Cardano Dan's Newsletter - Issue #33
Restrictive Tax Rates
Quote of the Day
“…an economy hampered by restrictive tax rates will never produce enough revenue to balance the budget - just as it will never produce enough jobs or enough profits.”
— John F. Kennedy
News broke today that President Biden plans to nearly double the capital gains tax rate for the wealthiest of Americans. Stocks and crypto markets quickly dropped on the news.
Tim Draper, a well known venture capital investor, summed up the proposal like this
Tim is absolutely right. Let’s walk through some basics of why. People invest in things to make money. They take profits and they get taxed when they do. When they take profits, they spend the money and it goes back into the economy as income for someone else, and that gets taxed again.
When taxes are really high, people start adjusting their behavior. Maybe it’s not worth working 12 months of the year to lose half of the money they would make. Or, in the case of capital gains, maybe they take less profit because they’ll be taxed less. In both cases, the lower business activity results in less money going back into the economy which kills jobs.
This isn’t even really Econ 101, it’s just common sense. But don’t worry, the Democrats have a solution for the decreased profit taking… per the Bloomberg article above and news earlier this year, “Congressional Democrats have separately proposed a series of changes to capital-gains taxation, including imposing the levies annually instead of when they are sold.”
People are upset about the way that the very wealthiest people in America and the world have benefited from stimulus programs designed to make the rich richer and the poor poorer. I share this frustration and agree that powerful people have been using the system to benefit themselves and their friends.
But, JFK was right when he said, “an economy hampered by restrictive tax rates will never produce enough revenue to balance the budget - just as it will never produce enough jobs or enough profits.” Increasing tax rates is not the solution. It will only make a bad situation worse.
Cardano Updates
Charles held an AMA earlier today. He shared some thoughts similar to mine about the state of politics.
Cardano Dan is now part of The Hoskinsons family! Keep an eye out for my addition to other NFT projects in the future and you may even see my own NFT release sometime soon.
In The News
Here’s some additional commentary on Biden’s proposed tax plans. There are some really good nuggets, I recommend checking it out.
Technical Analysis
Cardano closed today’s daily candle below the 50D EMA and below the consolidation support. It looks to me like we’re likely to retest $1 / 100D EMA in the near term.
Absent a catalyst to send overall markets higher, it feels to me like the capital gains tax news is likely to linger in the background as an overall drag on markets. It’s unfortunate timing with the Africa Special slated for next week.
I’m not actively trading Cardano, but if I was in the short-term, I might be looking to exit positions here and look for entries around the 100D EMA.
However, because I’m so bullish on Cardano mid and long-term, I’ve still not exited any of those positions. I continue to look for a strong break and hold of the 2017/18 highs to indicate we’re ready for continuation higher.
It’s possible markets will come to terms with the fact that there’s still a lot of ground to cover before the proposed legislation works its way into law. And it’s also possible (perhaps even likely) that whatever new tax laws pass won’t go into effect until 2022, which would provide the rest of this year for markets to run under the current tax rate.
As always, stay frosty and DYOR. I’d love to hear your thoughts. What do you think?
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This newsletter is for entertainment and educational purposes. I’m not a financial advisor and you should do your own research and consult a financial advisor before investing in cryptocurrencies.
always solid news and advice Dan... You da Man... Appreciate your continued efforts mate