# Clinton's cap gains tax proposal vs status quo **URL:** \ **Category:** Great Debates\ **Created:** [August 1, 2015, 3:24pm UTC](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730 "2015-08-01T15:24:36Z")\ **Posts on this page:** 10\ **Page:** 2
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [August 1, 2015, 6:49pm UTC](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730/21 "2015-08-01T18:49:15Z")
Well, let’s not be crazy here. The goal isn’t really to promote longer hold times on investment (though I believe that would be a good idea) but rather to increase the amount of taxes paid on the transfer of equities. I don’t see any increased [liquidity risk](http://www.investopedia.com/terms/l/liquidityrisk.asp) involved here, though. Stocks would still be liquid - subject to the three day limitation - under the proposed system as under the old. And it’s not like real estate or bonds don’t face the same or greater liquidity risk. In fact, I’d be willing to argue that real estate faces a higher level of liquidity risk simply because of what a drawn out process real estate transfers can be. Fun aside. A client once brought me some shares of oddball energy firms that his deceased father owned and the client inherited them. He asked me to sell them and add the proceeds to his portfolio. Simple enough. One of them was so thinly traded that moving 500 shares - what he’d inherited - ended up lowering the share price 38% in an afternoon. I kept getting calls from our trading floor asking if it was OK to lower the price another quarter. Now THAT’S liquidity risk. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [August 1, 2015, 6:50pm UTC](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730/22 "2015-08-01T18:50:41Z")
> [@Jonathan\_Chance](#): > > Those who hold investments beyond one year but less than six would see an increased tax rate. How many people that is I’m not at all certain. I’m sure someone knows. 53% of holding periods are 1-6 years, if I’m reading it right. > **[The Details of Hillary Clinton’s Capital Gains Tax Proposal](https://taxfoundation.org/blog/details-hillary-clinton-s-capital-gains-tax-proposal/)** > > Democratic presidential candidate Hillary Clinton has proposed a change in the top capital gains taxA capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in... That would, of course, change. The next pie chart shows expected holding periods based on CBO estimates of elasticity. Direct links to the charts: [http://taxfoundation.org/sites/taxfoundation.org/files/docs/holding\_periods\_under\_current\_law.png](http://taxfoundation.org/sites/taxfoundation.org/files/docs/holding_periods_under_current_law.png) [http://taxfoundation.org/sites/taxfoundation.org/files/docs/holding\_periods\_under\_clinton\_720.png](http://taxfoundation.org/sites/taxfoundation.org/files/docs/holding_periods_under_clinton_720.png) ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [August 1, 2015, 6:57pm UTC](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730/23 "2015-08-01T18:57:47Z")
> [@Jonathan\_Chance](#): > > Well, let’s not be crazy here. The goal isn’t really to promote longer hold times on investment (though I believe that would be a good idea) but rather to increase the amount of taxes paid on the transfer of equities. The stated goal is to change corporate behavior. The only revenue estimate linked to thus far in this thread shows an expected decline in receipts. Maybe it’s wrong. If you know something we don’t know, please share. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [August 1, 2015, 7:00pm UTC](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730/24 "2015-08-01T19:00:41Z")
No, no special knowledge. Just a certain knowledge of government and that stating ‘we’re doing this to increase tax revenue’ is a non-starter in a campaign year. ---
