I'll know Tuesday if I should buy stocks
My friend Ania twittered recently that she bought her first stock. I thought, Good for her. I also got a little jealous because I hadn't done that yet (except for the ol' 401k). Given the bargain price of so many stocks, it's an enticing time to start investing. My plan has been to see where I sit at the end of the year and consider investing a bit of money in a few carefully selected stocks.
A thought occurred to me today, though, that says I'll probably know if I want to invest after the election on Tuesday. Barack Obama joked at one of the debates, in response to John McCain noting that Obama plans to raise capital gains tax, that no one was going to have capital gains this year. Cute, and true. For people who bought high, they probably won't have capital gains for a while. But for those of buying now, capital gains are going to come quickly if the stock market begins to rebound.
So should I put my money into a stock market when I know that, if I want to pull it out in a few years, I'm going to get hit with the government taking an even bigger portion than they already do? And for those who make more than $250,000 a year, the ones who would have to pay whatever the new top rate is (possibly as high as 28%, versus 15% now) and actually have the money to invest, won't this create either a disincentive for investment or a disincentive to trade?
By the way, if those realizing gains are not actively trading but instead sit on their gains to wait for a more favorable tax climate, the government isn't going to get the tax revenue anyway. And then you have to wonder where an Obama administration will go looking for funds...
4 comments:
you know what will always hold its investment? shoes.
and think of how happy it will make me?
beautiful shoes.
I think you're exactly right in saying that Tuesday will be a turning point for investing. From my perspective, I look forward to an Obama presidency, because though the cap gains tax may rise, I expect that he would do more than McCain to boost the economy through tax cuts for the middle class, the elimination of capital gains taxes on small businesses and startups, and investment in long-term innovations in the manufacturing sector, among other things. So while yes, the percent of my stock earnings that goes to the government would go up, I think those earnings would be much higher to begin with under and after an Obama presidency.
That aside, however, I want to argue against the rhetoric of being "hit with the government taking an even bigger portion [of my money] than they already do." That money is going to programs that benefit a) all of us and b) people who desperately need it. I'm not going Marxist here--I don't want to restructure our economy from the bottom up to redistribute every dollar every person makes evenly across the board. But if higher taxes on those of us making over the oft-quoted $250K means that children get the schooling they need, that seniors don't have to pay income tax on their retirement funds, that we actually can bail out the large corporations that hold our economy together but suddenly can't make it in this environment, that the bridges I drive over on the way to work are safe, that a young single mom in this great country of ours has better opportunities than a young single mom elsewhere--I'll take it. I guess I'm not asking you to agree that these programs are right, or worth it--just to acknowledge that they exist and that that is where the money goes. It doesn't just disappear into the ether, or into the pockets of some cackling politicians, once it leaves your hands.
I'm interested to hear how you expect McCain to improve the economy enough that you'd be excited about investing on Tuesday if he were elected. Thoughts?
I'm going to be dispondent on Tuesday no matter who wins. McCain doesn't have an answer that's all that great, either, and it's possible the votes would be there in the House and Senate to override a veto on various tax increases.
The fundamental disagreement is over how extensively government should be involved in the economy in the first place. I believe it should be minimally involved, a view not shared by Mr. Obama and only partially shared by Mr. McCain.
Government money may go to do good things, in some cases great things. What government often fails to take into account is the opportunity cost of such actions - does raising a tax on something cause people to do less of that thing, leading to lower revenues than had things been left alone, or even lowered. Data would suggest it does. Are people less prone to charitable contributions when they feel that tax revenue will "fix" whatever social ill they would otherwise contribute to?
I do think it's a false assumption to disbelieve that some - yes, not all, but certainly a bit - of that tax money does disappear into the ether. On the heels of the Ted Stevens indictment this week, we have to remember that the incentives of the governing don't always match their lofty language.
I completely agree that some of the money slips into the ether (or is hauled into it by the truckful). And I also agree that one has to take into account opportunity cost when considering raising taxes. But I believe that the balance between that cost and the one that results from only minimal governmental programs is farther away from the extreme "minimal involvement" side.
Yes, there we disagree--but thank you for clarifying that at least (most) of the money actually does go somewhere.
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