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Politics : A US National Health Care System?
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To: J_F_Shepard who wrote (16394)4/8/2010 10:34:30 AM
From: TimF1 Recommendation  Read Replies (1) of 42652
 
The top 25 hedge fund managers averaged over 1 billion dollars each in income last year.....and they pay capital gains rates...

And this is significant in the context of dozens or hundreds of trillions of dollars of promises future spending because???

Lets say your reported facts are true. The 2011 long term capital gains rate is 20%. Lets say you bring the tax they pay up to 40%. Lets say the average is $2bil a piece. 20%*$2bil*25 is only $12.5 bil a year.

And that's before considering the actions they take in response to this tax. If your going to tax their income more, than instead of creating the quasi-capital gains that they take, they will just transfer the income to real capital gains, they will get a piece of the operation and sell it later. So your back to 20%

Well than you can raise the capital gains rate. Now you got them, they have to pay 40%. Well maybe not these people are rather sophisticated and will probably find some way to reduce their tax burden. But assume they can't, and that their activity doesn't change in any way. Fine you got your $12.5 bil a year, at the expense of generally discouraging and distorting investment across an economy more than a thousand times that size.

Which isn't to say you can't get money by raising taxes even if you avoid such foolish raises as raising capital gains taxes to 40%, but your talking small potatoes compared to projected future spending.

The problem isn't just that taxes don't meet the spending, the problem is the spending is too high. Having government at all levels spend 70+% of the GDP in the US, if it ever happens, is going to be hugely negative whatever tax changes you make.
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