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So you may be surprised at the number of jumbo accounts. Yes, the interest rates are minuscule, but at least the pile of dough gets bigger. Money in equities hasn't been able to say that lately (my 401(k) is down to around a 301(k) these days).
Lowering the capital gains tax further than it already is will simply benefit the rich and the super-rich, period. These folks will scoop up tons of stock at low prices, and enjoy the insanely low taxes. Everyday people will continue to struggle, since they don't have the spare funds to invest. Ugh. What world does this guy live in? Oh that's right... the kind of world where he doesn't know much much gas costs, how many cars he has, or how many houses he owns.
I am neither rich, or super-rich...nowhere near either of those actually. I do however have some stocks that pay a decent dividend, and if I can keep an extra 7.5% of that it will help to do things like offset increasing gas prices and/or the inflation we will see due to these bail outs.
If income tax rates cap at 350,000 and they lower that highest rate from 35% to 30% and I have $1,000,000 above the $350,000 amount then I'm going to save 5% on that $1,000,000 -- where the guy making $355,000 will save 5% on the $5,000 above the $350,000 amount. Rich guy "saves" more.
I don't think we should tax capital gains at all. I also don't think we should tax fortunes when people die.
I think we tax too much period. A third of every new dollar earned goes to the Federal government? And that doesn't include FICA, gas, hotels/phone, state and local taxes. It's insane.
wait, i think it does, to an extent....
let me rephrase that questions....
couldn't it also be argued that wealth "trickles" up?
Idea #4 - do we create a bigger whiplash at the end of 6 months? If so, is it being anticipated and coordinated with everything else that is planned? If we get people to stop paying attention to FDIC altogether, can we still go back and lower the limits?
If No changes were made to the laws, you would withdraw $25K and find out you had about 20% or possibly more taxes taken from your withdrawal ($5000) which means you actaually only get $20,000 becasue of the taxes you must pay on withdrawals from 401Ks.
Under McCains proposed limit of 10% tax on 401K withdrawals up to $50K, your $25K withdrawal would only be cut by $2500 tax bill instead of $5000 and give you $22,500. Thats a help for someone on a fixed income and $4.00/Gal gas.
This proposal would also give people another reason to save for retirement in a 401K since you dont pay taxes on the money going in and you get a break on the tax burden when the money is taken out during retirement.
Capital Gains tax cut?
As previously mentioned, mostly benefits the rich, and in any case, who exactly is making any capital gains on the stock market lately?
And the tax cut for senior citizens who want to tap into their retirement accounts early? Aren't we trying to inject capital into the market at the moment? It seems to me that all this will do is encourage people to withdraw capital from the market, making the current situation even worse!
Seems like a plan from a candidate increasingly desperate to patch up some votes rather than a coherent economic policy of any sort.
History has proven that every time an Administration raises Capital Gains taxes, the revenues from those taxes actually goes down. That's why Clinton reduced capital gains during his term and it's why Bush reduced capital gains further during his term. It's really actually quite stupid to raise capital gains tax as history shows it actually hurts both the economy and government revenue.
I see no problem with individuals being permitted to withdraw from their 401k, especially if it helps them stay out of Forclosure, for instance. Or, if they choose to invest in something "safer", like a long-term CD, let them!
FYI, if you make more than $31,987 (a low starting salary), you are considered to be in the "top 50%". If you make more than $64,702 (a respectable salary), you are in the "Top 25%"; and, btw, the top 25% are also paying over 86% of ALL income tax collected. I am not not rich, by any standard, but I do know that the "rich" in America pay the MAJORITY of all income tax collected.
Sources: 1 2 3
Capital gains apply to dividends also, and I'm still getting those since I pretty much only have stocks that pay dividends right now as a hedge against the market turning and the economy softening.
We shouldn't be discouraging people from investing. If we encourage more people to invest, then companies have more capital to expand, which creates more jobs, and rewards their shareholders and customers. Lowering the capital gains benefits the economy as a whole, which in turn generates more tax revenue (as others have already pointed out).
The only counter argument I have seen is from people who are jealous of a handful of rich people. The difference with executives who are paid in stock, rather than with a direct salary, is that their income is not a guarantee. If they manage their respective companies poorly, the stock will decline and their compensation will decrease. This creates a positive incentive for executives to do what's best for their companies, and their shareholders (which they are themselves). Raising the capital gains tax solely because you want to stick it to the rich is cutting off your nose to spite your face.
With McCain's plan, all employer provided benefits for healthcare become taxable income (the average cost nationwide for these benefits, including employer and employee costs, are $12k). Then, everyone receives a $5k tax credit. Based off of average cost, your marginal tax rate would have to exceed 41% for it to cost you any more, which means that most people would receive an even great tax benefit from this than they currently receive. This puts everyone on a level playing field.
I checked what it would cost for me to get as identical coverage as possible if I were to purchase my coverage on my own. I checked with my current insurer and the plan would cost me only $80/month more than my current premiums, and the total out of pocket would be cheaper after reaching the same deductible. My employer covers over $400/month of my premiums based on COBRA that I investigated, meaning that under this plan, I could go and get my own coverage and it would reduce my taxable income by another $3840. I think that this could truly remove the dependence that most people have on their employers for coverage, allowing them to get exactly what they want, and have it fully portable.
Maybe. But the problem is that this tax break encourages investing. More investing = more money for your employer. More investing = higher 401K value for all of us.
Rich people's selling to lock gains while the rate is still low = lower stock prices. I am sick of watching my 401k go down... Aren't you?
People who bash "trickle down" use generic words without looking at facts. Maybe tax breaks for your employer translate in higher raise for the CEO than for you, but lack of tax breaks for your employer definitely translate to no raise for you at best and layoffs at worse. Think what your employer is going to do when its taxes go up: reduce CEO pay or reduce your pay. I think prior history gave us the answer.
When people think how 250K is "rich" and they don't care because they earn less. I earn less too. But businesses that earn less than 250K don't hire people. Businesses that earn more than 250K do.
As to wealth redistribution - they tried it in Soviet Union. Didn't work out very well, did it?
The economy is horrible now. Raising taxes on investment will cause us - all of us, not just rich - can put it into depression.
When it comes to taxing the rich vs. poor, the rich always locate a way around it. Use a national sales tax, and the rich purchace goods through their companies. Use income tax, and they take stock in leu of a pay. There will never be a completely equitable solution. We can enforce some common sense. We can re-institute a long vs. short capital gains tax to encourage long term investments into our companies and curtail short term enrichment. We can treat dividends as standard income to encourge more companies to focus on long term stable growth rather than short term spurts.
Allowing penalty free 401K withdrawals, will only push today's mortgage problem into tomorrows going hungry (at retirement) problem. But we can artifically lower the interest rates on 401K backed loans. And if a we loose our job, those loans can be carried forward to the next job rather than suddenly having to cough up our 401k savings. The time period for repayment can be extended to 10years instead of the present 5. This will allow people to amatorize there debt over a longer period of time and increasing their personal cash flow.