The silver lining on the recent Nikkei downturn? Japan’s government eyes extending tax breaks; A sovereign wealth fund is proposed

7 Responses to “The silver lining on the recent Nikkei downturn? Japan’s government eyes extending tax breaks; A sovereign wealth fund is proposed”

1. Klemson on January 25th, 2008 10:02 am

   this proposal also calls for the setting up of a sovereign wealth fund.

   Think the fund managers will have to be approved by the parliament? That would be great.

2. young james on January 29th, 2008 12:59 am

   I dont really see how tax breaks on capital gains and dividends are good things, unless you’re saying that the only silver lining is the sovereign wealth fund. Pretty much every economist seems to be coming around on the idea that giving money back to the rich doesnt work to stimulate economies (on account that they save or invest elsewhere) whereas giving money back to the poor most certainly does(on account that poor people spend money, and being poor they spend it all locally).

3. Ken Worsley on January 29th, 2008 2:30 am

   james,

   I don’t necessarily see the sovereign wealth fund idea as the silver lining at all, I was referring to the tax break extensions.

   At some point in the future, the sovereign wealth fund would eventually collapse under its own amakudari-influenced mismanagement and be a complete disaster. In the meantime, it might be hella cool for news headlines.

   Anyway, as far as capital gains taxes go, I don’t see why they should be set higher than income taxes. Why penalize people for being involved in the nation’s capital markets?

   I’ve heard that people who are subject to the capital gains tax are somehow by definition those who can afford it (never seen anyone back this up with data, though).

   So, the capital gains tax is justified because market investors can afford it? That means current non-investors can’t afford it. That makes it a barrier to people trying to scrimp and save up enough money to buy funds or shares that could help them build a retirement nest, or whatever they aim to do. That sounds elitist to me, keeping a big segment of the population ‘out of the club’ by raising the barrier to entry so high.

   “Pretty much every economist…”

   Now that needs some major citation. “Pretty much every” would be over 95% of all living economists, so I’m not sure such a statement can even be backed up with data or research.

4. young james on January 29th, 2008 3:14 pm

   Alright, saying pretty much every is a reach… but there does seem to have been a massive sea-change about the effect of tax-cuts as an economic stimulus… I know that there have several studies of the last batch of tax cuts in america, that basically showed that the taxcuts aimed at lower tax brackets were the only ones that led to economic growth, i will try and find them for you when im not at work…. the only thing i have on my desk right now is this from Center for Budget and Policy Priority’s analysis , which i think was linked through NakedCapitalism a while ago.

   <>

   I would agree with you about capital gains tax, but umm, capital gains tax is anything but a barrier to entry into the market. Capital gains is by nature a tax on gains from the market… something you pay on the sale or exchange of a capital asset. Arguing that capital gains tax is a reason people dont invest in the stock market is like suggesting that income taxes are a reason that people dont enter the job market.

   Since the majority of capital assests owned by the average american are cars and primary dwellings (which arent subject to capital gains - well houses are after half a mil,) Capital gains tax basically amounts to a tax on gains made through the stock market or real estate.

   Now, like you I havent seen stats on who participates in the stock market in america, Im willing to bet its a small and exceedingly upper class minority.

   Now, if you want to argue that capital gains tax is an unfair tax on the rich, than thats a fair arguement to make, but then all progressive taxes are an unfair tax on the rich.

5. young james on January 29th, 2008 7:06 pm

   ah that didnt work, heres the quote

   “Tax cuts can provide effective economic stimulus, if — but only if — taxpayers spend quickly the resulting increase in their disposable incomes. This argues against proposals for across-the-board reductions in income tax rates or other tax breaks that would provide the largest benefits to higher-income taxpayers, who are likely to save rather than spend a substantial portion of any tax cut they receive. (At a recent Brookings Institution forum on stimulus, Martin Feldstein concurred that a temporary tax rate cut would not be effective as stimulus.) This also argues against tax cuts in capital gains or dividends, which would go even more disproportionately to those high up on the income scale.”

6. Ken Worsley on January 29th, 2008 11:20 pm

   Capital gains is by nature a tax on gains from the market… something you pay on the sale or exchange of a capital asset.

   As soon as one person says, “I’m not going to invest in (product X) because the tax on profit from (product X) is higher than the tax on (product Y)”, you have a barrier to entry imposed on (product X).

   Also, it’s not something paid on the sale or exchange of a capital asset, it’s something paid on realized profit generated by the sale or exchange of a capital asset. There’s a big difference. The first one is essentially a brokerage fee.

7. Kraig on January 29th, 2008 11:51 pm

   I don’t like any taxes, but I think the main reason is because of how badly the funds are wasted. What’s the point of paying higher taxes just to fund the deficit created by wasteful spending, pork barrel deals and cushy positions for former bureaucrats? I wouldn’t have a problem paying if I knew they actually went to something good for anyone other than the bozos in charge and their cadre.

Got something to say?