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PRINTED UNDER "THE FAIR USE DOCTRINE" \LOCALISM? Eugene Volokh, October 26, 2007 at 6:35pm] Trackbacks Rupert Murdoch and Media "Localism, Diversity, and Competition": Jack Shafer (Slate) opines on the subject, and I think gets it quite right.
(link)Freddy Hill: It is interesting how often regulators and "regulatees" (what's the right word,
anyway?) are often driven by a common interest to raise barriers to entry and create
oligopolies. 10.27.2007 12:18am (link)martinned (mail) (www): L.S.,
And yet, I think there would be good reason to consider imposing similar rules to
those in banking. In banking, no merger or acquisition is allowed if that puts the
resulting company over 10% of the market. (Put simply.) The rationale is the
extreme importance of the banking industry for the whole market, where you don't
really want to imagine what happens if a bank that is responsible for 50% of the
market goes bankrupt. Also, of course, you don't really want one person or one
company to have that much power over the economy. (Especially if that one company
belongs to the Russian or Chinese government.)
Mind you, organic growth is of course not prohibited. Similarly, there is a big
difference between Murdoch starting a new company, and making it a success, and
him buying up existing papers and networks. A carefully crafted (FCC) rule, that is
clear and as narrow as possible, would encourage organic growth while at the same
time stopping one person or company from having too much control over the kind of
debate that is essential to a free society. 10.27.2007 10:26am (link)Allen Asch (mail) (www): I have watched and complained about Fox News for many years, but I would never
want to "regulate it" out of its First Amendment rights, certainly not on the basis of
lack of diversity. I just wish Rupert Murdoch was honest and called it "conservative
news" instead of "fair and balanced." This dishonesty leads to my bigger problem
with Fox News (and the possible threat Murdoch represents to the Wall Street
Journal) which is that Fox News lowers journalistic standards and trust in
journalism (admittedly already pretty low).
Everything involving humans has to include some bias, but Fox News bias is
qualitatively different. Most news outlets have a bias toward controversy,
sensationalism, and corporatism. Fox News has those plus clear ideological bias
demonstrated by many people. If you're interested in my personal evidence of Fox
News bias, I was able to put together a YouTube playlist with DOZENS of examples
in my free time that you can see at:
Fox News Bias
I most worry that Fox News has this "poison the well" strategy to make people think
all journalism is as "fair and balanced" as Fox News. And, without the press as an
independent check on government and economic powers, our liberal democracy will
suffer.
So, just because Federal Communications Commission member Michael J. Copps
made the wrong criticisms of Rupert Murdoch, we shouldn't, therefore, assume that
Murdoch does not deserve a lot of legitimate criticism for the negative results of the
"diversity" he brings to journalism. 10.27.2007 12:04pm (link)Ramza: Yes this company is so fair and balanced. Sending cease and desist letters to McCain
about McCain using video clips in ads and on his website from a Republican Debate
(which Fox News hosted), while not doing the same thing to Giluanni when
"American's Mayor" does the same thing on his website.
Source 10.27.2007 1:17pm (link)Libertarian1 (mail): Alan wrote: I just wish Rupert Murdoch was honest and called it "conservative
news" instead of "fair and balanced."
Would you similarly favor having the NYT putting "liberal news" on their
masthead? Ot CBS "the liberal news with Dan Rather". 10.27.2007 1:48pm (link)Allen Asch (mail) (www): Libertarian1 wrote:
Would you similarly favor having the NYT putting "liberal news" on their
masthead? Ot CBS "the liberal news with Dan Rather".
I don't think Dan Rather has been on CBS for awhile and, if you forgive the violent
analogy, comparing Fox News bias to the bias at those other outlets is like
comparing targeting civilians to collateral damage: it's a matter of intent.
As I pointed out, everything involving humans includes some bias, but Fox News bias
is qualitatively different. Most news outlets have a bias toward controversy,
sensationalism, and corporatism. Again, Fox News has those PLUS such clear
ideological bias I was able to put together a YouTube playlist with DOZENS of
examples just in my free time that you can see at:
Fox News Bias
Do you have similar evidence of a pattern of ideological bias at other news outlets? 10.27.2007 2:19pm (link)eric (mail): So intentional bais is better than unintentional bais pe se. That cannot be correct.
