RSS!    Full Post
Share Vanguard's John Bogle -- At It Again... "A Tax Break for Gambling?"

John Bogle, the esteemed founder of the Vanguard Group, has probably done more to save investors money than any individual on the planet. So when he advocates raising taxes, folks tend to notice.


His core philosophy has always been at odds with the investment management industry -- identifying that most active managers fail to beat their benchmarks, net of fees. His relentless pressure on the industry to lower fees has not made him many friends, so his most recent remarks should come as no surprise.

In a recent interview with Bloomberg Television, Mr. Vogle argued for capital gains to be taxed as ordinary income. "Look, I would think most people in this room would say that there should be no tax rate that is lower than the earned income tax rate that people earn by the sweat of their brow or the burrows of their brain. That should be the regular tax rate. I think that there are a lot of good arguments out there for having a higher tax rate on capital gains, in particular short-term capital gains…. What is the explanation for the tax break for gambling?"


Bogle went on to call the low tax rate on private equity firms "ridiculous", and called for a transaction tax to reduce trading and encourage long term investing. "Why would you give a lower tax rate to other than the people working every day than you to on people who are, to a large extent, gambling on Wall Street?" he asked.

When queried about the stock market in general, Mr. Bogle has this to say: "In the case for equities, my view is a very simple one... In the long run, the fundamental things apply... The case for equities is based on today's dividend yield... and the earnings growth that follows that. I call that fundamental investing."


The 77-year old Bogle has long positioned Vanguard as the champion of the small investor -- and with great success, as the firm's more than $1 trillion under management would indicate. So perhaps it is not so odd that his comments continue to echo his familiar mantra: To level the playing field -- for all investors.