Capital Gains Tax

[Sisyphus]

How about if we lower taxes on earned income and raise taxes on capital gains to the point where both are equal while eliminating all deductions and credits?

Then none would invest for the long term, for the very reason you mentioned.

 

[AlabamaPaul]

Then none would invest for the long term, for the very reason you mentioned.

I've never met a person that would settle for no gain as opposed to investing excess capital...

 

[head of joaquin]

I've never met a person that would settle for no gain as opposed to investing excess capital...

Exactly why preferential capital gain treatment for the top bracket makes no sense, but does make sense for working people.

When you have $1B, you're going to invest it. You have to. When all you have is $1000, you need a real incentive to risk investing.

 

[polgara]

How about raising capital gain on the top bracket and lowering it on the lower brackets. Thus accomplishing the purpose of capital gain treatment.

Are deductions really a problem? I like deductions. They make economic sense.

I expect charities to weigh in on this.

Good evening, HOJ. :2wave:

 

[Lutherf]

PB said inflation reduced the return. So going with an inflation adjusted price comparison, would be taking the inflation-hit X 2.

The chart you posted only shows the inflation in the price of a house. It isn't showing overall price inflation. My comparison (and the one I assume PB is making) is between the increase in price of his investment and the increase in the price of everything including his house.

 

[Papa bull]

The chart you posted only shows the inflation in the price of a house. It isn't showing overall price inflation. My comparison (and the one I assume PB is making) is between the increase in price of his investment and the increase in the price of everything including his house.

It seems pointless to try to explain something to someone that, apparently, wants very much not to understand.

 

[trfjr]

Because the Tea Party Occupation forces refuse to lower taxes on working people without lowering taxes on billionaires, which is stupid. So the GOP is holding the tax cut hostage. What's new?

isn't your man Obama wanting to lower the corporate tax rate and leave the taxes for the rest of America the same, and isn't the GOP who wants to give a tax break to every one
get off the Obama Koolaid it is rotting your brain

 

[trfjr]

Exactly why preferential capital gain treatment for the top bracket makes no sense, but does make sense for working people.

When you have $1B, you're going to invest it. You have to. When all you have is $1000, you need a real incentive to risk investing.

so take away the incentive to invest away from the ones who have the money to invest
Only a progressive would think of something that stupid it is like taxing job creators to create jobs

 

[head of joaquin]

isn't your man Obama wanting to lower the corporate tax rate and leave the taxes for the rest of America the same, and isn't the GOP who wants to give a tax break to every one
get off the Obama Koolaid it is rotting your brain

Actually, no, but you know that. And besides I bet you're for lowering corporate rates, so I sense some dishonesty here. And finally, corporate rates are a separate issue from cap gain treatment.

Three strikes. You're out.

 

[head of joaquin]

so take away the incentive to invest away from the ones who have the money to invest
Only a progressive would think of something that stupid it is like taxing job creators to create jobs

Yeah, cuz billionaires need incentives to invest, given their aversion to risk (they could go broke!) and their desire to put billions under their mattresses.

Conservative psychology is soooo odd.

 

[head of joaquin]

The chart you posted only shows the inflation in the price of a house. It isn't showing overall price inflation. My comparison (and the one I assume PB is making) is between the increase in price of his investment and the increase in the price of everything including his house.

Since the dollars used to pay the taxes are subject to the same inflation as the increased value of the house (indeed it is the exact same measurement if you're talking about inflation), this objection makes zero sense.

 

[head of joaquin]

It seems pointless to try to explain something to someone that, apparently, wants very much not to understand.

Like the fact that the dollars used to pay the taxes on the non-inflated adjusted gains are not inflation-adjusted either, so your complaint here makes no sense?

 

[trfjr]

Yeah, cuz billionaires need incentives to invest, given their aversion to risk (they could go broke!) and their desire to put billions under their mattresses.

Conservative psychology is soooo odd.

if you raise the capitol gains tax to the point that it is not worth the risk they will invest in bonds or invest overseas and leave it there
there are billions of American investment dollars already overseas that will never be brought back to the states because of the taxes

 

[Papa bull]

Like the fact that the dollars used to pay the taxes on the non-inflated adjusted gains are not inflation-adjusted either, so your complaint here makes no sense?