Bias is bias. The degree of bias is largely a matter of opinion. Just because you hold
a strong opinion about Fox News bias versus CBS bias does not make Fox more
biased than CBS. Your opinion that big three bias is towards "controversy,
sensationalism, and corporatism" may misaccount for certain bias. Take the Jena 6
or the Duke Rape scandal. You might account for the awful reporting from network
news on these events with sensationalism. However, it can certainly be argued that
there is a systematic bias towards reporting biased towards so called "civil rights
activists." It seems to me to be a strong case. I also believe that Killian documents
controversy is particularly reveiling regarding CBS.
The intelligent watcher will notice the bias and take the news accordingly. I like Fox
News' Brit Hume program. I recognize his bias and watch accordingly. 10.27.2007 2:40pm (link)Smokey: Allen Asch:
I do not watch Fox News. Nor CNN, C-BS, NBC, ABC or the rest of the
spinmeisters' news. In fact, I don't watch TV. Therefore, I'm reading your critique of
Fox with some objective amusement. Pot/kettle, and all that: I just wish Rupert Murdoch was honest and called it "conservative news" instead of
"fair and balanced." Really? And you unquestioningly accept that CNN is "News you can trust"??
If CNN and most of the mainstream media had the honesty you demand of Fox, they
would inform viewers that they broadcast from the extreme Left point of view.
Otherwise, why would their nutroot cronies at the DU, DailyKos, etc., jump up and
down shouting "Yippee!" when a so-called 'debate' is hosted by one of their own
propaganda organs?
And... Fox News has those plus clear ideological bias demonstrated by many people. So do the others - and to a greater degree. After all, they've been practicing their
uberlib bias for a lot longer than Fox.
Fox News must be giving viewers what they want, because Fox is eating their
competitors' lunch. Aren't they? It's called the "free market," Allen. Viewers tune in
to watch whatever they want. 10.27.2007 2:48pm (link)Murmur: Otherwise, why would their nutroot cronies at the DU, DailyKos, etc., jump up and
down shouting "Yippee!" when a so-called 'debate' is hosted by one of their own
propaganda organs?
Can you explain what the heck this means? People shout (not speak, "jump up and
down and shout") "Yippie!" when some network hosts a debate? What are you
talking about? Who has ever done such a thing? 10.27.2007 3:01pm (link)Brian K (mail): objective amusement HAHAHAHA...you!? objective?
So do the others - and to a greater degree. After all, they've been practicing their
uberlib bias for a lot longer than Fox. if the "but clinton did it too" defense didn't work then, why would it work now? 10.27.2007 3:10pm (link)Libertarian1 (mail): Alan, apparently bias lies in the eye of the beholder, Even the NYT's own omnisman
said that of course the NYT is a liberal newspaper. If you don't actually see or
believe that than than I am afraid your objectivity is seriously compromised. I see
nothing wrong with political bias by the media. It is just frustrating to read over and
over again that Fox is biased but the NYT, Wash Post, CBS, NBC, ABC, Time and
Newsweek are not.
That the bias is designed to be subtle doesn't make it less so. It usually lies in what
the editor deems to be news and to therefore empahsize. As an example ripped from
today's news. The fire in San Diego. There is enough new rapidly developing
material there to fill any paper. But have you read and heard of the comparison
between the response in California and the response years ago in Louisiana after
Katrina. Different state, different tragedy, different political party in local control
and several years in which to learn. Choosing what to emphasize is by definition a
bias. The MSM consistenly chooses the liberal slant to emphasize. 10.27.2007 3:16pm (link)Smokey: Brian K: HAHAHAHA...you!? objective? HAHAHAHA...you!? objective, Brian??
Thanx for [unwittingly] supporting my contention that they're all biased. But some
folks only want Fox News to go away.
