Do higher taxes have a negative impact on pursuing investment opportunities?
No
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2Luis Perez Dec 01, 2012
Investment decisions are made thinking of discounted cash flows
When an individual/corporation evaluates whether to invest in a security/project they evaluate the discounted cash flows of that investment. The future cash flows (profits) generated that by that investment are summed up to determine their present value. If that PV is higher than the cost then you go ahead, if the costs are higher then you don't pursue that opportunity. Pretty straight forward.
Taxes affect future cash flows. If taxes are say 50%, that means that each earned cash flow will be half after tax thus reducing the present value of that investment opportunity and thus reducing the threshold for investments to purse.
http://johnhcochrane.blogspot.com/2012/11/buffet-math.html?spref=fb
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0Luis Perez Jan 10, 2013
People start companies without thinking about the tax implications
When deciding to pursue a business few people mention tax legislation as a factor in deciding to pursue the opportunity.
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0Joe El Rady Feb 19, 2013
The impetus to start a business or make an investment is: return. Just because the government will take more of your return, doesn't mean you are willing to forego the remainder.... If I'm looking at an investment that returns 12% and the government wants 50% of that, do I then decide to forego the remaining 6% return? That would be nonsensical... I'll make as much return as I can get (other things equal). In fact, I'll try harder to do more projects or find higher yielding ones in order to compensate my tax loss...
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0Carlos Schmidt Mar 28, 2013
Taxes only matter at the extremes - pre-tax returns trump
With 100% taxes on a type of investment, people would avoid making investments. Outside of the extremes, people focus maximizing pre-tax returns. When tax rates rise, people chase yield to obtain the same after-tax dollars. Same with labor.
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- Argument added by Carlos Schmidt on Thu Mar 28, 2013
- Reply added by Joe El Rady on Tue Feb 19, 2013
- Argument added by Luis Perez on Thu Jan 10, 2013
- Argument added by Luis Perez on Sat Dec 01, 2012
- Discussion started by Luis Perez on Dec 01, 2012
Yes
Investment decisions are made thinking of discounted cash flows
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But we have don't have permission to:
No
Taxes only matter at the extremes - pre-tax returns trump
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Reply in: Support Dispute
But we have don't have permission to:
People start companies without thinking about the tax implications
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Reply in: Support Dispute
But we have don't have permission to: