<p>I thought that this was an interesting analysis of what to expect if the Democrats win a majority in Congress.</p>
<p><a href=“http://www.opinionjournal.com/weekend/hottopic/?id=110009166[/url]”>http://www.opinionjournal.com/weekend/hottopic/?id=110009166</a></p>
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<p>Man - setting tax rates at a level sufficient to balance the budget. What will those wild-eyed whacko Democrats think of next? Don’t they realize that our kids exist to pay off our debt? It’s great that we got this alert from the Wall Street Journal - America’s leader in the drive to make the disparity between rich and poor greater every year than the year before!
[/sarcasm]</p>
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Well, with 52% of the American public owning stocks, probably in IRA or 401 (k) accounts, you’d better hope your kids don’t mind supporting you in retirement. I’d venture a guess that most of the adults who post on CC – all of you lawyers, I’m sure – qualify as “rich.”</p>
<p>Yap, yap, yap.</p>
<p>The Dems would like to win the White House in 2008, and this year’s House class is going to want to win re-election then, too. They’re not going to do that by passing tax increases that affect a ton of people. Even assuming that the Dems get both houses of Congress – something I regard as unlikely – they will have razor-thin majorities and will be perfectly happy to hold lots of hearings and to pontificate about budget deficits. </p>
<p>Some of the other claims are laughable. The 52% of American households that own stock mainly own it in tax-free vehicles (and most of the stock they own isn’t significantly dividend-paying, or wasn’t until the recent tax changes). I would love to see the analysis that says that raising the tax rate on dividends has that kind of effect.</p>
<p>The Medicare Advantage plans are popular with seniors? I suppose so, after the massive waste of national time it took to match your favorite senior with a plan, and as long as your favorite senior doesn’t happen to be one of the 30 million or so who fall into the “donut hole”. (My wife is a senior official in a state department that runs an enormous state Medicaid system. The people there are thoroughly conversant with the health care financing system. As the initial deadline approached no one there had any idea what plan to advise their parents to choose. I spent hours doing what-if spreadsheets for my Alzheimer’s-affected mother-in-law.) The Dems’ claim has always been that better coverage could be provided more cost-effectively. Wouldn’t it be interesting to see them try?</p>
<p>In any event, there ain’t going to be no Democratic legislative avalanche until there’s a Democratic President, and the conditions under which that will happen will have a lot to do with what gets enacted (if that really happens). And even if the Dems do win the House of Representatives, it would be pretty surprising if they hold onto it into the next administration. Something tells me that the DeLay, Foley, and Reynolds districts are going to wind up back in the GOP column pretty soon, and if they don’t it will be because the Democrats elected there build a fairly clear record of voting their constituents’ views rather than Nancy Pelosi’s.</p>
<p>So . . . I expect to see Dick Cheney subpoenaed for a new hearing roughly every other day. Maybe there will be closure on the all-but-done deal to stabilize the estate tax (but maybe at a $3.5 million exemption level, not the $5 million expected last year). Maybe there will be some movement on AMT reform, since that’s a blue-state pocketbook issue. But other than that, nothing much.</p>
<p>The Dems won’t be able to do any of those things purported by WSJ, and WSJ knows it - it’s just yellow journalism, and pretty disgusting at that.</p>
<p>But it is true that the Dems are intellectually bankrupt (unlike the Reps, who are morally bankrupt.) Just try to get them to articulate trade policy, health care policy, immigration policy, Iraq policy, Cuba policy, North Korea policy and you come to realize very, very quickly just how bankrupt they are.</p>
<p>They WILL be able to hold hearings. Lots of them. Hearings until we are sick of them. Hearings on Abramoff and co. Hearings on Libby. Hearings on Halliburton and the missing money and the missing body armor and the missing guns. Hearings on the donut hole and the windfall profits for the pharmaceutical manufacturers. Hearings on Foley, and Delay, and Cunningham. Hearings, hearings, hearings. It wll never end. We will all be bored out of our trees. By the time it all ends, Pelosi will look like Denny Hastert (still not able to confirm that he is gay, but I’m still working on it). Now that’s a scary thought.</p>
<p>JHS, I’m not an expert on the stock market, but I think the issue is that if taxes on capital gains go up, then the market goes down. That affects anyone who owns stock, whether through a tax-free vehicle or just as an investment. Many of us plan to finance retirement through investments in the stock market. I’d like for us to retire sooner rather than later, and if the market tanks, that’s not likely.</p>
<p>Unless it’s super-cool Barack Obama or someone like that, if any more politicians come out as gay it’s going to kill the whole Gay Pride idea. If Denny Hastert is really gay, maybe everyone can give up and go home, and we won’t have to debate whether Queer Studies is a legitimate academic discipline anymore.</p>
<p>x-post: No one is talking about raising the tax rates on capital gains, at least as far as I know. The issue is the recent reduction in the tax rate on corporate dividends to equal the capital gains rate.</p>