But the market has already decided: viewers prefer Fox News over the others. It
probably has never crossed your mind that most folks might want conservative news.
Do you think they're the imbeciles, and you're Einstein? 10.27.2007 3:35pm (link)Randy R. (mail): There may be bias in the media, but it certainly isn't extreme liberalism. Sure, much
can be liberal, but the mainstream media has been very slow to criticize the Bush Ad
on just about anything, but were very quick to criticize the Clinton Ad on just about
everything.
I hardly think the cheerleading they did in the runup for the Iraq war was liberal. In
fact, they refused to cover the many protests that were held in major cities.
I know for a fact that the NY Times didn't stop the anti-gay slant until certain editors
retired in the 1980s, and even then they were hardly pro-gay. 10.27.2007 3:37pm (link)taney71: My main problem with news channels or news programs is when they get to their
"round table" segment. For most of my life these programs/channels would have any
number of talking heads on (5, 6, 7) and try to debate the issues. Well, most of the
time what we got was a liberal moderator and 3 or 4 liberals debating and maybe
one token "conservative." Much the same today with Chris Matthews and George
Stephanopoulous (spelling?) former-Democratic staffers as moderators. On This
Week (ABC) the regular panelists include George Will (conservative), Cokie
Roberts(liberal), Sam Donaldson (liberal), Fareed Zakaria (moderate), Martha
Raddatz (no idea-guessing moderate), Torie Clarke (conservative), Donna Brazile
(liberal), Jay Carney (moderate), Clarie Shipman (no idea-guessing moderate), E.J.
Dionee (libera), Robert Reich (liberal), David Corn (liberal), Kathrina vanden Heuvel
(liberal), Mark Halperin (liberal...remember the 04 memo affair?), Joe Klein
(liberal), and David Brooks (conservative).
So out of the line up of people who regularly appear in this one show got:
3 conservatives 9 liberals 4 moderates
Not very scientific but it does present an alarming picture. Even if you combine the
"moderate" with the "conservatives" you don't get the number of liberals that
appear on the show. One might argue that the 3 conservatives appear regularly and
the liberals not so often. I tend to agree somewhat with this argument. However, only
George Will is a series regular and he is often set against at least two liberals. Most
of the time the "moderate" in the group is arguing a "liberal" position (generally the
only time that doesn't occur is on the issue of Islam/terrorism when Fareed Zakaria
is on).
It's a bit more balanced on some of these shows than it was but not by much. The
McLaughlin Group I believe has Pat Buchanan and some other conservative guy but
still generally tilts way left primarily because of the windbag McLaughlin (although
Buchanan is to blame for some of this cause he often sides with the liberal element on
foreign policy).
Fox News largely changed this one-sided debate. Instead of putting a bunch of liberal
talking heads on they put conservatives. Still they do a much better job on the
Sunday program of dividing ideology. For instance, the NPR women and Juan
Williams always appear along with Bill Kristol and Britt Hume.
With that said, I still watch/listen to all the shows. Mostly though I make sure I catch
the Sunday talk shows (ipod has made this much easier). 10.27.2007 3:49pm (link)taney71: Oh, I might add that ALL the talk shows do a good job of interviewing politicians
(and by good I am saying they don't show a political bias that I can tell). The news
segments tend to be the same just different focus on what is covered. 10.27.2007 3:54pm (link)Brian K (mail): Thanx for [unwittingly] supporting my contention that they're all biased. i just found it hilarious that you thought you were somehow free from bias even
though everyone else is biased.
(i also never claimed i was objective...but you did in a post using "uberlibs". how's
that for irony?)
"It probably has never crossed your mind that most folks might want conservative
news. Do you think they're the imbeciles, and you're Einstein?" nice strawman. is this more of your objectivity? 10.27.2007 3:54pm (link)Murmur: But the market has already decided: viewers prefer Fox News over the others.
Yes, of the tiny, virtually insignificant portion of the U.S. that watches cable news
(<1% of the population), Fox has a greater share. This is cause for triumphalism?
