Recovery from the Great Recession has been slow. Economic growth, productivity gains and stock market performance are generally expected to remain sluggish. One reason: many major corporations seem more inclined to tread water or downsize, via stock buybacks, than to invest in new business opportunities and productivity enhancements.
Laurence Fink, who as head of Blackrock might be called the world's most important shareholder, wants CEOs to
stiffen their spines. Rather than give in to "activist investors" seeking quick payoffs from buybacks and enhanced dividends, they should be running their companies the old-fashioned way: doing their best to get bigger and better for the benefit of their long-term shareholders.
To ease the pressure for short-term payoffs, Fink proposes that capital gains be taxed as ordinary income when investments are held for only one or two years.
“Since when was one year considered a long-term investment? A more effective structure would be to grant long-term treatment only after three years, and then to decrease the tax rate for each year of ownership beyond that, potentially dropping to zero after 10 years.”
This blogger will buy that. Can't imagine Congress joining me.
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1 comment:
What percentage of daily trades are made by individual investors? I submit most of the volume, and hence the price setting, is by institutional investors and tax-free endowments and retirement plans. Reducing tax benefits for stocks held more than a year but less than five would have minimal effect on the typical holding period for individual investors, in my view. And they would have no effect on those "activist investors" complained of, or the tax free pots of money.
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