a modest proposal -- 0% (and 100%) tax rates

[guyton]

After watching the Cramer video I've been wondering how to convert the stock market into a place for investors, where fundamentals actually are important and stock manipulation is very difficult.

Here's a modest proposal,

Tax short term capital gains at 100%, and
Tax long term capital gains at 0%

It's easy to understand, would allow for investments while avoiding most of the nuttiness of day trading.

What do people think? Good idea / bad idea?

Seriously, got a better proposal on how to reform the market? Obviously we can't count on the SEC doing their jobs since the current rules are apparently too difficult to enforce.

[dem629]

1. Bad idea.

Not all capital gains are achieved through manipulation. You're recommending amputating a hand b/c of a hangnail.

[guyton]

3. long term would be zero percent!

I'm not against long-term capital gains, I'm just saying that investments should be investments and leave the money for a year if you expect to keep the gains.

[dem629]

8. And short term would be 100 percent!

That would do nothing but shift the alleged manipulation to the long term side.

[guyton]

11. long term manipulation

the assumption is that manipulation on a long-term basis would be much harder than short term manipulation. Though you're right in that once you've held a stock for a year you could still float some rumors to temporarily spike the price. Hmm.

[Warpy]

2. No, just make them all subject to a progressive income tax

Small timers would pay little or no tax while hedge funds trying to manipulate the market would get socked for the maximum.

[guyton]

12. I like the progressive tax idea

Would seem to discourage massive swings in the market due to the 'rumor of the day' as well

[DS1]

4. -1

[MercutioATC]

5. Ridiculous.

You actually want to completely prevent people from making ANY short-term money?

What if I buy a house as an investment, rehab it, and find a buyer a month later? I have to turn that buyer away and wait until the sale is a "long-term" gain?

I invest in a company. Three weeks later, that company's major customer unexpectedly slashes their orders. I'm forced to hold stock in a troubled company or lose 100% of my gains?

You seem to think that ALL short-term gains should be eliminated. That's amazingly short-sighted.

[guyton]

9. yup!

How about buying a house to live in instead of flipping! The idea is to nuke speculation in favor of investing. They're different ideas.

The tax rate on short term gain would be 100% percent; if a company's major customer cut their orders I suspect your investment would be underwater and paying taxes on it wouldn't be the first thing on your mind.

[MercutioATC]

13. You seem to equate real estate investment with "flipping".

If people only bought houses to live in themselves, there would be a lot of renters without places to live. That aside, what issue do you have with buying a house, fixing it up, and selling it at a profit?

Exactly what problem are you trying to fix with this "solution"?

[guyton]

14. knee jerk market flux

The problem I'm trying to think about is the insanity of the marketplace. That a stock's price has no relationship to its fundamentals; that rumors and insider trading trumps running a business well. I get the feeling that the stock exchanges should be offering free drinks like most other casinos.

I have no problem with long-term investments (btw income from rentals isn't short-term capital gain, so that's not really an issue for investing in a rental unit ... unless you expect to be able to cash out with profits in under a year!?)

Re flipping a house -- I'm not sure it's inherently bad, but I think I'd rather see houses being available for low-income folks to buy and improvement loans made available for the owner/residents to fix it up themselves.

The 0%/100% is suggestion is obviously an extreme, the question is how to make the market rational?

[Kurt_and_Hunter]

6. And the government will cover 100% of your short-term capital losses, right?

It would be much easier to simply outlaw trading stocks which is what the proposal amounts to in practice.

[guyton]

10. no I said nothing about govt covering losses

losses would be counted as before

[Belial]

7. Bad idea and you are correct.. the SEC will NOT do anything

but blow a lot of air.. the new pick for the SEC chair is JUST as bad as the one that left.. sigh