Feeds:
Posts
Comments

Archive for the ‘Capital Gains Tax’ Category

The G-20 gab-fest is in Canada this weekend, but Canadian taxpayers are definitely not winners. In a display of waste that might even embarrass a French politician, the Canadian government somehow is going to squander $1 billion hosting the event. I can’t even conceive of why such an event should even cost $10 million. Maybe hookers are very expensive up north. One interesting policy issue at the meeting is that the United States is siding with Euro-socialist nations in pushing a bank tax. Fortunately for taxpayers and financial consumers, the former communists in charge of Russia are helping to block this money-grab. This adds to the irony of Russia recently proposing to eliminate capital gains taxation while Obama (and the U.K.’s Cameron) are increasing the tax rate on entrepreneurship and investment. The world is upside down. The EU Observer reports:

With international eyes focusing on the potential ‘stimulus versus austerity’ scrap between different member states, Canadian citizens meanwhile have reacted in uproar at news that the weekend’s bill is set to total over $1 billion. Although 90 percent of that cost comes under the ‘security’ heading, it is a artificial lake intended to impress journalists in the press area that has come in for the heaviest criticism. The controversy may not be helped by the forecast lack of tangible results set to emanate from the two sets of meetings… The need for a global bank levy provides one the more concrete topics for discussion, but there is no guarantee that participants around the table will come to an agreement. “In the G20, the idea of a bank levy is not supported by at least half of the members,” Russian ambassador to the EU Vladimir Chizhov told a group of journalists on Friday morning in Brussels. “Neither is it acceptable to Russia,” he continued, arguing that banks would merely pass on the extra costs to their clients.

Read Full Post »

As the chart below indicates, the United Kingdom has a large budget deficit solely because government spending has increased to record levels (OECD data). Unfortunately, the new Tory-Liberal coalition government has decided that taxpayers should be punished for all the over-spending that occurred when the Labor government was in charge.

The Telegraph reports that the top capital gains rate will jump to 28 percent, up from 18 percent (the new government foolishly thinks this will result in more revenue). But the biggest change is that the value-added tax will increase to 20 percent. According to Business Week, the Chancellor of the Exchequer (the British equivalent of Treasury Secretary) actually bragged that the VAT increase was good since it would generate “13 billion pounds we don’t have to find from extra spending cuts.” Here are some further details from Business Week about the disappointing fiscal news from London.

British Chancellor of the Exchequer George Osborne increased the value-added tax rate to 20 percent from 17.5 percent in the first permanent change to the levy on sales of goods and services in almost two decades. “The years of debt and spending make this unavoidable,” Osborne told Parliament in London in his emergency budget today as he announced a package of spending cuts and tax increases to cut the U.K.’s record deficit. …“We understand that the budget deficit needs to be tackled but we think the focus needs to be cutting public spending over tax rises,” Krishan Rama, a spokesman for the industry lobby group, the British Retail Consortium, said in a telephone interview yesterday. …VAT has remained at 17.5 percent in every year except one since 1991, when John Major’s Conservative administration raised the rate from 15 percent to help plug a deficit.

The one tiny glimmer of good news from the budget is that the corporate tax rate is being reduced from 28 percent to 24 percent, which is probably a reflection of the strong and virtuous tax competition that is forcing greedy governments to lower tax rates in order to attract and/or retain business activity. There also is a two-year pay freeze for government bureaucrats, but this is hardly good news since a 30-percent pay cut is needed to bring compensation down to private sector levels.

Read Full Post »

The former communists running Russia apparently understand tax policy better than the buffoons in charge of U.S. tax policy. Not only does Russia have a 13 percent flat tax, but the government has just announced it will eliminate the capital gains tax (which shouldn’t exist in a pure flat tax anyhow). Here’s a passage from the BBC report:

Russia will scrap capital gains tax on long-term direct investment from 2011, President Dmitry Medvedev has said. …Mr Medvedev told the St Petersburg International Economic Forum that long-term direct investment was “necessary for modernisation”. …Its oil revenues fund, which has been financing the deficit, is expected to end next year, and the government wants to attract more foreign investment to boost the economy.

Sounds like President Medvedev has watched the Center for Freedom and Prosperity’s video explaining why there should be no capital gains tax. Now we just need to get American politicians to pay attention.

Welcome Instpundit readers!

Read Full Post »

The chart below shows everything you need to know about why the United Kingdom is a fiscal disaster. Over the past 10 years, the burden of government spending has skyrocketed from 36.6 percent of GDP to more than 53 percent of GDP. Taxes, meanwhile, have remained largely unchanged, averaging about 40 percent of GDP.

Since the OECD numbers show that the fiscal crisis in the U.K. is solely the result of a bloated public sector, the obvious solution is…you guessed it, higher taxes.

