Author Topic: Incentive for politicians to reduce capital gains and dividends tax to zero?  (Read 2540 times)

seattleite

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Maybe I'm just jaded and a little conspiratorial but what do you think was going on in the minds of congress when they lowered capital gains and qualified dividends taxes to zero?

It seems so strange because I would imagine so few people in the lower 2 tax brackets would actually be making any money in the form of capital gains for qualified dividends. (present company excluded, of course)

There had to be something the politicians gained from the change. It couldn't possibly have been altruistic. Is there some major benefit to having more people go after the same companies? To raise the price of the market so the people who are already in can sell for more?

I feel like I'm missing something because this seems too good to be true.

Tyler

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It seems so strange because I would imagine so few people in the lower 2 tax brackets would actually be making any money in the form of capital gains for qualified dividends. (present company excluded, of course)

I think that's sorta the point.  They want to encourage more people to invest.  More invested money is good for the financial industry and economic activity overall.  They lower interest rates for the same reason.

seattlecyclone

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Maybe they were assuming that most of the people to have capital gains income in the lower brackets would be (normal-aged) retired people, who tend to vote more regularly than the rest of us.

mohawkbrah

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wait what? did USA get rid of capital tax and dividend tax?! D:

matchewed

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Maybe I'm just jaded and a little conspiratorial but what do you think was going on in the minds of congress when they lowered capital gains and qualified dividends taxes to zero?

It seems so strange because I would imagine so few people in the lower 2 tax brackets would actually be making any money in the form of capital gains for qualified dividends. (present company excluded, of course)

There had to be something the politicians gained from the change. It couldn't possibly have been altruistic. Is there some major benefit to having more people go after the same companies? To raise the price of the market so the people who are already in can sell for more?

I feel like I'm missing something because this seems too good to be true.

The answer is generally quite complex and multifaceted. There is a component of incentivizing investment from people with lower income, the argument of double taxation on capital income, influence from lobbyists, selfishness, economic growth...etc.

Remember Congress is comprised of a multitude of representatives of the people. For as many people that vote yea or nay there will be as many reasons for it. We tend to try to paint it into one big stroke of reasoning; the truth is there is no one big reason but many.

Also not sure if this is the right sub forum for this discussion...
« Last Edit: May 26, 2015, 05:30:32 AM by matchewed »

forummm

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The primary motivations are that politicians in the US typically cater to those who are more well off (the donors) and those who vote (the elderly and the more wealthy). Studies show that actions of politicians in the US are generally not responsive to the interests of the lower income citizens in their district, but are highly correlated with the interests of the wealthy.

So who has a lot of capital gain and dividend income? The wealthy and elderly. If you have a diversified portfolio that provides $90k in dividends from the portion that's in your taxable account, you probably have $4.5 million PLUS whatever's in your IRA, and your house, etc.

If you're a middle-earning family, you probably don't have any substantial amount of funds in taxable accounts. But since huge numbers of people have 401ks with stocks in them, its easy to pretend like policies intended to help the wealthy donors are actually of benefit to the average joe--even though 401k dividends are not taxed, and the top 10% owns something like 50% of all the stocks.