Fearing an increase in capital gains and dividend taxes, many of the rich are unloading stocks, businesses and homes before the end of the year.You and I can't do that, of course, as the invaluable John Hayward points out:
Wealth advisors say that with capital-gains taxes potentially going to 25 percent from 15 percent, and other possible increases in the dividend tax, estate tax and other taxes, many clients are selling now to save millions in taxes.
“Under almost any scenario, it makes sense to take the gains this year,” said Gregory Curtis, chairman and managing director of Greycourt & Co. “Clients aren’t selling willy nilly. But if they can and they have a huge gain, they’re selling now.”
The great asset sell-off also illustrates a lesson that class warriors have always been slow to learn. The wealthy are not only different from middle-income Americans in terms of the money in their wallets. The more dramatic difference is that the wealthy have far more options for responding to government policies, particularly taxes and regulation, than the rest of us do. Middle-class people cannot dramatically re-arrange their lives in response to tax increases. They have to make do with less, of course, but that’s not the same thing – it’s a response to changing conditions, not a deliberate strategy chosen from among many options.
But people who own a large amount of tangible assets and stocks can take deliberate steps to minimize their exposure to tax increases. At the higher levels, and in response to the most dreadful government policies, they have realistic options for leaving the United States altogether, or at least moving their assets overseas. These avoidance strategies, as you can see right now, are less economically productive than what wealthy investors and their asset managers would prefer to do with their money. They are far better investors than the architects of the Solyndra debacle. Their expenses and investments produce more stable, healthy jobs than central government planning does.
Emphasis in original I would differ with Hayward on one point -- class warriors never learn this lesson. While we won't know if tax rates on "the rich" will be going up for a while, the amount of revenue that these tax rates delivers will not be commensurate with what is needed to solve the deficit problems we face. And as always, we'll be told that the results are "unexpected."
7 comments:
I'm always amused by way the economic rightist in this country believe in their gut that there is only one way Capitalism works, and if the people don't conform to Her Absolute Will then us lowly worker drones are forever doomed to a pitiless misery we are too stupid to understand. I hear this dismal drumbeat even more now that the right is in fast retreat, licking their multiple wounds (most of which were self-inflicted btw) while flashing their once formidable now rather dull canine teeth. After what happened under the pathetic stewardship of this country under the Bush-Cheney fiasco, how could the people choose anything else but a complete repudiation of laissez-faire Wall St. reckless adventure capitalism? I'm shocked that the Republicans held onto the House, which without post census gerrymandering looks like they would have lost. What all these rightist economists, or more accurately put rightist economic speculators because from my sampling non of them seem to hold any advanced degree in the subject, seem to think is that the only measure of value in human understanding is money. Also in Mr. Hayward's piece was this nuget of reasoning:
"Thus far, “the most noticeable sell-off has been in stocks,” but another high-profile example cited by CNBC is George Lucas’ sale of his company, and its insanely valuable “Star Wars” property, to Disney. This move might have saved Lucas “hundreds of millions of dollars in taxes.”
Now, to some dollar sign struck monolithic humanoids, the reason Mr. Lucas sold to Disney was to save a few bucks on his taxes. Let's leave out the fact that Mr. Lucas has already pledged to give most of his fortune away to various education programs, we don't want to muddy the water with such sentimental foolishness. We are then left with the sense that Mr. Lucas' decision to sell "Star Wars" to Disney was strictly financial. I don't think even a magnificently shining intellect like Mr. Hayward would try and float that reason-boat across his heated lap pool. So when making financial decisions people think about other things than simply how much cash can I get out of it and how little do they have to put into the big government pot. Thank you Mr. Hayward, and by the transitive property (?) Mr. D., you make my point beautifully.
And always remember class warfare has worked any number of times around the world. When the scales get out of balance mankind's yearning for fairness as a species outweighs our sense of self-preservation and those that feel alienated from wealth and power will take it by force from those they perceive as their oppressors. History tells us this story again and again. The right seems willing to flirt with the tipping point; I prefer the long arc toward social justice.
Mark,
just curious: What is the proper rate at which to tax the wealthy? What rate will keep them happy and ready to participate in our little experiement here? Consider Mitt Romney: In the two years that we know of, he was paying between 12% and 14% on his carried interest. He wasn't paying any other federal taxes. If he were, we would surely know about it. Yet, even at these incredibly low tax rates, he still feels compelled to stash money away in off shore bank accounts and foreign tax havens.