Why? People also prefer Coke to water, but that doesn't mean Coke is good for you. 10.27.2007 3:55pm (link)Brian K (mail): But the market has already decided: viewers prefer Fox News over the others.
Even though you consider nbc, cbs, abc, etc. as all liberal news sources, then you
don't you compare fox news ratings to the sum of all of the liberal news sources? fox
is number one in the average viewership, but it doesn't beat out the sum of the liberal
sources. so i'd say the market has decided that viewers prefer liberal news.
haha...that's not even the whole picture. as this article describes, cnn beats out fox in
several important ratings. 10.27.2007 4:22pm (link)Michael B (mail): "I don't think Dan Rather has been on CBS for awhile and, if you forgive the violent
analogy, comparing Fox News bias to the bias at those other outlets is like
comparing targeting civilians to collateral damage: it's a matter of intent."
Wow. Firstly, Rather was only the successor to Uncle Walter himself, and then held
that position for over 20 years. More importantly, he's but the tip of the tip of the
iceberg, a reflection of the broader set of problems and issues. Too, his more renown
episodes are merely the most blatant instances of commentary being forwarded as
news. Or if you'll forgive a violent analogy, it would be like accepting Uncle Walter's
opinings on Tet as "objective journalism" or like accepting the many, many
reporters who echoed - in their "news" pieces - the political sentiments of Kerry,
Kennedy and others who assurred the country the Sandinistas were the voice of the
people, or the North Vietnamese had "no interest" in any type of violent reprisals
against "their people," their "fellow countrymen," in the South. Then, when we
pulled the plug on our earlier promises, somewhere between 400,000 and 800,000
former South Vietnamese were variously murdered, and that only accounts for the
dead, not the lives otherwise oppressed and destroyed.
Such historic examples, from two and three decades ago and more, reflect the
broader reality; such examples are not anomalies. Of course that is to transcend any
mere violent analogy. Reductive news-speak is a powerful presence and the
manifestly rich and telling irony is that in castigating Fox's "fair and balanced"
advertising you are tacitly, or not so tacitly, accepting the idea that others are "fair
and balanced." Irony is one applicable word, concerns with intellectual and moral
myopia come to mind, willful blindness as well, yet other benighted themes as well. 10.27.2007 4:37pm (link)Murmur: Such historic examples, from two and three decades ago and more, reflect the
broader reality
Yeah, it's not like anything has happened in the media in the last 30 years. Why are
you relying on decades-old examples to prove a point about today? What relevance
does a newscaster who retired 25 years ago have to today's media landscape?
Reductive news-speak is a powerful presence and the manifestly rich and telling
irony is that in castigating Fox's "fair and balanced" advertising you are tacitly, or
not so tacitly, accepting the idea that others are "fair and balanced."
Simply because someone recognizes that Fox's "fair and balanced" slogan is just
that, a slogan, doesn't mean that they uncritically accept every other news source as
fair and balanced.
Irony is one applicable word, concerns with intellectual and moral myopia come to
mind, willful blindness as well, yet other benighted themes as well.
You realize this nonsense relies on a fallacious argument, right? Just making sure
you're aware, you don't seem to know. 10.27.2007 4:51pm (link)Michael B (mail): "Why are you relying on decades-old examples to prove a point about today?"
In a word, relevancy. The reason is because they were such decidedly prominent, and
in point of fact genuinely historic examples, examples that additionally helped to
forward murderous reprisals. If you don't comprehend the relevance of that, for
example to the current crop of talking heads and attendant casts and crews of
reporters, etc., or likewise the relevance of Dan Rather, or Uncle Walter - then you
don't understand much. There are ample other reasons as well, e.g., removing the
argument away from present social/political animosities.
And you do realize you're sneering, and nothing more, right? Here's the deal, if
you're going to forward something as "fallacious," you actually need to argue the
point you're seemingly attempting. Simply pontificating, as if it's to be accepted via
fiat from on high, is not a form of non-fallacious argumentation.
