John McCain lied to the American people about the capital gains tax, while Obama got it right.

[milkyway]

"Sen. Obama wants to raise the capital gains tax, which would have a direct effect on 100 million Americans," McCain said. "That means he has no understanding of the economy and that he is totally insensitive to the hopes and dreams and ambitions of 100 million Americans who will be affected by his almost doubling of the capital gains tax."

http://talkingpointsmeacmo.com/news/2008/04/mccain_calls_obama_insensitive.php

That is a completely false statement that certainly John McCain should know is not true. He said 100 million people in this country own stock, which I assume is true. Yes, they own stock, but they don't pay a capital gains tax, and never will!

The vast majority of those 100 million people only own stock through retirement plans like IRAs and 401Ks. They might own stock through these investments, but even when they withdraw money from them they do not pay capital gains tax. The only tax that might be placed on withdrawals are an ordinary income tax. They never pay a capital gains tax, so increasing it will never affect people with these retirement accounts.

A capital gains tax is for taxing the profit from the sale of an investment like stocks. But only a very small percentage of Americans--the elite--have these kind of investments outside of retirement accounts. Yet McCain, like Charles Gibson did during the so-called debate, said the 100 million people who own stock would be affected by an increase in the capital gains tax.

What's really hilarious is that McCain says Obama not knowing the tax affects 100 million Americans means Obama has no understanding of the economy. But it's Obama that got it right today on Fox:


But that's not something that's going to affect the average person with a 401(k) when people start talking about how, "Well, there are, you know, millions of Americans who own stock," most of them own stock in 401(k)s where their taxes are deferred and they pay ordinary income taxes when they finally cash out.

http://www.foxnews.com/story/0,2933,352785,00.html

Oh, the irony. Who has proven he has no understanding of the economy (which McCain has confessed to in the past)?

I'm just a typical American with no special knowledge of taxes or financial issues, but I do have 401(k) and IRA accounts. If the capital gains tax is such an important issue to the republicans, and I know the truth that 100 million people don't pay capital gains tax, then why doesn't John McCain? Is he lying to the American people, or is he just a dangerously ignorant out-of-touch elitist?
__________

No Capital Gains on Tax-Deferred Investments

Many people invest in stocks, bonds, and mutual funds through a tax-deferred retirement account.

Individual Retirement Accounts (IRA), Roth IRA, and 401(k) plans are examples of tax-deferred accounts. Your investment profits in tax-deferred accounts are not reported as capital gains. Instead, income from these accounts is tax-deferred until the money is withdrawn, and then the income is taxed as ordinary income. (Withdrawals from a Roth IRA may be tax-free if you meet certain requirements.)

http://taxes.about.com/od/capitalgains/a/CapitalGainsTax.htm

[LakeSamish706]

1. I don't think McCain lied, it was probably just short term memory loss.. lol

Edited to say:

McCain and Clinton probably went to the same school that teachs ya how to lie.

[BlooInBloo]

2. Less wordy version:

http://www.eschatonblog.com/2008_04_27_archive.html#9075769741537277471

"With talk of raising the capital gains tax in the air, you're going to hear a lot of conservatives and mainstream media folks blather on about how much this kind of thing is going to be so bad for the "middle class" or "even working folk" because everyone is invested in the stock market through 401K plans, etc. But the capital gains tax rate will never apply to that money. More than that, any capital gains from those plans will be, upon withdrawal, taxed at the income tax rate which for most people will be higher than the current 15% capital gains rate. So wealthier people who have direct investments in stocks and whatnot get to pay 15% on their capital gains, while the rest of us in lowly 401K land will likely be paying a higher rate."

[Yupster]

3. I would think that 1/3 of Americans own

a stock or mutual fund outside of their retirement plans. Wouldn't you think?

I sure hope so anyway.

[John Q. Citizen]

4. Since you don't know, it's kind of moot. But how many own stocks that have appreciated in value?

Many many stocks depreciate in value.

And of course there are no capital gains taxes collected unless there is a capital gain.

So owning stock doesn't mean you pay capital gains, unless you sell your stock for more than you bought it for.

[Yupster]

5. But don't most regular people own stocks

through mutual funds?

And mutual funds make capital gains distributions each year even if they lose money.

The funniest year was 2001 when many funds lost 10-15 % and still payed out a 10 % or more capital gains distribution. Boy did I get a lot of perplexed calls that year.

I'm a stockbroker.