You aren't so good at math, are you? You can actually lose money in real inflation adjusted dollars and show a gain that you will be taxed on. Imagine that you could out a jug of milk in a time capsule. You buy it at market value 20 years ago. You sell it at market value today. You get taxed on the difference between the price of a jug of milk now and a jug of milk the. It's still just the value of a jug of milk. You didn't actually MAKE anything because of inflation. But you are taxed, anyway. Proof would be that after paying taxes, you couldn't afford to replace the gallon of milk. You actually lost money because you were taxed when you made no REAL profit.

 

[Peter Grimm]

I think that's a Capital Loss and can be deducted from any future Capital Gains and you can also use $3K of it against ordinary income. Luther, please correct me if I'm wrong.

As for Capital Gains themselves, everyone imagines you start a business and sell it at a profit and poor little you have to pay up 20%. But mostly you buy into a hedge fund that invests in Chinmese businesses and then sells at a profit doing your own country zero good and you still pay ONLY 20%. How sad.

Yeah, but it's your money. You work a job, you pay taxes. What's left over, you invest in the stock market and, if your stocks go up, you pay taxes on that. So that's double taxation.

But you know what? You could just buy a bunch of weed with your money, or blow it on strippers. That's tax free.

 

[Gipper]

I already view the increase in CGT as the main culprit in 401Ks going from defined benefit to defined contribution, by and large. Last thing we really need is Keynesian fisting of investment and money market routes.

 

[Peter Grimm]

You aren't so good at math, are you? You can actually lose money in real inflation adjusted dollars and show a gain that you will be taxed on. Imagine that you could out a jug of milk in a time capsule. You buy it at market value 20 years ago. You sell it at market value today. You get taxed on the difference between the price of a jug of milk now and a jug of milk the. It's still just the value of a jug of milk. You didn't actually MAKE anything because of inflation. But you are taxed, anyway. Proof would be that after paying taxes, you couldn't afford to replace the gallon of milk. You actually lost money because you were taxed when you made no REAL profit.

No democrat is ever going to understand this. If they did, they'd be a Republican.

 

[specklebang]

You owe me an explanation of the tax free weed and strippers comment. The fact is that money is taxed over and over and over again. Even strippers pay sales tax and some pot dealers are multi-millionaires with portfolios. Nobody likes paying taxes. Nobody.

Why are you OK with your hard, sweaty labor being taxed? Aren't you outraged that you're the one who goes to work every ****ing morning and these dip****s take 10-20-30-40% of it? So why is that cool but a tax on capital gains gets under your skin?

Just curious.

Yeah, but it's your money. You work a job, you pay taxes. What's left over, you invest in the stock market and, if your stocks go up, you pay taxes on that. So that's double taxation.

But you know what? You could just buy a bunch of weed with your money, or blow it on strippers. That's tax free.

 

[Fisher]

Cap gains are up this year. No more 15% treatment (including qualified dividends) and no more 0% for those in the 15% or lower bracket. A lot of people are going to be surprised come April 15th.

I just spoke with a CPA that said that all of those are still around this year and they just added a 20% bracket for income over $450K but that it is 2014 when things really start changing so if you are going to sell things now in 2013 would be the last best time to do it as far as gains taxes.

 

[Lutherf]

I just spoke with a CPA that said that all of those are still around this year and they just added a 20% bracket for income over $450K but that it is 2014 when things really start changing so if you are going to sell things now in 2013 would be the last best time to do it as far as gains taxes.

That's correct. Congress finally made the decision in January. The EGTRRA was set to expire and the provision you mention was part of the final agreement but don't count on it staying that way. That concession was made to get the ATRA passed as Congress had already run out of time to get a budget fix in but we'll see new debate on this in the fall and everything I'm hearing indicates that we will see that provision go away as well some other changes. One of the biggies that they are talking about is disallowing the mortgage deduction for anything over $500k in acquisition debt (limit is now $1M). My best guess is that $400/450k threshold will be dropped as part of a deal to extend the basis "step up" provision which is also on the chopping block.

 

[jaeger19]

That's some other discussion you need to have bragging about your financial wisdom. I'm just pointing out that gains over time are eroded by inflation and that's something people need to think about before they get their knickers in a twist because capital gains are taxed at lower rates than income.

I am sorry.. but that doesn't make sense... How are your "gains eroded by inflation"... Your gains are in part BECAUSE of inflation... you got more for you house because of its INFLATED value. Your house value follows the rate of inflation.

