Missing for those in technology hoping to sell the company they build:
Capital Gains Rate is likely to increase from 15% to 23.8%
Capital Gains Rate is likely to increase from 15% to 23.8%
But the gist is that when you plot the capital gains rate and stock market curves on the same graph, there's no dependency, which is counter-intuitive. However,
1) Endowments, pension funds and 401k's don't care about capital gains tax rate as they're shieleded at 0%
2) Foreign buyers are exempt from US rates as long as they pay their home country rates and there's a double-taxation agreement in place
3) People don't choose to buy less, people just choose to sell less. Combined with fairly stable demand generated from (1) and (2) the price of quality assets actually tends to grow faster in high-capital-gains-tax years than in low-capital-gains-tax years.
What's correlated with higher capital gains taxes is brokerage profits - sellers don't sell as frivolously.
Investment vehicles, such as a 401k, do pay capital gains taxes just not on the sale they pay when the individual pulls the money out of the account.
You're arguing for less liquidity in the market? Liquidity is a good thing because it allows the market to more efficiently deploy capital.
PS... correlation does not equal causation otherwise the amount Chocolate eaten per capita has direct effect on the number of Nobel Prize winners.
Nope. First off, companies in the stock markets sell, too. Second off, tax-free vehicles are used for investments in private equity, venture capital, real estate, etc.
> Investment vehicles, such as a 401k, do pay capital gains taxes just not on the sale they pay when the individual pulls the money out of the account.
Nope. It's all treated as regular income at the time of withdrawal, so former and current capital gains rates have no effect.
I agree with your argument on liquidity - I don't argue for it, I'm just saying that net effects from increased capital gains are far more subdued than apocalyptic scenarios people usually attach to them. Excess liquidity also generates bubbles, so there's a fine line you have to walk where even though you can get a no-documents loan to buy up dozen of new real estate properties, you probably shouldn't.
In general, tax hikes are bad, because the government caries little responsibility (look how reckless they have been with our budget/deficit to date). Giving more tax money to the govt. is like giving a loan to someone with a horrible credit score.
Also, this technology agenda is horrible. It is not the government's job gamble tax-payer money on business ventures (even ones as appealing as "green tech") - leave that to VCs and free markets.
That the investor/owner portion of the tax burden will go up slightly from historically low levels doesn't belie the fact that the average American and small business owner pays even more in %.
Remember - during the roaring 90s we had a much higher rate - did that stop the Googles, Yahoos, Akamais, etc?
I think a few here would feel free to move their startups to -- Germany, with less than 1/3rd of the US' military expenses per capita [0] -- or Hong Kong, where mass transit is privatized [1] -- or Canada, where the number of lawyers per capita is 1/15th that of the US [2]. I dare say some have a positive view of all three of these statistics, despite them being technically "more Somalia-like". Not to say (not at all!) that militaries, infrastructure, and legal systems are useless and shouldn't be funded; but perhaps that they can be less funded (by taxpayers) with a net social benefit.
And that the statement "we should pay more to government agencies for the benefit of startups" is not immediately obvious.
[0] https://en.wikipedia.org/wiki/List_of_countries_by_military_...
[1] https://en.wikipedia.org/wiki/MTR
[2] https://www.law.harvard.edu/programs/olin_center/papers/pdf/...
Feel free to do so, as specified by another commenter - you'll end up paying about double to the German Government, then.
Good infrastructure and a fertile business market apparently requires taxes, apparently.
Also, neither HK or Singapore are very cheap. You don't pay taxes, you just pay more. A car in Singapore, for example, is around $100K every 5 or 6 years.
I'm very tired of Americans complaining about taxes when they have one of the lowest tax burdens in the world along with the lowest cost of living based on value.
And honestly, that would probably not even be that bad. One of the major reasons techies talk so much about immigration reform is that people with ideas want to go to the US because that is where all the money is because nobody wants to invest outside the borders due to a combination of many factors, but tax rate is always one of them. A higher capital gains tax rate makes other markets more appealing, and I don't have the exact numbers on what other markets would be most appealing at what % hikes, but I can't imagine taking the tax rate up to even 40% would drive investors out of US markets just on the basis of how convenient America is for tech entrepreneurialism already, it reduces a ton of the risk factors involved you described.