LION on Windfall Profits

LION is a financial... ah... non-entity. Him can count wildebeests but beyond that what does him know? Nothing. But that has never stopped the LION from commenting on any subject.

LION looks at the stock market, and him sees two different kinds of investors.

The first kind of investor is the one who buys stock in a company because he wants to own a piece of the company and wants to profit on his investment through the receipt of dividends. He is an owner of the company and he shares in its profits and can loose his bun if the company goes belly up. At least when a wildebeest goes belly up the LIONS and the vultures can gnaw on the carcass. Not so if you corporation goes down.

The second kind of investor has no stake in any company. He buys and sells stocks and hopes to profit on market trends.

Now the LION will look at capital gains tax, the so called windfall profits tax.

The LION postulates that the first kind of investor should not be subject to a capital gains tax. He pays taxes on his received dividends and that is that. But how can you tell the first kind from the second kind. Time. A stock held for more than four (maybe five) years is not subject to capital gains, or inheritance taxes. By stock, the LION includes individual businesses, family businesses, family farms, and corporations or stocks owned by the individual.

The LION postulates that the second kind of investor should pay capital gains and or income taxes on monies earned through stock speculations and churnings. And more to the point, while the profits are taxed, the losses are not deductible. Look you buy a coffee on the way to work, you do not deduct the cost as a business expense. If you... a hem... mark a tree with it... it is not a financial loss. If you win a million at the casino, you can not deduct your losing bets as a business loss. If you will two hundred million in the lottery, you cannot deduct your losing tickets as a business expense. Windfalls are taxed, loses are your problem.

The LION extrapolates this theory into the realm of corporate income taxes. Now the LION could very well do away with the corporate income tax since all it really is is a business expense to be passed on to you, my dear friend, the end users of corporate products. LION know that this will not fly and so him will not propose it. Still, the LION will propose a 1% tax on all corporate income.

That is of course, on the gross income, not the net income. The LION does not care what your expenses or loses are. You touched the money. You put it in your account: you pay the 1% tax. No lawyers, no accountants, no deductions, no loopholes: just a simple, straight forward 1% tax on every dollar collected. After all... who decides what expenses and loses are? The company. That is like putting a chicken in charge of the foxes den. It will not work no matter how you look at it.

ROAR