Senate to end preferential tax for commodities?

[ByLoSellHi]

What, exactly, is the problem?

Under the current law formula, investors in oil and gas index funds or other financial products get long-term capital gains treatment for 60% of their returns. The current tax rate for long-term capital gains is 15%. The remaining 40% of returns are taxed as short-term capital gains, meaning they face ordinary income tax rates up to 35%.

By contrast, those engaged in the oil and gas business pay ordinary income tax rates on any profits from financial products they use to hedge their positions. The Grassley-Wyden legislation would tax investors' return on oil and gas contracts as ordinary income, the same treatment as the oil and gas firms receive.


Why are these groups taxed differently to begin with?

If you're going to criticize the legislation, do so for the right reason(s).

 

[FightTheFuture]

Quote from smilingsynic:

What exactly do traders produce, other than "liquidity"?

In short, trading is a parasitic industry. That is not necessarily a bad thing; it is what it is.

As for the impact of trading to the economy, the sum contributions of trading worldwide to the world economy is zero - minus commissions - minus spread (winners minus losers minus vig).

Gotta be kidding, right? The impact of trading on the economy is zero? The impact of trading on the economy, and the lives of people is huge, consider financial industry revenue and jobs, commodity prices, etc.

Brokerages just in the US generated $33 Billion just from derivatives trading alone in 2006, surpassing the US pizza industry by $3 Billion.

Trading and the economy surely must be greater than the pizza industry. The sum contributions of the pizza industry is zero - pizza revenues minus negative productivity from lost work days because of illness from people with food sensitivities from eating wheat and cheese.

The entire global securities industry generated $713 Billion in 2006.

Everyone involved in trading no matter how it's defined plays a significant part in the whole industry.

 

[Stosh]

Quote from smilingsynic:

I love the 60-40 tax treatment of futures, but, to be honest, it really isn't fair to others.

Traders really do not produce anything; we buy and sell what others produce.

Why, then, should traders have more favorable tax treatment than producers?

ntraday, I trade the S&P e-mini, which is a basket of stocks, and get the 60-40 treatment. Yet if someone wants to intraday trade one of the stocks that make up the S&P, they get their short-term gains taxed as ordinary income. How is that fair?

We futures traders have been getting special treatment since the early 80's. I'd love for it to continue, but one has to be pretty naive to think that they did not see this day coming. It is only a matter of time until this loophole is closed.

When it is closed, I'll still trade. Why would I stop? After all, I'm a trader.

I am going to list a few occupations, and would appreciate it if you would tell me which ones you would call "producers"?
Professional athlete, e.g. Tiger Woods.
Congressman
Video game manufacturer
Tobacco farmer
Cosmetic surgeon
Bartender
Maker of fine wine, or single malt.
Yacht manufacturer
Banker
Luxury homebuilder
Maker of counterfeit I.D.'s for illegals
Piano teacher
Professional musician
Sales clerk at cosmetics counter
History professor
Economics professor (unbiased)
Soap opera producer
Unbiased news channel
Coal producer
Ethanol producer
Producer of birth control pills
Border guard
Oil and gas producer
Pizza delivery man
Handgun manufacturer
Gun shop owner
Speculator who takes the other side of a businessman's hedge.

I could go on......just wondering who gets to choose who is productive and who is not?? Stosh

 

[smilingsynic]

Quote from FightTheFuture:

Gotta be kidding, right? The impact of trading on the economy is zero? The impact of trading on the economy, and the lives of people is huge, consider financial industry revenue and jobs, commodity prices, etc.

Brokerages just in the US generated $33 Billion just from derivatives trading alone in 2006, surpassing the US pizza industry by $3 Billion.

Trading and the economy surely must be greater than the pizza industry. The sum contributions of the pizza industry is zero - pizza revenues minus negative productivity from lost work days because of illness from people with food sensitivities from eating wheat and cheese.

The entire global securities industry generated $713 Billion in 2006.

Everyone involved in trading no matter how it's defined plays a significant part in the whole industry.

Read what I said. I did not say that trading has a zero impact on the economy. I said that it does not produce anything.

What exactly do brokerages produce?

 

[smilingsynic]

Quote from Stosh:

I am going to list a few occupations, and would appreciate it if you would tell me which ones you would call "producers"?
Professional athlete, e.g. Tiger Woods.
Congressman
Video game manufacturer
Tobacco farmer
Cosmetic surgeon
Bartender
Maker of fine wine, or single malt.
Yacht manufacturer
Banker
Luxury homebuilder
Maker of counterfeit I.D.'s for illegals
Piano teacher
Professional musician
Sales clerk at cosmetics counter
History professor
Economics professor (unbiased)
Soap opera producer
Unbiased news channel
Coal producer
Ethanol producer
Producer of birth control pills
Border guard
Oil and gas producer
Pizza delivery man
Handgun manufacturer
Gun shop owner
Speculator who takes the other side of a businessman's hedge.

I could go on......just wondering who gets to choose who is productive and who is not?? Stosh

Oil and gas producers actually produce something. Traders of CL or NG futures contracts do not produce anything; they merely buy and sell what oil and gas producers will produce.

RGR produces handguns; a trader of RGR stock simply buys and sells what RGR the company produces.

Remember, the discussion is about preferential tax treatment for futures traders. Why should an oil or gas producer who earns say, 300 K, for actually producing something be taxed more heavily that a trader of oil or gas contracts who earns the same 300K? Remember, the trader gets a significant portion of his gains taxed as long term gains, whereas the oil and gas producer has no such special treatment.

That to me is unfair.

That said, I don't write the rules, but play by them. Until they do, I'll insist on the 60-40.

 

[Stosh]

I agree .... we have to play by rules that almost everyone finds unfair in one way or another. I would like to see the same % for everyone without loopholes.....and make all the lobbyists harvest our farm produce by hand......then they would be "producers". Stosh

 

[FightTheFuture]

Quote from smilingsynic:

Read what I said. I did not say that trading has a zero impact on the economy. I said that it does not produce anything.

What exactly do brokerages produce?

You answered your own question in a previous post, unless you actually think the service of producing liquidity is trivial.

For a couple decades, the economy has been moving from producing things to producing services, a hard concept to grasp the value of.

What do underrated brokerages produce - they provide a service - you can't produce the underrated service of liquidity without them, so I guess they produce something significant.

Trading is productive in its self as it produces hundreds of billions to the world economy so does it not produce something of significance?

How about a different tax rate for every industry based upon its perceived value of producing something.

Back to 60/40, long term traders roll over every 3 months and incur short term trades and cannot qualify for long term tax treatment, so as a compromise....

 

[Jayford]

providing liquidity is critical. Without traders (speculators), markets would not be efficient at all, and the end result would be higher prices to the end user. Lack of an efficient method to lock in prices would lead to hoarding activity all the way down the production process.

it would be a mess.

 

[sammybea]

Quote from Jayford:

providing liquidity is critical. Without traders (speculators), markets would not be efficient at all, and the end result would be higher prices to the end user. Lack of an efficient method to lock in prices would lead to hoarding activity all the way down the production process.

it would be a mess.

Jay, thanks for providing info on this insane proposal. If you come across any more info, I would appreciate if you can post it. In the end, the obama followers will never understand how markets thrive..

 

[Dr. Zhivodka]

60/40 is a legacy from Rostenkowski when he chair of Ways amd Means. I'm surprised it lasted this long after he was booted from office in shame in 1994.