Should we completely eliminate taxes on the very wealthy? Perhaps it would behoove us to bribe the wealthy to live here. Surely, we can't expect them to pay 12% on their millions!
BTW, who are the class warriors here?
Regards,
Rich
Just curious: What is the proper rate at which to tax the wealthy? What rate will keep them happy and ready to participate in our little experiement here? Consider Mitt Romney: In the two years that we know of, he was paying between 12% and 14% on his carried interest. He wasn't paying any other federal taxes. If he were, we would surely know about it. Yet, even at these incredibly low tax rates, he still feels compelled to stash money away in off shore bank accounts and foreign tax havens.
The election's over, Rich -- you can drop the Romney-bashing now.
I think you and our kulak-bashing pal anon (the "long arc toward social justice" is still bending after 50+ years in Cuba with no justice in sight) are missing the larger point here. The rich are going to do what they're going to do, especially when wealth can be moved with a couple of keystrokes. If you taxed the shit out of Romney on his coupon-clipping, you'd pay for the operations of government for what, an hour?
I assume you know all that. The best way to maximize tax revenue is to make sure rates are fair and predictable. I don't know what the optimal rate is. Neither do you or anon. What I do know is that people who have the means to resist confiscatory tax practices inevitably resist them. The point Hayward is making is that those of us who don't have accumulated wealth, which definitely includes both you and me, don't have those options. And when the "unexpected" and "disappointing" results ensue, someone else is going to have to pay. And it won't be the rich.
I have a feeling you guys are going to learn a few things in the next few years.
Now, to some dollar sign struck monolithic humanoids, the reason Mr. Lucas sold to Disney was to save a few bucks on his taxes. Let's leave out the fact that Mr. Lucas has already pledged to give most of his fortune away to various education programs, we don't want to muddy the water with such sentimental foolishness. We are then left with the sense that Mr. Lucas' decision to sell "Star Wars" to Disney was strictly financial. I don't think even a magnificently shining intellect like Mr. Hayward would try and float that reason-boat across his heated lap pool. So when making financial decisions people think about other things than simply how much cash can I get out of it and how little do they have to put into the big government pot.
Nice verbiage, but wrong, wrong, wrong. I don't give a damn what Lucas does with his windfall. It's none of my business. If he wants to give it to "various education programs," good for him! Wonderful! Huzzah! The point is this -- Lucas gets to decide what happens to the money. Not you and not the permanent bureaucracy in Washington.
Mark,
"The election's over, Rich -- you can drop the Romney-bashing now."
Hardly Romney bashing. I will leave that to Bobby Jindal, Grover "Poopyhead" Norquist, and to Mitt himself. He is doing a fantastic job of discrediting himself without any help from me. I used Romney to make a point, because we all know the numbers there, so he was convenient. But we also know that there are thousands of people like Romney, and trillions of dollars moving out of this country, even with the historically low tax rates that the very rich have been paying over the last 10 years. So stop kidding yourself that there is a magical tax rate at which many of these greedy bastards will stop trying to avoid paying any taxes at all. There is not. Moreover, you seem to be the one that is having a hard time learning from history. Not me.
Here is what we do know: Some of our best econominc growth in the last 50 years came about during periods when we had higher rates of taxation than we have had in the last 10 years. Note: see Ronals Reagan, John Kennedy and Bill Clinton.
Regards,
Rich
The Obama administration has never given a coherent, logical or substantive reason to raise tax rates other than going under the guise of "fairness." Heck, by the administration's own admittance, they know such hikes will do little to nothing in terms of deficit reduction. That's not even a goal.
But hey, let's just keep playing these gimmicky little games to appeal to low information voters while sliding towards insolvency as a nation.
I have a feeling you guys are going to learn a few things in the next few years.
My, how generous.
Here is what we do know: Some of our best econominc growth in the last 50 years came about during periods when we had higher rates of taxation than we have had in the last 10 years. Note: see Ronals Reagan, John Kennedy and Bill Clinton.
Yep, when we were eating the seed corn. And if I have one complaint about "Ronals" Reagan, it's that he kicked the can down the road just as much as the other guys.
When the historians who come on the scene 100 years from now take time to look back at the history of the post-war era, every single one of the presidents you named will come in for a lot of criticism. And rightfully so.
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