Posted on 08/29/2019 7:22:32 AM PDT by SeekAndFind
Edited on 08/29/2019 10:08:18 AM PDT by Jim Robinson. [history]
The Bureau of Labor Statistics earlier this month released its July jobs numbers confirming that we remain in the midst of the longest economic expansion in U.S. history. The expansion is clearly paying off for Americans of all walks of life.
Just look at the mounting evidence.
(Excerpt) Read more at realclearmarkets.com ...
Why are capital gains so sacred that they, and they alone of all income types, get this special treatment. My salary is worth less every year because of inflation, but the tax brackets don’t automatically adjust downward to take that into account?
In general income earned as salary should be given all the breaks capital gains get. Most income is earned by average Americans working what ever job they have. Most capital gains go to a much smaller portion of the population.
It’s always weird that guys like Grover Norquest somehow manage to focus on the category of taxes that rich contributors have, but the rest of us not so much.
Here’s how the “inflation tax” works today.
Capital gains tax should be abolished. They need to stop taxing people who save and invest. It’s money you already paid tax on and also the government isn’t with you as a partner if you lose money on property or stocks.
The honest thing to do. It has ZERO chance of succeeding. Big loss for the IRS. Even Trump is unlikely to support.
>>Why are capital gains so sacred that they, and they alone of all income types, get this special treatment
They don’t, your income - at least just about everyone’s income - is already indexed to inflation; most people get a raise periodically in order to keep your salary in-check’ with inflation (which is why people don’t earn $100 a month anymore), so as time goes by, your salary goes up so that hopefully (and at a minimum), you have at least same purchasing power you did before.
Capaital Gains are somewhat unfair in that, for example, you buy an asset for $100K, sit on it for a number of years and sell it for $200K (for example).
That $200K may only be worth (buy as much as) $100K when you purchased the asset, but you still owe a fat-tax bill to keep your overlords happy.
Not sure if this proposal solves the problem or not - probably loopholes would be exploited - but its a worthy discussion to have imo.
No, it doesn't. When you report income on your tax return, you are taxed on it based on the year it was earned. That's it. You still pay your income taxes one year at a time even if your income doesn't change from one year to the next. The same holds true for the value of any tax deductions you take in any given year.
A capital investment is held for years -- even decades -- which means inflation is built into the underlying appreciation of the asset in a way that you don't see with income.
Personally, I think the investment banking industry loves this "inflation tax" on capital gains because it gives investors a big incentive to hold assets for shorter periods of time, meaning they're executing trades more frequently than they might have done otherwise.
Makes sense to me.
> Capital gains tax should be abolished.<
I have mixed feeling about that. Let’s say a guy invests in a brand new company. And that company uses the money to grow the business. That’s obviously good for the country.
But now let’s say some guy bought 100 shares of some old company like Coca Cola or Ford. A year later he sells those shares for a profit. That particular investment really did nothing to help the country.
Cruz is now co-writing articles with Norquist of all people?
Exactly right. Capital gains tax needs to be abolished. Uncle Sugar is always palms up and gimme dat when you are successful and niggardly with credits palms down don’t know you when you lose.
You have already paid tax on the at risk money you invested and put at risk. Uncle Sugar didn’t do a damn thing but watch when you invested it and potentially lost all you invested.
The inflation indexing needs to apply to EVERYTHING as well.
Every year Uncle Sugar comes to your door and holds a gun to your head demanding a tribute. It is theft they have made all nice and “legal”
They will do whatever they want to do. Grousing is a waste of time and so is writing “your” congressman. “Your” ccongressman is owned by someone else from the day he is selected.
“But now let’s say some guy bought 100 shares of some old company like Coca Cola or Ford. A year later he sells those shares for a profit. That particular investment really did nothing to help the country.”
It does.
The market for shares is why people invest capital.
The market provides liquidity, which encourages capital formation.
The old guy who buys 100 shares of Coca Cola is a shareholder, having exchanged money for ownership.
Capital gains get taxed differently because they are the foundation of building wealth. It dates back to the New Deal, and Joe Kennedy Sr didn’t want to live in a society where his progeny would have to worry about keeping up with the “Joneses.”
So many Freepers want to cut taxes but ALSO favor more wars, eg against Iran. Problem is, wars cost money, which means taxes
I think this is a similar discussion, though not 1 for 1 , to the differences between a traditional IRA and a Roth IRA.
On the Traditional your not taxed now but you end up taxed on what you put in AND all your capital gains when you take it out in the future.
On the Roth your taxed on your current income, but the basis is not taxed when you take it out AND any capital gains you earn are not taxed at all when you take it out.
No different then how they handle the budget.
When it’s great times they should be paying off debt and stocking up a safety net.
When it’s lean times they should use the safety net and not issue more debt.
Of course what they do instead is:
In great times issue more debt, since they have better credit, and spend even more
In lean times issue more debt and increase taxes, because no programs can be allowed to be cut.
Every time the capital gains tax rate gets cut, the capital gains tax revenue to the treasury goes down.Why would that be? First, realizing a capital gain is a voluntary act. You have to actively sell a property or stock or bond or business - for more than you paid for it - to incur liability for the tax. You do that when (a) you have such an appreciated property, and (b)you want or need money more than you want to keep the appreciated property as (a historically good) investment. You might, for example, see a new business opportunity you want to invest in instead. But when trading one business opportunity for another, which you see as better - which presumably is good for you, and good for the economy - hits you with the capital gains tax.
So if the cap gains tax is 20%, you have to be confident that the alternative investment is no less than 20% better in order to decide to move your capital. Increasing the cap gains tax thus makes moving capital less desirable than standing pat. And people - the kind of people who make the economy grow when they invest - do. Sufficiently so, that raising that tax rate takes the federal disc. backwards. Without even considering the negative effect on the economy - and thus on the Treasury - of the foregone improvements in the allocation of capital.
Secondly, why would the original investment have appreciated in the first place? And the default answer is, simple inflation. In which case the cap gains tax is simple engine of big government, an abuse.
But another answer is that the business has grown - due to the perspicacity and possibly the self-denial and hard work of that self-same owner. At the very least, the owner exposed himself to the risk of depreciation rather than appreciation of the value of the asset (“Buy low, and sell high.” But what if it goes lower? “Don’t buy it.”).
IOW, the seller of the business earned the prospect of future revenues - note, revenues which are prospective and not yet realized - which are reflected in the appreciated value of the business. So now the owner decides to sell, perhaps to retire, and if he does the government takes a cut on the discounted present value of that prospective income stream. And then the government taxes the actual income (irrespective of whether or not it met the buyer’s expectations) as ordinary income to the buyer.
Hence the unloved nature of the capital gains tax.
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