Why the capital gains tax rate will remain forever low.

[jpljr77]

Long term capital gains (the selling of stock held more than a year, the sale of a business, etc.) and dividends are currently taxed at 15%. So if someone buys $100,000 of stock in a company and sells it 18 months later for $200,000, their tax on that transaction will be only $15,000.

President Obama has already signed TWO extensions of this 15% rate (and yes, it was lowered under Bush) under intense pressure from Congress. Why does Congress care so much?

Here's why:

http://www.stltoday.com/business/columns/david-nicklaus/article_088229a0-87ce-11e0-bffd-0019bb30f31a.html">A new research paper has identified a small group of investors who consistently beat the stock market over time, but its authors weren't studying hedge funds or mutual funds. They were studying Congress.

Four academic researchers, including James Boyd, chair of the finance department at Lindenwood University, pored through U.S. House members' financial-disclosure statements to determine when they bought and sold stocks. Despite some problems with the data, they were able to focus on 16,000 transactions by more than 300 representatives between 1985 and 2001.

Relatively few House members turned out to be stock traders -- at most, 27 percent of them made trades in a given year. The ones who traded, though, turned out to be uncanny stock pickers: Their purchases outperformed the overall market by more than 6 percent a year.

Interestingly, Democrats' portfolios outperformed those chosen by Republicans. The Dems beat the market by nearly 9 percent a year, but then, their party also controlled the House for 10 of the study's 17 years.

There's just too much money to be made to tax it fairly. As if you needed any additional prodding, the researchers sum up their findings thusly: "We find strong evidence that Members of the House have some type of nonpublic information which they use for personal gain." Duh.

It's disturbing that Democrats seem to be more willing to cheat than their counterparts. Or perhaps that discrepancy can be explained by the time in control disclaimer.

And just so you don't think it was just Congresspeople, there's this story today: http://dealbook.nytimes.com/2011/05/26/former-nasdaq-executive-pleads-guilty-to-insider-trading/">Former Nasdaq Executive Pleads Guilty to Insider Trading.

Donald L. Johnson had a privileged role at the Nasdaq Stock Market. When companies that trade on Nasdaq wanted to understand how impending news would affect their share prices, they would consult with Mr. Johnson, who was a senior executive on the exchange’s so-called market intelligence desk.

Over a three-year period, Mr. Johnson took that secret corporate information and, directly from his work computer, traded in an online brokerage account in his wife’s name, reaping illegal profits of about $750,000.

Too many people with power over traders have got their grift on. There's just too much money to make to ever fairly tax capital gains.

[Hubert Flottz]

1. "The Rat Takes The Cheese"

"The Rat Takes The Cheese"

[ejpoeta]

2. you or i would be sitting in prison. why aren't they!!! congress should not be allowed to

trade stocks then. just like employees of radio stations can't participate in contests, congress should not be able to play in a casino when they know the tricks.

[jpljr77]

3. Agree 100%. No stock trades for sitting members.

If they held stocks before being elected, great. Then hold them for their duration in Congress or sell them before being sworn in. But no buying or selling of stocks while in office. Period.

The study does point out that, to their credit, members of Congress largely abide by this dictum. Only 27% of House members made stock trades in any given year. So at least most of them see that it's a slippery slope and just stay away.

[w4rma]

4. That is where the money is, so that is what needs to be taxed to eliminate the deficit. (nt)

[jpljr77]

5. Absolutely.

The fear from Congress is that the Wall Street money would flow away from the party that proposes and passes such a measure. And that fear is probably founded. But the larger macroeconomic, "unintended consequences" fear is that passing a larger tax on capital gains (like recognizing them as ordinary income) would cause a market crash as investors would pull their money out of U.S. investments and put them into places where taxes were lower. This is a silly fear, imho, because a nice gain is still a nice gain, no matter what the tax on it is.

[FormerDittoHead]

6. They'll probably just take away the exemption for seniors to sell their homes w/o paying any. n/t

[blindpig]

7. Simple truth: the economic dominates the political

Material conditions are what moves the world, all else follows. And that's why we must put an end to capitalism.

[ThomWV]

8. I don't mind low rates on capital gains, but dividends/interest should be taxed as regular income

[kenny blankenship]

9. Because our "representative" form of government

has hard coded into it, a bias to elevate capitalists and their interests to special status as the group which represents the whole of society and society's interests.

In our system, MONEY has always been political speech (the Citizens United decision just underlined that) and those with the most money get the most political speech.

It will be like this until there is a revolution.