To imagine so is to imagine a type of pure and unmitigated: non-sense. 10.27.2007 5:42pm (link)Murmur: In a word, relevancy. The reason is because they were such decidedly prominent, and
in point of fact genuinely historic examples, examples that additionally helped to
forward murderous reprisals.
And the relevance of these examples to today's media landscape is what, exactly?
You act as if nothing has changed in the last 30 years--why?
Here's the deal, if you're going to forward something as "fallacious," you actually
need to argue the point you're seemingly attempting. Simply pontificating, as if it's to
be accepted via fiat from on high, is not a form of non-fallacious argumentation.
That someone thinks "X is not Y" does not imply they also believe "not X is Y."
Simply because someone recognizes Fox's "fair and balanced" for what it is, an
advertising slogan, doesn't mean they automatically believe CNN is fair and
balanced, though I understand how grasping such an idea could be difficult for
someone who lives within a "with us or against us" binary. 10.27.2007 6:09pm (link)Michael B (mail): Ok, a final response.
Firstly, no, I didn't so much as come close to "acting as if nothing has changed."
(And you're the one pontificating about binaries and nuance!) What I did was note
that some prominent aspects of the situations are (tellingly) similar - and very nearly
parallel - both in terms of the partisanship, the presumption concerning which side
has a better grasp of the truth and facts (as viewed both from short and longer term
perspectives), and in terms of the real-world risks involved, though this time the risks
have more domestic import whereas previously the risks were geographically and
tactically/strategically remote, at least in the more immediate aftermath of April,
1975. Other factors as well come to mind.
"That someone thinks "X is not Y" does not imply they also believe "not X is Y.""
I'll walk you through it. The formal logic is right as such (as formal logic), but the
application herein and everything else is either wrong or bias dressed up as fact. The
other commenter I had responded to, in terms of the fuller quote, stated the
following, emphasis now added:
"I don't think Dan Rather has been on CBS for awhile and, if you forgive the violent
analogy, comparing Fox News bias to the bias at those other outlets is like
comparing targeting civilians to collateral damage: it's a matter of intent.
"As I pointed out, everything involving humans includes some bias, but Fox News
bias is qualitatively different."
Iow, in attempting to forward the notion of such a stark contrast, represented in
alleged "intent" and the yet more preposterous allegation, via analogy, of "targeting
civilians" vs. "collateral damage," the result is to cast a binary scenario, a nearly
manichean script, despite the allusion to "everything involving humans includes some
bias."
So, you're not so "fair and balanced" yourself. Indeed, even the simplest and most
basic comprehensions have eluded you. Which fact has not stopped your
demonstrated bias from posing as fair and balanced commentary.
That hole you're in? You dug it yourself. Keep digging. 10.27.2007 7:04pm (link)Smokey: To add to taney71's post above, another major problem with the alphabet news
spoon-feeders is that the 'conservatives' that are carefully pre-selected by lib news
directors - who are then certain to be safe from any really major attack on their
boss's leftist viewpoints.
Those putative conservatives hand-picked by the liberal media are also highly paid
by the same media - and they are unlikely to risk those hefty paychecks by biting the
hand that feeds them.
Certainly there are methods available to get true conservative viewpoints on these
shows. The first requirement is to have conservative organizations select the
spokespeople for their point of view, rather than allowing the liberal media to select
them; that corrupts their message.
Is there any nationally-known conservative in the mainstream media who continually
raises the issue of who represents the average taxpayer??
But there is never ending, constant hand-wringing over the assumed plight of union
members, racial minorities [every group but caucasian - can't have that], gays, prison
inmates, misunderstood terrorists, illegal immigrant scofflaws, people who
deliberately refuse to buy health insurance for their children, Islamist whiners, and
every other special-interest group imaginable.
Who represents the working people who are expected to pay the freight? Congress
overspends like drunken sailors, then eyes the ordinary taxpayer like a ravenous
wolf looks at a free-range lamb. Where is our spokesperson?? It certainly isn't our
congressional "Representative," who has long since been bought and paid for. As
Ronald Reagan commented, "Republicans think every day is the Fourth of July, and
Democrats think every day is April Fifteenth.
