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How to Stick It to the Greedy Capitalists

Monday, December 17, 2012 8:30

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Governments in Europe and the U.S. have decided that bankers and investors need to be attacked…

Last week, the European Union reached a deal with lawmakers to cap banker bonuses at twice their salaries. And we know that U.S. lawmakers plan to dramatically increase taxes on investors – by increasing taxes on dividends and capital gains.

You’ve got to PUNISH those greedy bankers and investors… right? What good are they, right?

But is that right?

Consider this: Japan’s government is going the opposite way…

Japan’s government is – God forbid – encouraging investment. Can you imagine such a thing?

It’s true… To encourage people to invest in businesses, Japan’s bank regulator has proposed that investors pay NO dividend tax or capital gains tax on the first million yen invested. The U.S. and Europe are in the opposite situation… Japan’s government is removing barriers, hoping people will invest and put money to work in the Japanese economy.

According to Bloomberg magazine, Japan has “the lowest taxes on dividends among developed nations, and a 10 percent capital gains tax.”

Just imagine this crazy concept the Japanese are experimenting with: If you are willing to invest – to help grow your country – and you succeed, you actually get to keep a good deal of what you earn. What a crazy concept!

In the long run, capital – both dollars and human capital – flows to where it’s treated best.

Politicians in the U.S. and in Europe either fail to understand this or are afraid to explain it to their voters. But the concept is crucial for long-term growth.

For example, the lawmakers in Europe think they’re doing a good thing… They think they are reining in greedy bankers. But the unintended consequences will be dire for Europe.

Here’s what will happen: Going forward, Europe’s best and brightest finance graduates will leave the European Union to find jobs elsewhere on the globe – where pay isn’t capped. Human capital will move to where it’s treated best. And Europe loses, big time.

I think about it like this: Every successful business I have worked for has had a limit to FIXED salaries to keep FIXED costs low, but has kept potential bonuses and commissions of key employees UNLIMITED – tied to the success of the employee. If an employee smashes all sales records in his division, why should his bonus or commission be capped? What is his incentive to keep pushing so hard late in the year after he’s already reached his pay cap?

It is a simple story.

Today, in Japan, the government is encouraging investors. What happens when a government encourages investors? People invest!

That’s just one reason I love Japan as an investment right now. I recommend the WisdomTree Japan SmallCap Dividend Fund (NYSEARCA: DFJ) in my True Wealth newsletter. As I have explained in previous essays, Japanese stocks are dirt-cheap.

And Japanese politicians are practically forcing money into the stock market.

Make sure you have some money invested in Japanese stocks. If you’re already fully invested in your portfolio, make some changes. Get rid of some stocks in Europe and the U.S. to make some room for Japanese stocks…

You will be glad you did!

Good investing,

Steve

2012-12-17 08:22:29

Source: http://www.dailywealth.com/2285/japanese-stocks-dividend-taxes

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