**Author:** ![watchwolf49](https://avatars.discourse-cdn.com/v4/letter/w/e9c0ed/32.png) [@watchwolf49](https://boards.straightdope.com/u/watchwolf49)\ **Post date:** [August 1, 2015, 8:03pm UTC](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730/25 "2015-08-01T20:03:12Z")
> [@Jonathan\_Chance](#): > > No, no special knowledge. That’s more knowledge than me. I used stocks and real estate in my example to show the two extremes of liquidity, typically stocks can be bought and sold quickly, whereas real estate is the very definition of illiquidity. The end result of your above mentioned experience is that your client had less money in his pocket. It cost him money to sell quicker than maybe it could have. I’m trying to frame this new tax proposal in the same vein, it costs money to sell a capital asset too soon. It seems added risk, I’m just trying to get a handle on what kind of risk this is. As a revenue source for the government it’s a complete failure. If there’s not strategies to get around this already there soon will be. This would slow down the number of taxable capital transactions, so it’s even possible to reduce tax revenues. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [August 1, 2015, 8:19pm UTC](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730/26 "2015-08-01T20:19:43Z")
> [@watchwolf49](#): > > As a revenue source for the government it’s a complete failure. If there’s not strategies to get around this already there soon will be. This would slow down the number of taxable capital transactions, so it’s even possible to reduce tax revenues. $18 billion decrease estimated. ---
**Author:** ![DinoR](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dinor/32/2821_2.png) [@DinoR](https://boards.straightdope.com/u/DinoR)\ **Post date:** [August 2, 2015, 12:30am UTC](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730/27 "2015-08-02T00:30:19Z")
> [@watchwolf49](#): > > It seems added risk, I’m just trying to get a handle on what kind of risk this is. I don’t see it strictly speaking as [risk](http://economictimes.indiatimes.com/definition/risk): > [@](#): > > Definition: Risk implies future uncertainty about deviation from expected earnings or expected outcome. Risk measures the uncertainty that an investor is willing to take to realize a gain from an investment. This doesn’t really create added uncertainty about the outcome. It takes a known chunk out of that expected outcome. Now because the tax rate varies with time it essentially makes the risk a bigger factor in certain time periods. For that period variance doesn’t go up it’s just that the expected net benefit is smaller. ---
**Author:** ![The\_Lurker\_Above](https://avatars.discourse-cdn.com/v4/letter/t/dc4da7/32.png) [@The\_Lurker\_Above](https://boards.straightdope.com/u/The_Lurker_Above)\ **Post date:** [August 2, 2015, 1:07am UTC](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730/28 "2015-08-02T01:07:05Z")
> [@Jonathan\_Chance](#): > > Third, General Mills _destroyed_ the S&P over the time frame (S&P topped at $1.7MM). Take _THAT_ index fund advocates!\*\* Just as soon as I figure out how to retroactively invest in General Mills circa 1972 I’ll stop buying index funds. 😛 ---
**Author:** ![OldOlds](https://avatars.discourse-cdn.com/v4/letter/o/a3d4f5/32.png) [@OldOlds](https://boards.straightdope.com/u/OldOlds)\ **Post date:** [August 2, 2015, 8:03pm UTC](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730/29 "2015-08-02T20:03:37Z")
> [@Jonathan\_Chance](#): > > …SNIP > > General Mills _destroyed_ the S&P over the time frame (S&P topped at $1.7MM). Take _THAT_ index fund advocates!\*\* Too bad Lawrence and Lorraine Luthor invested in GM in 1972. If only they had gone index fund… ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [September 7, 2015, 2:09pm UTC](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730/30 "2015-09-07T14:09:28Z")
I thought this discussion had died down in the media, but WSJ had a piece from a Cato Institute fellow which links Clinton’s proposal to one tried by FDR, which the author blames for all sorts of recession and doom and gloom. Regardless of whether FDR’s actions were responsible for economic catastrophe, I’m not sure I’d compare her plan to one that suddenly bumped the max cap gains rate from 25% to 63%. > **[Hillary Parties Like It’s 1938](https://www.wsj.com/articles/hillary-parties-like-its-1938-1441235230)** > > In The Wall Street Journal, Alan Reynolds says Hillary Clinton parties like it’s 1938—her capital-gains tax proposal has been tried before, by Franklin Roosevelt, with disastrous results. [Previous page](https://boards.straightdope.com/t/clintons-cap-gains-tax-proposal-vs-status-quo/726730.md?page=1)