Thursday, October 9, 2008

Capital gains tax

I absolutely love Obama. I think he is a great public speaker, a great leader, and I agree with him 100% on social issues. I am from Oakland and went to high school in Berkeley, so based on my background I lean far to the left. Claremont did a good job at making me more open minded and more towards the middle, but I am still extremely liberal. However, while I am liberal I am also a realist and I agree with Barro's idea of presidential economic report cards, and I grade Obama's proposed economic policy an F+. I threw in the plus because I like him, but I believe that raising the capital gains tax is about the worst thing he could do in our current economy. For that reason alone I am on the fence as to who I will vote for in this upcoming election. It scares me that I might vote for a 72 year old who undoubtedly has to have some SERIOUS psychological issues, due to being tortured for five years in a Vietnamese prison camp. Not to mention voting for someone who has to have some health problems, due to the fact he is pushing 73 and the presidency isn't a stress free job and it's not like you can take month long vacations… whoops, I guess now that's ok, Bush did it… Speaking of health problems, what is even more terrifying is that if he gets elected and he kicks the bucket, then SARAH PALIN will be the president of the United States. I mean people think Bush is stupid… I can't think of anything more terrifying than a person who believes every single word in the bible is true and that living in Alaska counts as a foreign experience because it's so close to Russia. What is more terrifying than that woman becoming president? Perhaps raising the capital gains tax…

The capital gains tax is currently at 15%. Obama is planning on nearly doubling this tax. As the capital gains tax taxes peoples gains in an investment it could single handedly edge out many venture capitalist funds as the cost of doing business would be so high. Just say for example that a VC fund invests 100 million dollars in a company with a deal that the company must return the 100 million over 5 years, with an extra 50 million total, so about 10% a year. If everything goes according to plan this VC firm under Obama's rule would lose an extra 6 million dollars of profit. While that might not seem like much, it is a lot. As it is VC firms take on lots of risk and cutting into their profits by 10% would mean that the firm would have to take less risk and therefore due deals that would have less potential reward. If VC firms are crippled that hurts the country a great deal because private investment is how entrepreneurial ventures are started and without startups coming to life, our economy would suffer from not having the fresh blood. Lastly, if Obama is elected, that might spark a fire sale in the stock market. People who have positions that have a significant gain at the moment, would likely sell their position. If they wait until January they will have to pay back an additional 10%-15% of their profits. I completely agree with everything Obama wants to do except for raising he capital gains tax, yet that might be enough for me not to vote for him come November.

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