Trumped up trickle down or Clintonized?

[Pio1980]

Originally Posted by whell

The tree is capital as since it can be argued that the value is increased by human labor in this example. Also in this example, the tree is the "raw material". Raw materials are capital.

You're making sense.
Who are you and what have you done with whell?

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[donquixote99]

Originally Posted by whell

The tree is capital as since it can be argued that the value is increased by human labor in this example. Also in this example, the tree is the "raw material". Raw materials are capital.

Per this U Penn discussion, you are correct from an accounting and tax perspective, but by accounting definition, not due to human labor input.

Per classic economic theory, standing timber still does not seem to me to fit the idea of 'capital.' Stockpiled cut logs would be capital.

Land, timber, and equipment are the basic capital accounts usually maintained in forest operations. Assets placed in the land account include the land itself, nondepreciable land improvements, and depreciable land improvements. Because neither the land account nor the equipment account has elements unique to forest ownership, this discussion will focus on the timber account.

Timber has had long-term capital gains treatment under the Internal Revenue Code (IRC) since 1944. The Taxpayer Relief Act of 1997 substantially lowered maximum long-term capital gain rates from 28 percent to 20 percent. Under the Act, the rate is scheduled to drop further, to 18 percent for assets purchased and held five years beyond December 31, 2000. There are several major reasons for forestland owners to ensure that their timber sale proceeds qualify for capital gains status:

The maximum tax rate for long-term capital gains is only about half the maximum rate for ordinary income (20% versus 39.6%).
If taxpayers have a large capital loss, they can use it to offset a maximum of $3,000 of ordinary income. However, a large capital loss can be applied against any amount of capital gains.
Capital gains are not subject to the 15.3 percent self-employment tax on income realized from a trade or business (12.4% social security tax on income up to $72,600 for 1999, plus 2.9% medicare tax on all income). Taxpayers who materially participate in their forest enterprise may fall within this circumstance (see page 7).

http://extension.psu.edu/natural-res...estland-owners

[donquixote99]

Originally Posted by whell

The tree is capital as since it can be argued that the value is increased by human labor in this example. Also in this example, the tree is the "raw material". Raw materials are capital.

The definitional argument aside, would you care to comment on my main point, which is that to low taxation of capital gains, in comparison to taxation of income, can be an economic impediment to growth by over-incentivizing risk?

[whell]

Originally Posted by donquixote99

Per this U Penn discussion, you are correct from an accounting and tax perspective, but by accounting definition, not due to human labor input.

Per classic economic theory, standing timber still does not seem to me to fit the idea of 'capital.' Stockpiled cut logs would be capital.

http://extension.psu.edu/natural-res...estland-owners

We can agree to disagree here, 'cuz there remain examples aplenty. Ask the sod farmer, for example, if his grass is capital. But I digress.

To your earlier post, sure: the argument that, I think, sensible folks would have isn't whether or not financial gains realized from the conversion or appreciation of capital should be taxed. Its how much. I don't think I agree that "too little tax" on capital damps economic activity. But there are typically societal costs to the conversion of capital that can be paid for with a MODEST capital gains tax.

[Pio1980]

Determine the value of the labor or skill contribution to the resource is a consideration.
I don't think much of profiting from gaming economics without actually providing a useful trade, service, or product.


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[Pio1980]

Investment is ok get a return for providing capital, but the enterprise's primary priority should be their service/ product and their employees, rather than investors.

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[donquixote99]

Originally Posted by whell

We can agree to disagree here, 'cuz there remain examples aplenty. Ask the sod farmer, for example, if his grass is capital. But I digress.

To your earlier post, sure: the argument that, I think, sensible folks would have isn't whether or not financial gains realized from the conversion or appreciation of capital should be taxed. Its how much. I don't think I agree that "too little tax" on capital damps economic activity. But there are typically societal costs to the conversion of capital that can be paid for with a MODEST capital gains tax.

Sod of course is a crop. Standing timber is more like coal in the ground, tree farming aside.

And we must agree to disagree if you cannot see there are economic consequences to incentivizing taking capital gains over taking income.

[whell]

Originally Posted by Pio1980

Investment is ok get a return for providing capital, but the enterprise's primary priority should be their service/ product and their employees, rather than investors.

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In reality, I think its a balance. If you don't prioritize the needs of investors, you negatively impact market capitalization if you're a publicly traded company. But even in a publicly traded company, investors would support a business strategy that balances their needs against those of the customer and the employees if the strategy was successful.

On the other hand, if you want to strictly favor investors, take or keep the company private and pursue whatever business strategy makes sense. If the strategy works, customers will beat a path to your product and folks will want to work for a successful company that provides opportunities. If the strategy doesn't work, well...failed enterprises are not uncommon either.

[whell]

Originally Posted by donquixote99

And we must agree to disagree if you cannot see there are economic consequences to incentivizing taking capital gains over taking income.

Of course there are consequences, but you don't need a capital gains tax as the sole remedy to regulate that particular behavior.

[donquixote99]

Originally Posted by whell

Of course there are consequences, but you don't need a capital gains tax as the sole remedy to regulate that particular behavior.

What regulatory remedies do you prefer, and why are they better than a proper level of capital gain tax?