How to fix an ailing economy, Biden Style.
The economy is in slow motion, headed into a train. What is the correct policy answer?
1. Raise taxes by 3.7% and impose a minimum of 25% on the ultra-wealthy
2. Raise taxes on investments, in some cases by 19.7%
3. Raise taxes on businesses by nearly 10%
4. Hibernate until November 2024 and vote.
More fun with great policy ideas, below!
Economic policy to lower the cost of oil for US consumers?
1. Eliminate all tax preferences long enjoyed by the Oil industry right at a time when oil has become very scarce, one of the largest exporters has been sanctioned, our SPR is tapped, and prices at the pump are at very high rates.
How to increase real estate investment and continue improving the nation's housing stock?
1. Eliminate like-kind exchanges, a process that allows a seller to buy a new property within a specific period after the sale and roll the cost basis from the original to the new property, thereby not triggering a taxable event. For example, you sell a building for $100,000 that you bought for $10,000. You then find a new property, building C, that costs $110,000. You structure a like-kind exchange wherein you sell A, buy C, and in buying, you roll your cost basis from building A to building C. This is a decades-old, prevalent practice in the real estate industry and would adversely affect the market.
How to stabilize and legitimize crypto assets that so many millennials and younger are interested in?
1. Eliminate the ability to collect a loss when selling crypto for a price below what you paid for it, thereby removing your ability to offset any gains in that tax year from other crypto trades by the loss you incurred. Example: Buy BTC at 20k. Sell BTC for 19k. Buy BTC for 21k. Sell BTC for 22k—net Tax bill: 0 under current law. Under the new proposal, you would pay taxes on the 1k you made, with the loss having no impact on your declared earnings.
How to stimulate the innovation pipeline and the funding mechanism that has powered silicon alley and led to the formation of countless multi-billion dollar companies that employ literally hundreds of thousands of people and have made vast numbers of savers and pensioners huge sums of money, all while solving technological problems, in many cases for the betterment of society?
1. Eliminate the compensation payment treatment for managers operating private equity, venture, and hedge funds. Currently, any of the above funds raise money from a network of wealthy investors. They agree with the manager to commit their capital; the manager will invest that capital in exchange. To cover his operating expenses, such as legal, employees, accounts, etc., he will collect 1-2% of the total assets under management. A second part of the agreement is that if the manager reaches certain thresholds that his investors establish in structuring the deal to make the fund, that manager then collects anywhere from 10-25% of the total capital gains made by the fund.
How do they want it to work? Same as above, except instead of the manager paying capital gains tax on.... capital gains that he/she was entitled to, he now must pay income tax on those earnings. To be very clear, those are not wages. There is no guarantee of that money; in a bad year, he might make none at all, and if he has a negative year, he likely won't be able to collect carried interest until he reaches his previous high water mark and surpasses it. This structure, at its core, is about incentivization. If I get 20% of the earnings of a pool of money, I will do everything I can to advance the interests of that pool. So, in summary, these are not wages, they are not pre-determined, there is no guarantee they will get them, they reduce fees for investors - without carried interest, managers would increase their management fees to 5,6,7%+, they align the interests of the investment manager with the clients, and for carried interest tax rate to apply, the capital gains from the fund must be long term gains, meaning gains from securities held for more than a year. Gains less than that are taxed again, as capital gains, but short-term capital gains are the same rates that income taxpayers have to remit.
This destructive policy will upend one of the essential industries in the country in terms of advancing innovation, solving problems, allocating saved capital, and building wealth for countless people in this county, from independent savers, investors, and 401k holders, to pensioners. Not everyone necessarily has a stock brokerage account, but nearly every American has some of his lifetime net worth exposed to the stock market's performance. It will drive costs up for investors substantially. It will lower the incentive of the manager to put everything he or she has into the fund. It will likely reduce the size of the total fund universe, meaning less capital is being smartly deployed to emerging and potentially successful enterprises. This doesn't create much in the way of tax receipts. It's just an easy target - the big evil wealthy bankers. Parade them around, upend their long history of operating a certain way, and slap them in the face in the public square for a cheap thrill for the party's most loyal supporters.