A stockbroker friend of mine insists that every time Kerry moves up in the polls, the stock market dips, because Kerry wants to raise the capital gains tax and that frightens investors. But I can’t find anything about that on his campaign website (http://www.johnkerry.com/index.html). Has anybody else heard anything about this?
The question is a bit confusing because I believe that right now the cut in the capital gains and dividends taxes that was passed last year is set to expire at some point in the future. (This was done in order to keep the projected cost of the tax cuts down to a level that was acceptable to those Republican moderates in the Senate who still thought that one had to pay at least a little passing attention to fiscal responsibility.)
So, the question would probably be whether Kerry favors letting them expire or whether he wants to make them permanent, a question to which I do not have a definitive answer at the moment.
As to what the stock market reacts to, most people are better at seeing patterns than the patterns are at actually being there. And, in fact, while Republicans like to think of themselves as the stock-market-friendly folks, I think that there are some who have produced evidence that the stock market has done better under Democratic Presidents than Republicans. Whatever!
For reference, here is the Washington Post article on the passage of the 2003 tax cuts. Here is some of what they said about the dividend and capital gains tax cuts in particular and the sunsetting in general:
Here is what a Money/CNN articles says in regards to Kerry’s and Edward’s plans for the dividend and capital gains tax cuts that they discussed in the primaries:
Sorry, here is the cite to that article.
This is my last past here for now…Honest!
jshore seems to have the facts covered. I’d say that I sure hope he raises them back to the level of income taxes as indicated. Pisses me off that income derived from actual work is taxed at a higher rate than income derived from owning wealth. Talk about your class warfare!
Amen! Then add in SS taxes and you have a real regressive situation for low income wage earners. I can’t believe people aren’t up in arms about this.
ALthough there is a lot of politcal and “class” reasons for this, one strong economic reason is that capital is most effective when it is liquid and able to move around easily. Capital gains effectively puts a large incentive to keep capital where it is.
This is just a sort of side question, but why does the government tend to refer to tax cuts as ‘costs’?
That would assume that the tax cut is money owned by the government that they are paying out to people, wouldn’t it?
Well, they refer to it as costs because the government has to budget and in dealing with budgets, this decrease in revenue shows up on the negative side of the balance sheet.
In the same way, my company thinks that paying my salary is a cost even though it is simply rightfully giving me the money they agreed to in exchange for my labor.
It is just a way of looking at money, catsix. A producer who looked to decreasing the sale price could easily look at a price-cut as a cost when using the current situation as a reference point. If a producer cut the sale price in an attempt to sell more and hence make more profit, but didn’t make more profit, then the price cut cost him money. Doesn’t mean it is “his” money rather than the future buyers’.
jshore got peanut butter on my chocolate!
I guess it just bugs me because it’s my money that I’m keeping that someone else is referring to as a ‘cost’.
It stands to reason that it happens everywhere, but it’s just not usually so vocalized.
Anyway, carry on with the debate.
Well, it is only really your money if you live on a desert island and don’t take advantage of government services. Otherwise, you have to pay the fees associated with living in our society because it ain’t money that you earned in a vacuum.
Yeah, that is all nice in theory. In practice it amounts to tax beaks for those who have large amounts of wealth. In theory, providing government funded health care would boost the economy by allowing workers to take more risks starting new businesses, but you don’t see the Republicans proposing that.
To put a slightly different spin on jshore’s response… the government has already spent those taxes that they had planned to levy on you. That money already belongs to the government’s creditors. It is only a question of when they come get it from you. Bush decided to gather this money by increasing the Birth Tax.
Well, it wouldn’t be necessary for him to have SAID it. It’s entirely possible that everyone thinks that everyone thinks that repub=cgt-reducing and dem=cgt-increasing, and trading accordingly, and hence the stock market dipping appropriately. Regardless of what anyone DOES think, what Kerry will do, what Kerry is likely to do, or what he’s said.
Am I too cynical? I just assumed that mentioning an issue like this could not gain any votes so neither candidate would say anything, but just hint that they would be nice.
This should be a sticky.
I’ve also heard it said that both can be true…it’s possible Dems are worse for business AND that the market does better under Dem. presidents.
It would involve the market being SO pessimistic about the incoming president that, while not doing very well, nonetheless beats the lowered expectations, producing a rebounding market.
Yeah, this is why the government’s attitude toward a tax cut bothers me. Because they (and you) will tell me that the money I worked to earn automatically belongs to someone else.
If I could pay the government by the piece, my share for the services I use, I’d do it that way. As it is right now, however, the government feels entitled to money to pay for services I don’t use and then looks at me like ‘well it wasn’t yours in the first place even though you earned it’ if I don’t like that.
That and their insistance upon taxing money that has already been taxed (inheritance tax, taxing money I make in the stock market on stocks I purchased with my already taxed paycheck), it kind of irritates me.
It also irritates me when local government enacts a tax that was voted down by the people so they can build a couple stupid ass stadiums to subsidize the pro sports teams that wouldn’t pay rent on their old stadiums.