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  • mike57dk mike57dk Mar 19, 2010 5:15 PM Flag

    My apology - error made on tax rate ..sorry

    Porkus - at the core of the debate between "progressives" and "conservatives" is the concept that TAXES dont change behavior ...

    Progressives from Nobel prize winner / Princeton professor, Paul Krugman, on down cant conceptualize that SIMPLE TRUTH that the BUSH tax cuts ...dramatically RAISED revenue to the government ....Krugman wrote a painful article where he admitted that reciepts to the US Treasury from taxes were GREATLY enhanced in 2002 and 2004 ...the years after the two famous tax cuts of the Bush administration but he claimed it didnt matter ...he was STILL RIGHT ...

    Obama / Pelosi and crowd estimate that they will get $35 billion from this new investment income tax ...never thinking that investors will simply CHANGE their behavior ....moving into municipal bonds / Option based funds and tax deferred annuities ...anything ...3.8% per year is almost like buying a LOADED mutual fund ...every year ...taking almost 4% off your expected investment return is HUGE ....the impact on a $100,000 base investment income over just 10 years would be ...$38,000 in new taxes ...on a risk based investment ....since we know that bear markets seem to come around every four years or so ....your taxes on $100,000 of investment income ..could EASILY exceed the overall rate of return ...hows that for thought ?

    My thinking is that the minimum ...investors will move more towards non-dividend paying issues ...why pay 3.8%...on top of capital gains rates that just jumped up 69% as well ....

    Opinion - The govt will NOT get $35 billion in new tax reciepts from this new tax classic LIBERAL GROUP THINK ....they will RAISE the rate ..trying to get even more ....

    Perhaps ... this grand experiment in social welfare / taxation will at least end the arguement ....and the basic truth is that TAX CUTS ...when properly applied ...bring in MORE money ....Raising taxes ... brings in much less ....

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    • Mike, two things I hope you can clarify for me. Isn't the new investment tax applied to those earning more than $200,000 as individuals and 250,000 as families? If so is it only on the income above those amounts?

      Second on option income Eaton Vance has an interesting article in the closed end fund section news and updates that indicates that option income funds generate a roc as a result of option sales and the resultant accounting.

      I follow your discussion about option taxation just wonder how it squares with the ROC which Eaton Vance states reduces basis and is untaxed at the time of receipt.

      In any event, thanks for the excellent posts and I think we are seeing just the tip of tax increases in this country. The ordinary citizen is so addicted to government support and pay so little in taxes today they all prefer more taxation and more services(since they aren't paying for them) Unfortunately cutting spending is a fantasy in modern America.

    • Really an interesting discussion ... thanks Mike and Porkus!

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