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by
John Brooks
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July 16 - December 9, 2017
would not be the stock market if it did not have its ups and downs.
following the establishment, in 1611, of the world’s first important stock exchange—
In the stock market, however, as de la Vega points out, “the news [as such] is often of little value;” in the short run, the mood of the investors is what counts.
A margin call is a demand for additional collateral from a customer who has borrowed money from his broker to buy stocks and whose stocks are now worth barely enough to cover the loan.
“Never give anyone the advice to buy or sell shares, because, where perspicacity is weakened, the most benevolent piece of advice can turn out badly.”
The expectation of an event creates a much deeper impression … than the event itself.”—de la Vega.)
(Floor specialists are broker-dealers who are responsible for maintaining orderly markets in the particular stocks with which they are charged. In the course of meeting their responsibilities, they often have the curious duty of taking risks with their own money against their own better judgment. Various authorities, seeking to reduce the element of human fallibility in the market, have lately been trying to figure out a way to replace the specialists with machines, but so far without success.
1962. The moral may be that psychological gestures on the Exchange are most effective when they are neither intended nor really needed.
The insidious effects of a late tape had to be explained to thousands of naïve customers who thought they had bought U.S. Steel at, say, 50, only to find later that they had paid 54 or 55.
“It is foolish to think that you can withdraw from the Exchange after you have tasted the sweetness of the honey.”
The Edsel, these people argued,
was designed, named, advertised, and promoted with a slavish adherence to the results of public-opinion polls and of their younger cousin, motivational research, and they concluded that when the public is wooed in an excessively calculated manner, it tends to turn away in favor of some gruffer but more spontaneously attentive suitor.
The fact is that in the short, unhappy life of the Edsel a number of other factors contributed to its commercial downfall.
Automobile deliveries to dealers—one of the important indicators in the trade—are customarily measured in ten-day periods, and during the first ten days of September,
thereby neglecting “the reality principle.” “What the motivation researchers failed to tell their clients
It was also a prime example of the limitations of market research, with its ‘depth interviews’ and ‘motivational’ mumbo-jumbo.”
Opposition is always at its most reckless and strident at the very outset; with every year that passes, the tax tends to become stronger and the voices of its enemies more muted.
1865, of its progressive rates, on the arresting ground that collecting 10 per cent on high incomes and lower rates on lower incomes constituted undue discrimination against wealth.
An income tax! A tax so odious that no administration ever dared to impose it except in time of war.… It is unutterably distasteful both in its moral and material aspects. It does not belong to a free country. It is class legislation.… Do you desire to offer a reward to dishonesty and to encourage perjury? The imposition of the tax will corrupt the people. It will bring in its train the spy and the informer. It will necessitate a swarm of officials with inquisitorial powers.… Mr. Chairman, pass this bill and the Democratic Party signs its death warrant.
eventually gave Congress the power to levy taxes without apportionment among the states was put forward by the implacable opponents of the income tax,
To their dismay, it was ratified in 1913, and later that year Congress enacted a graduated tax on individuals at rates ranging from 1 per cent to 7 per cent, and also a flat tax of 1 per cent on the net profits of corporations. The income tax has been with us ever since.
Then, in 1926, came the loophole that has undoubtedly caused more gnashing of teeth among those not in a position to profit by it than any other—the percentage depletion allowance on petroleum, which permits the owner of a producing oil well to deduct from his taxable income up to 27½ per cent of his gross annual income from the well and to keep deducting that much year after year, even though he has deducted the original cost of the well many times over.
new means of escape for high-bracket taxpayers appeared, or an old one widened, for the period during which stocks or other assets must be held in order to benefit from the capital-gains provision was reduced from eighteen months to six.
another important escape route, the so-called “restricted stock option,”
Paradoxical as it may seem, the evolution of our income tax has been from a low-rate tax relying for revenue on the high income group to a high-rate tax relying on the middle and lower-middle income groups.
but as a result of the efforts of an elected government to serve the general interest.
They are taken seriously here, and part of the reason is the power and skill of our income-tax police force, the Internal Revenue Service.
Among the accomplishments that Mortimer Caplin, a small, quick-spoken, dynamic man who grew up in New York City and
Our chief mission is to encourage and achieve more effective voluntary compliance.…
through withholding at the source,
up to five years in prison per offense in addition to extremely heavy financial penalties.
to emphasize “voluntary compliance,” to strive for agreeable, or at least not disagreeable, relations with the taxpaying public, and so on.
the authority to propose rate changes belongs to the Secretary of the Treasury, who may or may not seek the Commissioner’s advice in the matter, and the enactment of new tax laws is, of
for writing the regulations that are supposed to explain the laws in detail.
or a drastic curbing of favored treatment for capital gains;
“hardships, complexities, and opportunities for tax avoidance.”
would be heroically simple, with loopholes eliminated, and most personal deductions and exemptions eliminated, too, and with a rate scale ranging from 10 to 50 per cent.
Probably a point of crisis of some kind will make us begin to see beyond selfish interests. I’m optimistic that fifty years from now we’ll have a pretty good tax.”
“Perhaps we can move the rates down and get rid of some deductions,” he says, “but then we may find we need new deductions, in the interests of fairness. I suspect that a complex society requires a complex tax law. If we put in a simpler code, it would probably be complex again in a few years.”
If the single most important law now on the statute books of the United States is the income-tax law, it would follow that we must have the income-tax law we
after taking advantage of all their deductions and personal exemptions, and availing themselves of the provision that allows married couples and the heads of households to be taxed at rates generally lower than those for single persons, ended up paying an average tax bill of about one-tenth of their reportable receipts, while those in the $10,000–$15,000 range paid a bill of about one-seventh, those in the $25,000–$50,000 range paid a bill of not quite a quarter, and those in the $50,000–$100,000 range paid a bill of about a third.
According to Statistics of Income, there were eleven of them in 1960, out of a national total of three hundred and six million-a-year men, and seventeen in 1961, out of a total of three hundred and ninety-eight. In plain fact, the income tax is hardly progressive at all.
Loophole,” as all fair-minded users of the word are ready to admit, is a somewhat subjective designation, for one man’s loophole may be another man’s lifeline—or perhaps at some other time, the same man’s lifeline.)
