t see how that can be a straw man argument? When you retire, do you have active income or passive income? If it’s passive, then it would be tax at a much higher rate. So, if you think it’s a straw man argument, then please clarify what one’s preference is if one prefer tax investment income at a much higher rate?[/quote]

Your assertion is uses binary assumption. If tax law shows preference for earned income, that preference must prefer people work until they die. It presumes that it is impossible to retire with preferential rates for earned income. Yet we had just those preferential rates from 1965 to 1981 and millions of people retired.

[SK in CV]

[quote=jstoesz][quote] little empirical evidence that rate changes, by themselves, either promote or reduce the availablity of capital or labor.[/quote]

This statement is just asinine. Rates change behavior…incentives and disincentives work. Small changes of the tax code are just too hard to tease out of all the other factors that go into the economy

If you tax labor at 100% you will get less labor then if you tax it at 90% and even less than if you tax it at 80% etc.

The same goes passive income and investing. Incentives work.[/quote]

We’ve never had a 100% marginal rate. At that level, I suspect you’re right. Since the middle of the last century, we’ve had marginal rates as high as 91% and for almost all of the last 50 years, the highest rate on earned income was 50% or less. During that period, there has been no empirical evidence that top rate changes, by themselves, either promote or reduce the availablity of capital or labor. Both investors and workers pursue the highest after tax income, regardless of the top marginal rates.

[Author]

Posts