Capital gains rates for the most part are a travesty... its bad for the economy, as it discourages private enterprise. I invest in my own company.. and run a business with employess etc etc... I get taxed at income rates....

Same money in the stock market.. essentially doing nothing.... that profit taxed at a lower rate.

 

[Papa bull]

I am sorry.. but that doesn't make sense... How are your "gains eroded by inflation"... Your gains are in part BECAUSE of inflation... you got more for you house because of its INFLATED value. Your house value follows the rate of inflation.

Capital gains rates for the most part are a travesty... its bad for the economy, as it discourages private enterprise. I invest in my own company.. and run a business with employess etc etc... I get taxed at income rates....

Same money in the stock market.. essentially doing nothing.... that profit taxed at a lower rate.

Wow. I tried to explain this earlier. Let me try again.

1.00 in 1980 is worth 2.83 today.

So say you invest 10,000.00 in 1980 and in 2013, you sell it for 28,300.00.

You DIDN'T ACTUALLY MAKE ANYTHING. What you sold it for is exactly what you paid for it in REAL inflation adjusted dollars. But you will pay capital gains tax on 18,300.00 that you "profited". The profit, however, is nothing but inflation. You will pay 15% of 18,300 for a total of $2,745.00. How did you make out really? You lost $2,745.00 is what really happened because what you're left with is 28,300 - 2745 = 25,555 and in 1980 dollars, that's only worth 9,017.00. You would have broken even except that the tax you paid on the gains you didn't really make caused you to lose about 10% of the real value of your invested wealth.

Remember, you sold for 28,300. In order to buy your "investment" today, that's what it would cost you. You can't turn around and re-buy that investment with the proceeds of your sale because you LOST MONEY since you got taxed for profit you DIDN'T REALLY MAKE.

I don't know if you get it or not at this point, but if you don't, then I'm not going to be able to teach you about this. If you still don't get it, then you should probably try to research and understand how inflation affects money and investments.

 

[AlabamaPaul]

Wow. I tried to explain this earlier. Let me try again.

1.00 in 1980 is worth 2.83 today.

So say you invest 10,000.00 in 1980 and in 2013, you sell it for 28,300.00.

You DIDN'T ACTUALLY MAKE ANYTHING. What you sold it for is exactly what you paid for it in REAL inflation adjusted dollars. But you will pay capital gains tax on 18,300.00 that you "profited". The profit, however, is nothing but inflation. You will pay 15% of 18,300 for a total of $2,745.00. How did you make out really? You lost $2,745.00 is what really happened because what you're left with is 28,300 - 2745 = 25,555 and in 1980 dollars, that's only worth 9,017.00. You would have broken even except that the tax you paid on the gains you didn't really make caused you to lose about 10% of the real value of your invested wealth.

Remember, you sold for 28,300. In order to buy your "investment" today, that's what it would cost you. You can't turn around and re-buy that investment with the proceeds of your sale because you LOST MONEY since you got taxed for profit you DIDN'T REALLY MAKE.

I don't know if you get it or not at this point, but if you don't, then I'm not going to be able to teach you about this. If you still don't get it, then you should probably try to research and understand how inflation affects money and investments.

If your investments only grow at the rate of inflation, your investment strategy sucks...

 

[Papa bull]

If your investments only grow at the rate of inflation, your investment strategy sucks...

That's beside the point and your investment strategy sucks even worse if you lose money or don't even keep up with inflation, but that's beside the point, too. The point is that long term capital gains are eroded by inflation and in lieu of there being some sort of adjustment value for inflation, a reduced rate is the most sensible compromise.

 

[jaeger19]

You aren't so good at math, are you? You can actually lose money in real inflation adjusted dollars and show a gain that you will be taxed on. Imagine that you could out a jug of milk in a time capsule. You buy it at market value 20 years ago. You sell it at market value today. You get taxed on the difference between the price of a jug of milk now and a jug of milk the. It's still just the value of a jug of milk. You didn't actually MAKE anything because of inflation. But you are taxed, anyway. Proof would be that after paying taxes, you couldn't afford to replace the gallon of milk. You actually lost money because you were taxed when you made no REAL profit.

Excuse me.. but that jug of milk that you sell? Its price is dependent on inflation.