Free Republic

Willie: Thanks for all the info, read most, agree with some, disagree with others. Is this rookie hazing?

Back to my point: Wealth can be described by listing assets, however, those assets can only be valued by markets, stock markets being an obvious example. Stock markets are driven by yield. If you change the capital gains rate, you change yield and hence the price of the stock. For example, what would the price of a stock be if the capital gains and dividend tax rates were 100%? (Assume that (1) The 100% rate will never change and (2) the owner of stock cannot control the company.) The obvious answer is that with no possibility of gain, the value would be zero. On a micro level, if you change the cap gains rate to 0%, you maximize both yield and price for the individual investor, whose "wealth" increases. (By the way, 0% corporate taxes [your paper] would have a compounded effect on price for those companies currently paying taxes.) The 17% increase in yield and stock market prices would have a very real secondary impact on the GDP.

Willie: GDP refers only to the economy's annual activity. The wealth of the economy (or its balance sheet, if you will) is my focus, and increasing national wealth by changing the tax code is my objective.

Willie: This is not about party politics, it is about how the capital gains rate effects the total value of the equity market. If Kerry was for 0% capital gains and Bush for 20%, my support would be for Kerry on this issue.

You'll note that the "Fat-Cat Tax" applies only to stockholders and will lower the national debt, by a little less than $1 trillion.

This is my first attempt at posting an idea that I've been working on for some time. I have a three page paper, but no idea how to proceed, since I'm a total blog novice. Any hints or links would be helpful.

Kerry wants cap gains at 20%. This means a 6% (80/85) decrease in return, and because markets are driven by yield, price of stock.

Bush at 0% offers a gain of 17% (100/85) in yield and price.

As pols lean toward Kerry market falls off 6%, because change is likely. As pols move toward Bush, stocks up but not the full 17%, because passage not assured in deficit environment.

Note1: If Kerry elected, stocks off 6% create a loss of $1.2 trillion or $240 billion tax losses. He will not breakeven over his 4 years.

Note2: Bush can pass 0%, by paying for it with a one time tax, as follows: The day before 0% goes into effect, tax accumulated capital gains at 15%, with payment over 4 years. Result $1-1.5 trillion in taxes, with stock markets up 17%, of $3.4 trillion, with faster growth to follow. Also opens the door for ownership and flat tax proposals.