[John Q. Citizen]

6. How do they gain capital if they lose money? That's an oxymoron. By your reasoning,

no one would ever lose money in the stock market.

They do pay the managers and the stock brokers, even if they don't pay the investors.

Is that what you are referring to?

[unblock]

7. mutual funds don't pay taxes on nav, they pay taxes on each stock position they close out

just like individuals.

if you close out your profitable positions (to take profit while you can) but hold on to your losing positions (to hope for a rebound), you'll pay taxes.

[Yupster]

11. Correct, and in 2001

The S+P was down 12 %, but many mutual funds sold many of their tech holdings like Intel, JDS Uniphase where they had made 500 % over the last few years. When they started to go down, the funds sold the positions which created large capital gains distributions even though the funds lost 10 % or more.

It was an unusual year, but those funds were proven right when stocks like JDS went down 98 % over the next few years.

[Spider Jerusalem]

9. Actually, no, most 'regular people' don't.

One wonders what your definition of 'regular people' is. (Hint: 'regular people', in most of the country, are not degreed white-collar professionals.)

[Yupster]

12. I admit I'm too close to the trees to see the forest

Obviously since I'm a stockbroker, every person I know owns stocks/ and or mutual funds, from the poorest to the richest. Every six year old I know owns mutual funds.

I have dozens of clients who barely speak English who own mutual funds. Oftentimes its just $ 2,000 worth with a $ 50 per month bank draft growing it.

Anyway, I know for sure that many, many regular people own mutual funds because I see them every day.

[Spider Jerusalem]

13. Six-year-olds can't legally own anything.

And again, this is an obvious question of your social milieu; you're a stockbroker, so your perceptions will be naturally biased by your associations.

[Yupster]

14. You're correct about six-year olds

It's actually their UTMA accounts which own the mutual funds. Their trustee controlls the account for their benefit until age 18 at least, maybe age 21 depending on the state and the trustee's decision.

[thoughtcrime1984]

10. I guess I'm not a regular person

I owe on a house, truck, personal loan, and credit card debt. To forgo extra payments on these high-interest loans, and put it in a stock market that is on the precipice of a steep drop, is foolish, in my estimation. I imagine most "regular people" probably do not trade stocks or mutual funds, because of lean times and loans that must be paid, loans that have higher interest rates than what a person can expect to gain in the market right now, or for the next several years. I'm in favor of raising the cap gains tax, to recoup large amounts of money from those who benefit most from the US' free enterprise system. The working class is not going to be affected by that, by and large. It makes a hell of alot more sense than raising income tax, which should be lowered for those making less than "x" amount of dollars. 75K is a number I have heard bandied about.

[Yossariant]

8. Obama got it right??!!!

:wow:

George Bush could have formulated a better answer and looked less like a deer caught in the headlights:

:rofl:

GIBSON: All right. You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, "I certainly would not go above what existed under Bill Clinton," which was 28 percent. It's now 15 percent. That's almost a doubling, if you went to 28 percent.

But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent.

OBAMA: Right.

GIBSON: And George Bush has taken it down to 15 percent.

OBAMA: Right.

GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.

So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

OBAMA: Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness.

We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year -- $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That's not fair.

And what I want is not oppressive taxation. I want businesses to thrive, and I want people to be rewarded for their success. But what I also want to make sure is that our tax system is fair and that we are able to finance health care for Americans who currently don't have it and that we're able to invest in our infrastructure and invest in our schools.

And you can't do that for free.

OBAMA: And you can't take out a credit card from the Bank of China in the name of our children and our grandchildren, and then say that you're cutting taxes, which is essentially what John McCain has been talking about.

And that is irresponsible. I believe in the principle that you pay as you go. And, you know, you don't propose tax cuts, unless you are closing other tax breaks for individuals. And you don't increase spending, unless you're eliminating some spending or you're finding some new revenue. That's how we got an additional $4 trillion worth of debt under George Bush. That is helping to undermine our economy. And it's going to change when I'm president of the United States.

GIBSON: But history shows that when you drop the capital gains tax, the revenues go up.

OBAMA: Well, that might happen, or it might not. It depends on what's happening on Wall Street and how business is going. I think the biggest problem that we've got on Wall Street right now is the fact that we got have a housing crisis that this president has not been attentive to and that it took John McCain three tries before he got it right.

And if we can stabilize that market, and we can get credit flowing again, then I think we'll see stocks do well. And once again, I think we can generate the revenue that we need to run this government and hopefully to pay down some of this debt.

GIBSON: Senator Clinton?