Let's face it: the liberal mainstream media sets the agenda, and they will never allow
a strong voice representing the taxpayers to do so. Taxpayers are expected to just
understand why each group must have more and more of their income, and then shut
up and open their wallets. Any sentiment to the contrary is kept out of the broadcast
commentary.
Oh, and Brian K,: It may be that you were misreading my response to Allan A, and
assuming that I claimed to be objective on everything. If you re-read it, you'll see that
I was not saying that. I'm a conservative, it's true, and proud of it. And that, of
course, makes me Right!
We still friends, aren't we? 10.27.2007 7:52pm (link)Libertarian1 (mail): Murmur wote: That someone thinks "X is not Y" does not imply they also believe
"not X is Y." Simply because someone recognizes Fox's "fair and balanced" for
what it is, an advertising slogan, doesn't mean they automatically believe CNN is fair
and balanced
If one challenges Fox as not being fair and balanced and then fails to add "of course
the other MSM are also not fair and balanced" it strongly implies you think Fox is
the only exception. if not why not say so.
I would imagine you would reply they are the only ones who use that phrase in
advertising. But equally erroneous is "all the news that's fit to print". Why don't you
attack that?
In my mind when I read news articles, not op-ed, and say to myself either good point
or why did they bring that up, it is reflective of the bias of the writer. Most of the time
when I read the NYT I wonder why they chose that aspect to emphasize. Almost
always it is in line with their liberal philosohy. IMHO, the news should be fact
oriented not opinion oriented.
As a matter of interest all Fox had to say was "Fair and Balanced" not we are
conservative. Everyone who was a news junkie instantaneously knew they were
placing themselves in opposition to the liberal alternatives. 10.27.2007 8:14pm (link)Brian K (mail): It may be that you were misreading my response to Allan A, and assuming that I
claimed to be objective on everything. I'm only doing that if you equally mischaracterize my statement into something
outside of the topic of this post. I think your biased in a lot of things...but I would say
in everything.
We still friends, aren't we? haha...sure...you can never have too many. 10.27.2007 9:05pm (link)Brian K (mail): but I would not say in everything.
that's a pretty crucial typo on my part. 10.27.2007 9:14pm (link)J. F. Thomas (mail):
OMG, in what bizarro far right world is Cokie Roberts a liberal? 10.27.2007 10:51pm (link)Dave N (mail): OMG, in what bizarro far right world is Cokie Roberts a liberal? I do not know her views but her father did not become House Majority Leader nor
was her mother given a seat on the House Rules Committee because either of them
was conservative. 10.27.2007 11:02pm (link)J. F. Thomas (mail): Is there any nationally-known conservative in the mainstream media who continually
raises the issue of who represents the average taxpayer??
And who smokey, do you consider the "average taxpayer". I think I am a pretty
average taxpayer and I think the problem with the tax system is that all income,
regardless of its source, is not taxed at the same rate (I have never understood why
capital gains should be taxed at a lower rate than earnings from actual work). I also
think that that the marginal rate on high incomes should at be higher (at least to
make up for the fact that they don't have to pay FICA and medicaid taxes on those
higher incomes).
I also think that if people looked at the health insurance premiums pay at work as a
tax, they would look on "socialized" medicine a lot more kindly.
Oh yeah, and I will believe in the myth of the liberal MSM when the "labor" news
gets as much air time or ink as "business" news. 10.27.2007 11:03pm (link)Montie:
The rationale is the extreme importance of the banking industry for the whole
market, where you don't really want to imagine what happens if a bank that is
responsible for 50% of the market goes bankrupt. Also, of course, you don't really
want one person or one company to have that much power over the economy.
