I was amused to hear that even the porn kings are asking for a bailout, if only in jest. I’ve gotten a lot of feedback about my original bailout blog, and the feedback has been fairly consistent:
- Thumbs down on general stimulus and tax-loss deductibility changes.
- Thumbs up on the interest and stocks proposals (for the “average Joe”).
- Suggestions for real, meaningful infrastructure improvements.
I’ve already addressed the infrastructure feedback, to a degree, in a green power blog article. I’d like to expound on the ideas that got good feedback and traction:
- Make the first $2500 of interest earned in FDIC-insured vehicles (e.g. savings accounts) in 2009 exempt from federal tax.
- U.S. Stocks (including ETFs) purchased in 2009 and held for over 18 months would be exempt from capital gains up to $20,000. Additionally, after 12 months, dividends on such stocks would be tax-free up to $2500 per year… indefinitely.
Idea #1 was the most popular. In particular readers seems to really like the middle-class and low-income appeal of the idea. For example seniors commonly have literally some money in the bank. In addition to Social Security, they common rely heavily on interest income. A $2500/year break on interest would be very helpful to seniors.
Similarly idea #1 would be, perhaps, the most realistic investment incentive for low-income people. The are many more low-income people with savings accounts than stock portfolios. It is easy to open a bank savings account with $100, and sometimes even $10. And while there are many “unbanked” low-income earners, there are many more who do use banks or credit unions. Further, since the first $2500 of interest would be tax free there is less risk of an April 15th-surprise lurking around the corner come tax season.
Idea #1 would, of course, benefit the middle class. With inflation eating away at the value of our hard-earned dollars every year, why should we have to pay taxes on our meager interest incomes as well? Getting rid of this insult-to-injury tax on the first $2500 of interest income would be a godsend.
Idea #2 is also very middle-class friendly… at least for the investing class. If part of the government’s goal is to bolster the stock market, I cannot think of a more powerful way to realistically achieve such a result. I could invision a veritable surge of stock buying with the one-time lure of tax-free dividends for life (up to $2500/year) and the prospect of up to $20,000 of tax-free capital gains. Sure the capital gains paperwork for the 1040 would be a bit messy… but more much more so than it already is. And the the dividend paperwork… that would be easy.
So, Congress, and President-elect Obama, I urge you to consider these common-sense proposals. Please encourage savings and new investment — from the bottoms up. Help reward the savings of America’s low-wage workers. Reinvigorate and reward middle-class savings and investing in 2009.
And, readers, thank you for your feedback. Keep it up! It keeps me blogging. Cheers!