[FoRK] so is it for real now?
J. Andrew Rogers
andrew at ceruleansystems.com
Mon Oct 13 18:50:38 PDT 2008
On Oct 13, 2008, at 5:17 PM, Lucas Gonze wrote:
> What's the difference between old deliberate loopholes and new
> incentives, except for transparency? How were those loopholes
> anything but politicization?
In the original policy of yore, you could defer capital gains taxes
indefinitely by reinvesting the gains into most any small or medium
business that was capitalized to less than, in 2008 money, about $100M
(no idea what the precise state is at the moment). It was intended to
create a virtuous feedback cycle, where capital growth would be
invested in generating even more capital growth. It is easy to see how
this would work in places like Silicon Valley. Since capital and
capital growth pretty much define an economy, this was considered A
Good Thing. You still had to pay taxes on any eventual net gains, but
only if you stopped risking your capital in small-ish companies.
It was not a "loophole" per se, it was just economic policy that
encouraged people to either reinvest their capital in business
ventures or pay a lot of taxes. About as political-free as you can get
in a tax policy.
The proposed tax policy choice is "pick a government approved company
and never pay taxes" or "pay one of the highest capital gains tax
rates in the industrialized world". Gosh, I do not see any
possibility for unfairness, abuse, or unintended consequences at all.
That is a pretty damn big qualitative difference in terms of
politicization. It must be swell to be the investor who has the ear
of someone who helps decide who is currently "approved" and who is
currently "unapproved". It is a spectacular opportunity for
government manipulation and corruption, it is less economically
efficient than the old way on its face, and creates all manner of
perverse incentives that do not currently exist. Since when is it a
good idea for government to pick winners and losers in the venture
marketplace according to political whim? And it would be great to be
one of those well-connected people who never has to pay any capital
gains taxes. More simply, what could possibly be the justification
for using the new system over the old system? Is it the fact that you
would now be able to permanently exclude yourself from paying any
significant taxes? I thought Democrats were supposed to be against
this kind of banana republic government.
Seriously, is it that hard to understand? After being hyper-sensitive
to every perceived potential for corruption in the current
administration, is everyone suddenly blind to an obvious whopper
dumped right in front of them?
J. Andrew Rogers
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