Given the history of banking regulation in the U.S., I am skeptical of any claim that
any banking regulation was written to ensure (a) the stability of the banking system
and (b) competition within the banking system. 10.27.2007 11:47pm (link)David M. Nieporent (www): I also think that that the marginal rate on high incomes should at be higher (at least
to make up for the fact that they don't have to pay FICA and medicaid taxes on those
higher incomes). There is no "medicaid tax" -- presumably you mean "medicare" -- and they do have
to pay medicare tax on those higher incomes. The cap on medicare taxes was
eliminated long ago, back in 1993. I also think that if people looked at the health insurance premiums pay at work as a
tax, they would look on "socialized" medicine a lot more kindly. I think that if people looked at politicians as terrorists, they would look on socialized
medicine a lot less kindly, as long as we're making up fake hypotheticals. Since the
essence of taxation is that it is money forcibly taken by the government, "health
insurance premiums paid at work" are not a tax. They're salary, given in non-cash
form because the government distorts the market with tax breaks.
Oh yeah, and I will believe in the myth of the liberal MSM when the "labor" news
gets as much air time or ink as "business" news. This is the nonsenscial gibberish left-wing cliche you're parroting. No left-winger
who says this has ever been able to explain what on earth "labor news" is, or how it
differs from "business news."
It doesn't make sense in any context, even if there were a difference; the amount of
time given to a story is orthogonal to ideology. A media outlet could spend all its time
on "business news" by only covering stories which make "business" look bad.
Would the lack of "equal time" for anti-labor stories demonstrate that this outlet
was conservative? Obviously not. It's the slant of a story, not just the time spent on
it, which evinces bias. 10.28.2007 9:00am (link)A. Zarkov (mail): J. F. Thomas
“(I have never understood why capital gains should be taxed at a lower rate than
earnings from actual work).”
Here is the theory. A long-term capital investment is inherently risky, that’s why
we have theories like Capital Asset Pricing Model. The lower tax rate is supposed to
compensate you for the risk. We want this to encourage capital investment so an
economy can grow and new products invented. Some countries don’t tax long-
term capital gains at all, for example Germany. Here is a table of international
capital gain tax rates. Note from the table that the US has a high rate compared to
most other countries in the table.
Another problem with the capital gains tax is that in the US it’s not adjusted for
inflation. Thus you could be taxed for holding an asset that has not increased in real
value. Taxing nominal gains at the full income rate would make many investments
unattractive.
Now you might not agree with this theory, but that’s the explanation of why
capital gains taxes are lower that taxes on income. Note also that when risk is
removed as with a zero-coupon bond, the holder is taxed every year on the basis of
an “imputed income,” making the effective tax on this kind of asset very high.
With inflation you could end up worse off. But this shows that risk an important
element in tax policy. 10.28.2007 10:16am (link)LN (mail): Wait, don't you get compensated for the greater risk of long-term capital investments
with, um, higher returns??
I agree with you on the issue of taxing nominal gains versus real gains, and that tax
policy can encourage society as a whole to either invest more/consume more... but
the government doesn't need to compensate people for risk. 10.28.2007 10:58am (link)A. Zarkov (mail): “Wait, don't you get compensated for the greater risk of long-term capital
investments with, um, higher returns??”
If by “return” you mean total expected return (as distinguished from rate of
return) then the answer is yes. But the same is true for a fixed income investment
with no risk, the longer you hold it, the greater your accumulation. If we tax both
equally, then we increase the attractiveness of a fixed income investment over a risky
capital investment.
“… but the government doesn't need to compensate people for risk.”
It sure does if it wants people to make long-term capital investments. Like I said, a
zero coupon bond with a fixed rate of return is taxed a lot more than, say, a stock
with the same expected rate of return held for the same period. Now you could argue
that we should have a holding period of more than one year to qualify as a long-term
capital return. That’s another story. 10.28.2007 1:32pm (link)Smokey: LN: Wait, don't you get compensated for the greater risk of long-term capital investments
with, um, higher returns?? Something needs to be clarified here: the government is not trying to 'compensate'
investors for anything. Rather, the government is trying to encourage investors to put
their money into sectors of the economy that it perceives are essential to growth.
And the one-year holding period was originally proposed to keep short term traders
from benefitting. Most politicians don't really understand markets, you see. 10.28.2007 5:16pm
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