David Cameron’s new coalition government has announced support for a higher capital gains tax and is signalling that this will be followed by an increase in the value-added tax.

There are some proposals to curtail the growth of spending, including some pay cuts for Prime Minster Cameron and other political figures, but I will be very surprised if those amount to more than window dressing. The United Kingdom, I fear, has gone past the point of no return in the journey toward becoming indistinguishable from the decrepit welfare states so common in the rest of Europe.

Read Full Post »

Every economic theory – even socialism and Marxism – agrees that saving and investment (a.k.a., capital formation) are a key to long-run growth and higher living standards. Yet the tax code penalizes with double taxation those who are willing to forego current consumption to finance future prosperity. This new Center for Freedom and Prosperity video explains why the capital gains tax should be abolished.

Unfortunately, Obama wants to go in the wrong direction. He wants to boost the official capital gains tax rate from 15 percent to 20 percent – and that is after imposing a back-door 3.8 percentage point increase in the tax rate as part of his government-run healthcare scheme.

Share this post with your friends and neighbors. If enough people understand why the capital gains tax is a job killer that reduces American competitiveness, perhaps the wrong thing won’t happen.

Read Full Post »

President Obama is proposing a series of major tax increases. His budget envisions higher tax rates on personal income, increased double taxation of dividends and capital gains, and a big increase in the death tax. And his health care plan includes significant tax hikes, including perhaps the imposition of the Medicare payroll tax on capital income – thus exacerbating the tax code’s bias against saving and investment. It is unclear why the White House is pursuing these punitive policies. The President said during the 2008 campaign that he favored soak-the-rich taxes even if they did not raise revenue, but his budget predicts the proposals will raise lots of money.

Because of the Laffer Curve, it is highly unlikely that all of this additional revenue will materialize if the President’s budget is approved. The core insight of the Laffer Curve is not that all tax increases lose money and that all tax cuts raise revenues. That only happens in rare circumstances. Instead, the Laffer Curve simply reveals that higher tax rates will lead to less taxable income (or that lower tax rates will lead to more taxable income) and that it is an empirical matter to figure out the degree to which the change in tax revenue resulting from the shift in the tax rate is offset by the change in tax revenue caused by the shift in the other direction for taxable income. This should be an uncontroversial proposition, and these three videos explain Laffer Curve theory, evidence, and revenue-estimating issues. Richard Rahn also gives a good explanation in a recent Washington Times column.

Interestingly, the DC government (which certainly is not a bastion of free-market thinking) has just acknowledged the Laffer Curve. As the excerpt below illustrates, an increase in the cigarette tax did not raise the amount of revenue that local politicians expected. The evidence is so strong that the city’s budget experts warn that a further increase will reduce revenue:

One of the gap-closing measures for the FY 2010 budget was an increase in the excise tax on cigarettes from $2.00 to $2.50 per pack. The 50 cent increase in the cigarette tax rate was projected to increase revenue but also reduce volume. Collections year-to-date point to a more severe drop in volumes than projected. Anecdotal evidence suggests that Maryland smokers who were purchasing in DC in FY 2008, because the tax rate in the District was less than the tax rate in Maryland, have shifted purchases back to Maryland now that the tax rate in the District is higher. Virginia analyzed the impact of demand when the federal rate went up by $0.61 in April and has been surprised that demand is much stronger than they had projected–raising the possibility that purchasing in DC has moved across the river.  Whatever the actual cause, because of the lower than anticipated collections, the estimate for cigarette tax revenue is revised downwards by $15.4 million in FY 2010 and $15.2 million in FY 2011. Given that cigarette tax rates in neighboring jurisdictions are now lower than that of the District, future increases in the tax rate will likely generate less revenue rather than more.

Read Full Post »

The punitive class-warfare mentality of the left can be found buried in the healthcare bill. The Wall Street Journal dug deep and found a big capital gains tax increase. Ideally, there should be no double taxation of income that is saved and invested, which means the right tax rate is zero. Boosting the rate from 15 percent to 25.4 percent is a big step in the wrong direction, of course, and almost surely will lose revenue (and definitely will undermine growth):

Our job is to read bad legislation so you don’t have to, and on that score we may demand combat pay for plowing our way through the House health-care bill that passed on Saturday. …House Democrats are funding their new entitlement with a 5.4% surtax on incomes above $500,000 for individuals and above $1 million for joint filers. The surcharge is intended to snag the greatest number of taxpayers to raise some $460.5 billion, and so the House has written it to apply to modified adjusted gross income. That means it includes both capital gains and dividends. That surtax takes effect on January 1, 2011, or the day the Bush tax rates of 2001 and 2003 expire. Today’s capital gains tax rate of 15% would bounce back to 20% because of the Bush repeal and then to 25.4% with the surtax. That’s a 69% increase, overnight.

Read Full Post »

« Newer Posts

%d bloggers like this: