The Taxman Is Coming. But Stocks Will Worry About That Later
For now, the obsession du jour is still inflation soup. The recipe is a secret. As Dan Tarullo put it, "we do not, at present, have a theory of inflation dynamics that works sufficiently well to be of use for the business of real-time monetary policymaking."
But there are plenty of people who suspect they know what's in the soup. And almost everyone insists the unbridled issuance/creation of money without offsets (i.e., without borrowing or taxing to "pay for it") is inflationary. "How could it
As long as they do not tamper with the most sacred part of the tax code, the preferential treatment of carried interest.
Imagine the damage to the economy and society in general if private equity managers had to pick up and move somewhere or simply retired. Horrible!
Perhaps “the market” is right — earnings have not mattered very much for over 20 years. Why should they now?
The driving force of capitalism is capital not labor. Real wealth is created by leveraging capital. Labor leverage is minuscule and even shrinking more in the digital age. When a government doesn’t control the power of capital vs labor, the unequal distribution of wealth increases until the masses opt for a dramatic reset. In line with the new economic concepts of MMT, perhaps labor shouldn’t be taxed at all, only capital. I suspect that just the contemplation of such a thing will raise the blood pressure of some Capitalists.
You may have opened a line of reasoning that needs much contemplation.
“perhaps labor shouldn’t be taxed at all, only capital”
MMT would increase taxes and INTEREST RATES in the face of inflation, so your idea is at odds with MMT. In the long run you may have a view that may be more practical than MMT.
It seems that it comes down to the same old issue- who is the better allocator of capital?
Corporations/individuals or the government?
I absolutely think that our country should provide better education, healthcare and opportunities to earn a living wage to our people. However, it seems like we should be focusing on that goal and not worrying so much about taking something away from the very few who might have (subjectively) gotten “ too much”.
Would we tax Bezos because we don’t like what he does with his capital, but not Bill Gates because we like The Bill and Melinda Gates Foundation?
I think that should be an important part of tax policy as a guide socially positive outcomes. We should tax activities that produce negative externalities where the market cannot effectively price in the social costs. Similarly, there needs to be a regulatory floor in place as necessary. If we are going to have an economic system based on a competitive market, a minimum standard is required or it becomes a race to the bottom.
That should be – guide to socially positive outcomes.
How about an AMT for corporations that gross over, say $1 billion? So companies like AMZN, AAPL, etc. have to pay at least 5-10% of gross earnings (after their accountants have brought their tax bill down to what they pay now, which, I believe, is $0).
The devil is always in the details but a tax hike could have a positive read through for equities due to supply/demand impact on treasuries.