Alan Cole for the Tax Foundation: One of the least effective features of Hillary Clinton’s tax plan is its sliding scale for the capital gains tax rate in the top bracket. Instead of having a single rate, taxpayers in the top bracket would have six different rates based on the holding period for investments.
Why create such an ugly-looking system with so many rates? Well, the idea is that CEOs are beholden to “activist investors” with an unreasonable short-term focus, and therefore they’re unwilling to make long-term plans.
This proposal, by mucking around with the incentives for some investors and pushing them to hold their capital longer, is supposed to change investors’ opinions and make them more long-term focused, and thus make the CEOs more long-term focused as well. If this sounds like a Rube-Goldberg contraption to you, you’re not alone …
But there’s an even simpler reason for skepticism: Investors trade short-term cash for delayed earnings all the time. In fact, that’s what investing is. If you really wanted all your money now, and none of it in the future, you wouldn’t be investing in the first place.
We can even see this preference in stock market data … If you invested $539 in 2015 in Amazon stock, your share of the company would get about $1 of earnings. Obviously, that’s a terrible deal. You’d do way better in the short term with virtually any investment you can think of. And yet, rather than dumping their Amazon stock, investors bought it in droves in 2015. In fact, the share price more than doubled.
So why did people like Amazon stock so much? They understood that Amazon was in the process of setting itself up for the long term, expanding revenues (though with low profit margins) on its Internet retail, and building a profitable web-hosting service that will deliver earnings in the near future.
The evidence from a firm like this is the precise opposite of what Clinton seems to believe. Investors are long-term people, by definition, and they’re happy to fund long-term businesses.
Ominous housing signs for minorities
Steven Brown for the Urban Institute: Under contracts for deed, the seller finances the home purchase, rather than a bank or traditional lender. Until the contract is paid in full, the seller owns the deed. The buyer won’t build equity and, in many states, can be legally evicted for a missing statement.
In the 1950s and 1960s, predatory contract sellers developed new rules, balloon payments and surprise inspections mid-contract to cause buyers to fall behind. Meanwhile, the sellers kept all the previous payments and would “resell” the house, starting the process all over again.
The New York Times recently published a series of articles showing that financial firms today are buying large bundles of foreclosed properties and reselling them under contract “as-is” at much higher price points and at interest rates approaching 10 percent …
Many of the properties sold under contract need work or aren’t valuable enough to be bought with traditional mortgages. Mortgages under $50,000 are disappearing, even though the number of properties worth less than $50,000 is growing …
Many potential home-buyers who would need to borrow to purchase one of these lower-value homes are locked out of the market. And it’s no coincidence that many of these home-buyers are black and Latino, the same groups trapped in the initial contract-for-deed boom.
Though the current contract sellers are not explicitly targeting minority home-buyers, they are selling to groups historically underserved by the conventional mortgage market and oversold to during the subprime lending crisis. And increasingly tight access to credit continues to hurt blacks and Latinos in the housing recovery.
Watch out for Big Farm
Leah Douglas for the New America Foundation: A generation ago, America’s farm and food economy was dominated by small family enterprises. Today, just four companies control 65 percent of pork slaughter, 84 percent of cattle slaughter and 53 percent of chicken slaughter.
Milk production is largely shaped by one large processor, Dean Foods, and one large cooperative, Dairy Farmers of America. Dean Foods’ national market share hovers near 40 percent, and DFA controls about a third of the national milk supply. Recent mergers, such as the Brussels-based Delhaize’s (Food Lion) acquisition of the Dutch company Ahold (Giant, Stop & Shop), have reduced the number of large grocers to four.
Such consolidated power has real effects on producers, distributors, workers, eaters and animals. Farmers face less competitive markets in which to sell their goods, leaving them vulnerable to any price offered by a buyer. Distributors and suppliers feel their prices squeezed as large retailers such as Walmart leverage their growing power over the supply chain.
Eaters are faced with an illusion of choice, wandering through supermarket aisles where dozens of seemingly competitive products might be owned by the same one or two food processors. Workers on farms and in meat-packing plants face pressure to increase production, sometimes at the expense of their safety. Animals living on factory farms are crowded into stifling barns, often receive unnecessary antibiotics and are susceptible to disease.
Compiled by Joseph Lawler from reports published by the various think tanks.