<p>In theory, by the way, I support this, since double-taxation of dividends is clearly stupid and distortive as a matter of tax policy. I don’t think it matters much in practice, though. First of all, most non-public companies are set up as tax pass-throughs now (LLCs, S corprations), so dividend taxation is largely irrelevant to them. Public companies tend to have very low dividend rates, so even if raising the tax rate lowers the effective value of the dividend, you’re still talking about a small component of the value of the overall company. (And, believe me, a lot of the accumulated dividend-paying capacity of companies has been blown out in the past few years. No one has expected the “sale” on dividends to last forever.) </p>
<p>Companies also have lots of ways to turn dividends into capital gains, the most popular and simplest of which is stock buy-back programs. Instead of distributing $.10 per share to the holders of 10 million shares, the company buys back and cancels $1 million worth of stock on the open market. The economic effect on shareholder wealth is pretty much the same as a dividend, or a little better. Instead of everyone getting a little cash, some shareholders get a lot of cash and the rest get slightly larger (and thus more valuable) pieces of a same-size pie. But no one pays taxes on dividends. The ones who sell pay capital gains taxes, and the ones who don’t sell will pay capital gains taxes on the appreciation they received when they do sell.</p>
<p>Finally, even if raising taxes on dividends makes corporate stock less valuable, the alternative is the debt market, so that bonds should become slightly more valuable (because more in demand). So the overall effect on individual wealth is not just a decline in stock value; it could be a decline in stock value offset by an increase in bond value.</p>
<p>SJMom, minor tax changes do have a temporary effect on stock prices - but only that. In the long run, stock values rationally have to track actual profits and asset values of companies, and capital gains taxes really don’t effect those very much. If a tax change results in a significant downward market movement that means you had a bubble to begin with, which was just waiting for an event to let the air out. Everyone seems to think that the market runs on some kind of magic. In the short term it can be irrational; in the long term it isn’t. And modest changes in the tax on capital gains don’t create a rational basis for change in stock values. </p>
<p>A lot of clever arguments have been pushed advocating that it’s necessary to tax unearned income at a rate that’s less than is imposed on wages, but that’s more a credit to the persistance and good sense of those with the ability to push a position that is to their advantage than anything else.</p>
<p>Makes much more sense to tax assets.</p>
<p>Thanks to the do nothing Republicans I should be hit by the alternative minimum tax any day now. I don’t need Democrats to raise my taxes. :)</p>
<p>Well, somebody’s gotta pay for the Halliburton boondoggle, and better that it be you than your kids. ;)</p>
<p>Staying the course costs money.</p>
<p>Oh, our kids (and theirs) will still be paying off this misadventure, for the next 50 years probably.</p>
<p>To be honest, what really fries me is that the Republicans intentionally ran up the national debt while at the same time intoning sanctimoniously about the impending Social Security funding crisis. Talk about tying one hand behind your back just before you head into a fight! I guess tacking an extra zero onto the net worth of the nation’s multi-millionaires was a higher priority than making sure we, as a nation, can keep our promise to all the working men and women who have paid into Social Security all their lives.</p>
<p>mini, I want those who have misled our country to pay, but I could not agree with you more. Hearings and more hearings are just depressing to contemplate, particularly when there are very real problems that need solutions!</p>
<p>You don’t get them to pay by taxing their increased income, but by confiscating their assets.</p>
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Mini, I don’t know why you live in a Capitalist society. You seem to be the ideal candidate for a communist or socialist government. It’s too bad about the fall of the Soviet Union. I’m sure you’d enjoy all that collective farming and such.</p>
<p>I agree with Mini and JHS that if the Dems do win a majority - in either house - most of what we’ll see out of Congress will be investigations and hearings. Probably not to the excessive and obsessive lengths that the Republican Congress investigated everything Clinton did or was alleged to have done, but it will nonetheless probably be the primary focus for a couple of years. </p>
<p>To a certain extent that will be a good thing - some of the excesses and failures of the Bush Administration might have been avoided, or at least ameliorated, if we hadn’t had a lapdog Congress which simply whistled and looked the other way. I imagine that avoiding those investigations and hearings is probably the strongest motivating factor behind the Republican campaign effort right now. </p>
<p>However, the investigations will probably be taken to excess eventually.</p>
<p>sjmom, I’m not entirely sure what Mini is talking about (nothing new there!) but forfeiture of assets is an established policy for criminal violations.</p>
<p>" Quote:
Originally Posted by mini
You don’t get them to pay by taxing their increased income, but by confiscating their assets. </p>
<p>Mini, I don’t know why you live in a Capitalist society. You seem to be the ideal candidate for a communist or socialist government. It’s too bad about the fall of the Soviet Union. I’m sure you’d enjoy all that collective farming and such. </p>
<p>Courts confiscate assets for illegal activity all the time, and police do regardless of whether folks are even convicted. Putting that aside, if the goods are “ill-gotten gains”, what CAPITALIST sense does it make to reward those with them further by allowing them to increase their income based upon them?</p>
<p>You just don’t get it - you DON’T live in a capitalist society, and neither do I. You live in a corporate socialist one, where a single economic class owns the means of production, and controls government entities for their own ends.</p>
<p>mini - Touche!</p>