Then she will propose several areas in which changes in government policy could push companies toward longer-term investing, including curbing chief executive compensation, tweaking capital gains tax rates and shining more light on corporate stock buybacks and so-called activist shareholders whom Clinton will say can push companies to sacrifice long-term growth prospects.
Of note to many wealthy investors -- those who pay income tax bracket of 39.6 percent, which is roughly $400,000 in income a year -- will be a plan to increase the capital gains rate on investments held between one and six years. It would raise rates on income from investments held for six years or less. Currently, gains realized in under one year are taxed at nearly 40 percent, and everything else is taxed at 20 percent. Clinton would extend the 39.6 percent rate to investments held for up to two years. Then she would implement gradually declining rates for investments held for several years after that, ending with the 20 percent rate for those held longer than six years.
Clinton is aiming to address a problem that liberals and conservatives largely agree exists in America today: Companies aren't investing enough in the sorts of things that could lift the economy in the long-run. But some may question whether Clinton's plans would suffice to change investment behavior substantially.
In the speech, aides said, Clinton will lament that large companies are spending more on dividends and stock buybacks -- which reward investors immediately -- as corporate profits remain near historical highs. She'll propose requiring companies to file much more detailed quarterly disclosures about those actions. Other countries such as the United Kingdom, she will note, require reporting within one day of a buyback taking place.
Clinton will levy similar complaints about the U.S. tax code's treatment of executive compensation and propose to change it. Many liberal economists criticize the code for encouraging companies to pay their CEOs in the form of corporate stock, which in turn encourages CEOs to pursue strategies to boost the stock price -- and their own compensation -- in the short-term.
In both cases, liberals will be watching to see if Clinton's proposals are aggressive enough.
"Curbing short-term staples like manipulative buybacks and tax incentives for CEO pay are important, but it's equally important to empower other long-term agents of the firm," said Mike Konczal, an economist at the liberal Roosevelt Institute, who had not seen the details of Clinton's plans by Thursday evening. "A tax code for long-term investment does that, but so does things like giving workers more power. There [are also] solutions outside the firm, like full-employment, and within, like workers represented on boards."
Aides said Clinton will stress "that much of the shift back to long-term thinking will depend on actions and choices outside of Washington." But conservatives have suggested that plans that attempt to restrict CEO pay inject too much government interference into decisions best worked out by boards, executives and shareholders.
In another example, Clinton will propose changing capital gains rates in the top income tax bracket to reduce taxes on investments held for a relatively long period of time - even more so that the current system, which reduces rates for investments held for a year or more. The longer you invest, she will say, the more favorable the rate will be.
Conservative economists say that would be a symbolic move, at best.
“I think she misunderstands," said Steven Moore, an economist at the Heritage Foundation, who has consulted with several Republican presidential candidates on their tax plans. "There’s no relationship between how long somebody owns a stock and the time horizon that a company is using to make investment decisions. The company doesn’t care whether the same people are holding their stock for a long time, or if it’s constantly turning over."
“It won’t affect their investment decisions one iota.”
Still, Moore agreed that American companies aren’t making long-term investments at their usual pace. “No doubt about it,” he said. “The big question is why that’s happening. As a conservative, I think it’s because these companies are worried about what’s coming down next from Washington” in terms of regulation
In a final proposal, Clinton will seek a review of securities regulations surrounding activist investors, such as Carl Icahn, who buy large stakes in companies and then often force their boards to take swift action to benefit shareholders right away. That's more of the sort of interference that some economists dislike. But it might win her some cheers on Wall Street. As Ben White notes in Politico, there's little love for activist investors among the CEOs whose companies they target.