Right Wing Finance

In an article titled Mutual Fund Tax Changes?, Lisa Smith at Investopedia has hi-lighted a proposed change to the tax law regarding capital gains distributions and mutual funds.

The idea is to make U.S. based mutual funds more competitive on an international market and provide a tax break to middle-class investors.

From the article:

“Mutual funds sold in the United States are required to pay out all capital gains at least once per year. The same isn’t true in Europe. Now, a think tank backed by the financial services community is pushing to eliminate the provision that requires U.S. mutual funds to make those capital gains payments.”

Makes sense to me, but there’s a catch:

“The group, the Committee on Capital Market Regulation (CCMR), released a report by Harvard professor John C. Coates that includes a set of recommendations for mutual fund regulators that includes eliminating the required yearly capital gains payout for all investors owning less than 2% of a mutual fund’s outstanding shares. Under this plan, the gains would be deferred until the fund is sold – exactly the way most other securities are treated. “

It would only affect those who have less than 2% of the outstanding shares – read: “the rich” will still be taxed.

It should come as no surprise to readers of this blog that I am against any tax the rich scheme because unlike the Marxists who currently inhabit the congress and the white house, I know that other people getting rich never took a dime out of my pocket.

I don’t hate the rich. I admire them because they have achieved something I have not. I also have sympathy for them because more often than not, they have sacrificed aspects of their personal and family life to achieve their status and those are thing I find more important than money. So, I don’t begrudge them their wealth.

But the funny thing in this article is that Ms. Smith doesn’t misses this point.

“The Coates recommendation would provide a tax break to those American rich enough to have large taxable mutual fund portfolios, and pump up profits at mutual fund firms. Neither of those results seems to be quite in keeping with the groups stated goals.”

Umm… huh? The tax break goes to those “owning less than 2% of a mutual fund’s outstanding shares.” That doesn’t sound like rich to me.

Then she really goes for the gold:

“Sure, the tax provision would help U.S. funds compete overseas, but remember that the U.S. fund industry isn’t exactly in dire straits. … the U.S. fund complex has a massive captured audience.”

This is the standard vilify wall street move. It doesn’t matter how much of an audience or market share they have. The point is that they can’t compete as well internationally without this recommendation being put in place. That’s the hypothesis anyway, and that should be the focus of the argument.

She ends the whole affair with a cautionary tale:

“Remember, we live in the land of the zero or near-zero savings rate. We’re not a nation of thrift savers being victimized by taxes regardless of how the CCMR seeks to position the issue.”

She makes a fine point about the U.S. savings rate, but I would like to point out that if the liberals in the Obama administration and Congress have their way, we will be a nation victimized by taxes.

• Democrats Still Aren't Listening. Only a few short days after the previously unthinkable loss of the seat once held by the liberal lion of the senate, Ted Kennedy, the Democrats are still not listening to the people - Senate Democrats Propose $1.9T Increase to U.S. Debt Limit. The loss of a seat held for......
• Why the Stimulus Failed. Democrats seem hell bent on illustrating the definition of insanity by trying yet another stimulus bill and expecting a different result this time. Personally, I think all this "stimulus" spending is just one slush fund after another. It's democrats making sure they have fund available to buy democrats who may......
• Bernanke: Recovery Will Be Slow. "A number of factors are likely to continue to weigh on consumer spending, among them the weak labor market, the declines in equity and housing wealth that households have experienced over the past two years, and still-tight credit conditions," Bernanke said. And that's not even taking into account the backwards......

• Why Vanguard Is My Favorite Mutual Fund Company Greedy financial institutions have gotten a lot of bad press lately.  From AIG to Goldman Sachs to Citigroup, all have been criticized for putting profits ahead of the interests of...
• What Happens When a Mutual Fund Goes Out of Business? Like any business, times can get tough. Once a company has more money going out than in, it must decide whether or not to go out of business. Mutual funds...
• Mutual Funds 101 One way that investors can pool their money is mutual funds, which allows them to invest together in a variety of different stocks. Each of the participating investors is charged...