Former IBM CEO says Capital Gains should be taxed at 80%

[marmar]

Gerstner Says Short-Term Capital Gains Should Be Taxed at 80%
By Matthew Benjamin and Judy Woodruff


June 25 (Bloomberg) -- One of America’s premier business leaders, Louis Gerstner, decrying the culture of short-term greed on Wall Street, called for changes to investment taxes, including an 80 percent tax on short-term capital gains.

“If you buy something -- a stock or a bond -- in the morning, and you sell in the afternoon, the tax probably ought to be 80 percent,” said Gerstner, the former International Business Machines Corp. chief executive officer and former chairman of Carlyle Group, the world’s second-largest private equity firm.

“If you hold it for six months, maybe it ought to be 60 percent,” Gerstner told Bloomberg Television.

Selling an investment after five years should carry a zero rate “to try to get the incentives for investment to go back to being a true investor and not a trader,” he said.

Gerstner acknowledged that such a change would be “controversial” yet argued it is necessary to encourage investors to think about the longer term. The top tax rate on gains from investments sold within one year is now 35 percent.

“We do have a greed or an inefficiency that comes out of excessive focus on the short term,” said Gerstner, who bemoaned an investment climate driven by quarterly earnings and a 24-hour news cycle.

Gerstner, 67, also criticized compensation practices, saying “there’s been astoundingly unnecessary, excessive executive compensation in certain instances.” ..........(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=aFcXAGUYZSVw

[MannyGoldstein]

1. Absolutely

This addresses the biggest problem in our tax code.

[Atman]

2. 100% in agreement

:thumbsup:

.

[Warpy]

3. It would end abuses like naked shorting overnight

and hedge fund managers would soon find themselves on the wrong end of the Ponzi schemes they always were.

I have to agree with him.

Capital gains on stocks/commodities/real estate held for more than 6 months should be subject to the same sort of progressive taxation that labor income is.

[jmowreader]

19. Naked shorting is already illegal

I don't know how to stop it, but I do know how to punish it: 1000 percent tax on the total proceeds of the scheme. Payable immediately.

[surrealAmerican]

4. That's an interesting idea.

[Coyote_Bandit]

5. We've failed to recognize

the difference between traders and investors.

Traders hold securities/assets for a short time period. Investors hold them long-term. Investors ought to be encouraged with low/no capital gains taxes. Traders ought to be taxed heavily IMHO.

Of course, these proposals will be opposed by brokers who earn their livlihood through commissions and have an incentive to churn accounts. Responasible brokers don't do this of course. Portfolio managers on the other hand - professional investors who often are permitted to trade without client consent - are often limited to no more than 10% asset turnover in a year.

[paulsby]

17. i'm a trader. some of my trades last less than 5 seconds

i provide liquidity, and am a market participant.

note also that i put my capital at RISK.

should i pay a reasonable tax?

yes

80% ?

no.

why should i pay any higher tax on trades than i do on income?

because some people don't like traders.

[JVS]

6. "Selling an investment after five years should carry a zero rate"

yeah, he'd like that

[sinkingfeeling]

7. First and only good idea to ever come from Gerstner. I hated him when he came into IBM.

And he should know about executive compensation. Until his time at IBM, we had our CEO being paid about $500,000.

[NashVegas]

8. I'll Give Him That

It's not just stocks.

When you study the internet-entrepreneurial culture, it becomes rapidly apparent that most people in it are there hoping to cash out and go on to the next thing. Basic model: come up with an idea for a site/tech co; bring in investors; start-up; get huge publicity; sell it to a conglomerate.

[Gregorian]

9. Capital gains exemption is part of what caused the housing meltdown, in my opinion.

It is what put a fire under the real estate market. The day I heard there was a capital gains exemption, my property went up for sale. And so did a hell of a lot of others. It was the one thing that put the pedal to the metal in the real estate market.

It would slow things down to raise the rate. And slowing down is what the planet needs. But I have mixed feelings about it. I profited very well from it. But I don't think it's healthy. And another thing, until my government can be responsible with my tax money, I would prefer they don't get it. I want my taxes going to people, not bombs. But that's another subject.

[jmowreader]

20. An extremely small part

I've tried to come up with The Reason for the financial meltdown--it's not just housing, m'kay? The only thing that makes sense is, a massive, ongoing pattern of fraud and malfeasance by the world's financial institutions.

Let's see...

1. Construction industry builds nothing but large homes, because the builders' expected profit margins can't be attained by building 1500sf homes with vinyl siding and laminate countertops.
2. Real estate speculators flip a large part of the existing inventory into homes that cost more than they're worth
3. Mortgage industry uses vehicles like Interest Only and Negative Amortization notes to move this expensive inventory. These loans were not intended for general consumption--they're for two classes of people: realtors who want to pay as little as possible to hold retail inventory, and ultra-rich people who can do better financially by taking out a mortgage to buy a home than they can by paying cash for it. However, the loan sharks decided it was a good idea to put Joe Jones with his $32,000 annual income and no savings into one of these esoteric loans.
4. The industrial sector, which is now the importing sector because lots of their factories--which were the source of many of America's best-paying blue-collar occupations--have been packed up and shipped to China.
5. The financial derivatives market, which sees nothing wrong with securitizing mortgages into Mortgage Backed Securities, then securitizing those into Collateralized Debt Obligations, then resecuritizing those into CDO-Squared CDOs...after which Groucho, Harpo, Chico, Zeppo and Karl all take out insurance in the form of Credit Default Swaps even though the security they're purportedly insuring really belongs to Stan Laurel.
6. Jim Cramer. Enough said.

And you wonder why the country's in sad financial shape!

[chill_wind]

10. knr. n/t

[jgraz]

11. Or we could just have a sensible transaction tax

Assuming we ever elect someone who will stand up to Wall Street...

[FourScore]

12. Thank you for bringing sanity into the discussion. nt

[jgraz]

13. Well, I think we should start by asking for an 80% cap gains tax

And "compromise" on a 0.25% transaction tax. :evilgrin:

[FourScore]

14. You should work in Washington.

They're always looking for people with your skills.

:spray:

[JerseygirlCT]

15. Interesting idea

and it probably has zero chance of actually happening. But I like the way he's reasoned this.

[ddeclue]

16. I've been saying this for many years. Glad to hear that somebody with clout agrees. nt

[Az_lefty]

18. What a fucking Hypocrite!!!!

Lou Gerstner cam into IBM (where I use to work before being caught up in the culture of off shoring and layoffs) and orchestrated the biggest layoff IBM ever saw (which was quite easy, before this asshole, IBM didn't have layoffs). Now, after making a shit load of $$$$ he wants to act like he has a conscious? FUCK YOU LOU!!!