A simple way to Raise Revenue and INCREASE "job creating" investment

[degsme]

So how to raise revenue AND increase job creating investment is part of the challenge facing the legislators today.

Well a very simple first step, that requires ZERO changes in Marginal rates, would be to increase the Long Term Capital Gains holding period from 1 year to 3 years.


Lont Term capital gains investment is what funds Startups, and it is STARTUPS that create job growth, not just random small businesses. Most Small businesses DO LITTLE to GROW jobs. Instead they are "Joe's Mow and Go" and Joe having access to an extra 5% of his income isn't going to hire someone new until AFTER the economy has already improved.

Instead it is someone like my buddy who is starting up a new company to compete with Pintrest... who is hiring a developer, and then looking to get VC Investment to build out the rest of the solution. But their business plan only has them turning a profit 18-36mos into the product release.


So right now, the LTGC holding period DISCOURAGES that sort of investment. Furthermore what it really does is allow wealthy individuals who can invest large amounts of capital in fairly stable predictable growth capital assets, to cascade their investments in 12 chunks so that every month a "Long Term" Capital gains investment from the previous year comes to maturity and they just take that as Cap Gains rather than the monthly income it really is.

So what it effectively does is simply give the wealthy a way to pay 15% tax rate instead of the 35% tax rate that should be the minium on INCOME



So if the legislators simply reset the LTGC to 3 years, you would see MORE REVENUE as investors pay a full 35% rate on what really is just short term income investments (that's a 20% jump in revenue from this group)

AND it would INCREASE investments in REAL "job creating" "long term capital gains" - as some of those investors will shift to actual productive investments with 3+ year holding periods

 

[OldGaffer]

I am thinking 5 years. And get rid of the "carried interst" loophole forever.

 

[degsme]

Well "Time to Profit" on average for a startup is 3 years. We used to have LTCG at 5 years and for that to make sense you really have to set the benefit quite low (35%-50% below standard income rate) and that starts to distort the market

 

[OldGaffer]

It looks like no one wants to discuss job creation or reducing the deficit, it is much more important to discuss Benghazigate and the impending doom of the human race because Obama got reelected.

 

[Bluedog]

So how to raise revenue AND increase job creating investment is part of the challenge facing the legislators today.

Well a very simple first step, that requires ZERO changes in Marginal rates, would be to increase the Long Term Capital Gains holding period from 1 year to 3 years.


Lont Term capital gains investment is what funds Startups, and it is STARTUPS that create job growth, not just random small businesses. Most Small businesses DO LITTLE to GROW jobs. Instead they are "Joe's Mow and Go" and Joe having access to an extra 5% of his income isn't going to hire someone new until AFTER the economy has already improved.

Instead it is someone like my buddy who is starting up a new company to compete with Pintrest... who is hiring a developer, and then looking to get VC Investment to build out the rest of the solution. But their business plan only has them turning a profit 18-36mos into the product release.


So right now, the LTGC holding period DISCOURAGES that sort of investment. Furthermore what it really does is allow wealthy individuals who can invest large amounts of capital in fairly stable predictable growth capital assets, to cascade their investments in 12 chunks so that every month a "Long Term" Capital gains investment from the previous year comes to maturity and they just take that as Cap Gains rather than the monthly income it really is.

So what it effectively does is simply give the wealthy a way to pay 15% tax rate instead of the 35% tax rate that should be the minium on INCOME



So if the legislators simply reset the LTGC to 3 years, you would see MORE REVENUE as investors pay a full 35% rate on what really is just short term income investments (that's a 20% jump in revenue from this group)

AND it would INCREASE investments in REAL "job creating" "long term capital gains" - as some of those investors will shift to actual productive investments with 3+ year holding periods

That is a very reasonable suggestion. I see no reason people would object.

 

[degsme]

That is a very reasonable suggestion. I see no reason people would object.

Thanks BD... the sad thing is that much of the GOP establishment DOES object. The arguement raised by the likes of Lukey, is that a longer LTCG holding period reduces the tax benefit and thus the incentive to invest. Now of course that isn't the case buuuut ideology runs strong in that one (and others)