Cap Gains Taxes - What is Fair?

[devans0]

Hmmm, 52% say capital gains should be the same tax rate as wages.

Most Americans agree with "Buffett rule" concept, poll shows - Political Hotsheet - CBS News

[ERD50]

Quote:

Originally Posted by devans0 Hmmm, 52% say capital gains should be the same tax rate as wages. Most Americans agree with "Buffett rule" concept, poll shows - Political Hotsheet - CBS News

Sure. But I wonder how many of those people know anything about cap gains and the effects a tax would have?

I could take a poll of the public on whether I should use 12 Ga or 14 Ga wire on a project, but I wouldn't expect the results to be useful. I think economics is at least as complicated as house wiring.

As an example, we have mentioned adjusting cap gains for inflation several times in this thread and others. And it seems that people are agreeable to that, once we bring the issues to light. I see no discussion of inflation adjustments in that piece, and I doubt that 90% would grasp it, and that 99.9% have never thought about it. I hadn't really thought about it much until it was brought up in these forums.

Policy decisions by (uninformed) populist vote is a dangerous thing.

-ERD50

[Hamlet]

Bingo.

There is a good reason that we have elected representatives, rather than just put everything to referendum.

See California for the results of veering too far towards direct democracy.

Quote:

Originally Posted by ERD50 Sure. But I wonder how many of those people know anything about cap gains and the effects a tax would have? I could take a poll of the public on whether I should use 12 Ga or 14 Ga wire on a project, but I wouldn't expect the results to be useful. I think economics is at least as complicated as house wiring. As an example, we have mentioned adjusting cap gains for inflation several times in this thread and others. And it seems that people are agreeable to that, once we bring the issues to light. I see no discussion of inflation adjustments in that piece, and I doubt that 90% would grasp it, and that 99.9% have never thought about it. I hadn't really thought about it much until it was brought up in these forums. Policy decisions by (uninformed) populist vote is a dangerous thing. -ERD50

[donheff]

Quote:

Originally Posted by MichaelB Bruce Bartlett often posts about taxes and this week his blog entry is an excellent short summary of the two competing philosophies of taxation - taxing income or taxing consumption - and then links to a Treasury study published in 01/1977 that describes both. Bartlett's column here Bruce Bartlett: How to Avoid Reinventing the Wheel on Tax Reform - NYTimes.com and the US Treasury study here http://www.treasury.gov/resource-cen...ments/full.pdf titled Blueprints for Basic Tax Reform

I'm sure nothing in life is new but I think Bartlett is wrong about the "typical" liberal view of income for income tax purposes. He says liberals define it as including all earned income and all capital gains, realized or not (i.e. including positive changes in net worth as income). But I don't remember hearing any liberals suggest taxing unrealized capital gains. Every CG proposal I have heard in decades involves realized CGs. Many liberals (me included) would address unrealized CGs through a continuation of some level of estate tax.

[GrayHare]

Quote:

Originally Posted by Animorph Cap gains tax rate goes to 20% when the Bush cuts expire in 2013.

hmm, rather than consume all tax loss harvesting in 2012, might be smart to postpone some into 2013

[donheff]

Quote:

Originally Posted by ERD50 Sure. But I wonder how many of those people know anything about cap gains and the effects a tax would have?

How many of us really know anything in this regard? Economists are all over the place on the topic with statistics to prove both that the current 15% is choking the engines of industry and that under previous 35% rates those same engines roared.

[ERD50]

Quote:

Originally Posted by donheff But I don't remember hearing any /people/ suggest taxing unrealized capital gains. Every CG proposal I have heard in decades involves realized CGs.

I'm trying to keep any appearance of partisan politics out of this, so let's just say 'some people'.

I do think that some people have suggested a wealth tax. That would capture unrealized gains. I'm not saying it is widespread approach, but I think it has been thrown out there.

-ERD50

[ERD50]

Quote:

Originally Posted by donheff How many of us really know anything in this regard? Economists are all over the place on the topic with statistics to prove both that the current 15% is choking the engines of industry and that under previous 35% rates those same engines roared.

The trouble with that is they are using 'statistics' (and IMO, with an agenda), rather than reason.

35% versus 15% did not occur in a vacuum. It 'proves' nothing. We've been around on this before.

If I add insulation to my house, and then we have an unseasonably cold winter and my heating bill rises regardless, I can use 'statistics' to 'prove' that increasing insulation is bad for my heating bill. You buy that one?

-ERD50

[MichaelB]

Quote:

Originally Posted by donheff I'm sure nothing in life is new but I think Bartlett is wrong about the "typical" liberal view of income for income tax purposes. He says liberals define it as including all earned income and all capital gains, realized or not (i.e. including positive changes in net worth as income). But I don't remember hearing any liberals suggest taxing unrealized capital gains. Every CG proposal I have heard in decades involves realized CGs. Many liberals (me included) would address unrealized CGs through a continuation of some level of estate tax.

Including unrealized capital gains as taxable income is part of the Treasury study.

[ziggy29]

Quote:

Originally Posted by MichaelB Including unrealized capital gains as taxable income is part of the Treasury study.

Terrible idea, IMO. For many people, this would force you to sell the asset in order to pay the "imputed" taxes. That might discourage investment altogether.

Would this also provide write-offs for unrealized capital losses?

[donheff]

Quote:

Originally Posted by donheff How many of us really know anything in this regard? Economists are all over the place on the topic with statistics to prove both that the current 15% is choking the engines of industry and that under previous 35% rates those same engines roared.

Quote:

Originally Posted by ERD50 I'm trying to keep any appearance of partisan politics out of this, so let's just say 'some people'. I do think that some people have suggested a wealth tax. That would capture unrealized gains. I'm not saying it is widespread approach, but I think it has been thrown out there. -ERD50

I'm sure some people out there may propose a wealth tax on net worth but that is a completely marginal segment. Raising such fantasies amounts to a red herring. I would be accused by many of being a "yellow dog..." and yet I haven't seen any of my fellow travelers proposing anything like that.

[Hamlet]

Can you imagine the last few years for people with substantial assets?

What was your taxable income for 2009? -1 million

What was your taxable income for 2010? +1 million

Don't forget that capital loss carry-over or you're just screwed.

Quote:

Originally Posted by ziggy29 Terrible idea, IMO. For many people, this would force you to sell the asset in order to pay the "imputed" taxes. That might discourage investment altogether. Would this also provide write-offs for unrealized capital losses?

[ziggy29]

Quote:

Originally Posted by donheff I'm sure some people out there may propose a wealth tax on net worth but that is a completely marginal segment. Raising such fantasies amounts to a red herring. I would be accused by many of being a "yellow dog..." and yet I haven't seen any of my fellow travelers proposing anything like that.

I would expect to see net worth used in means testing for public benefits (particularly Social Security and Medicare) some day, but not directly taxed. I believe that would be unconstitutional and require an amendment anyway, just as the 16th Amendment did for income.

[donheff]

Quote:

Originally Posted by donheff I'm sure nothing in life is new but I think Bartlett is wrong about the "typical" liberal view of income for income tax purposes. He says liberals define it as including all earned income and all capital gains, realized or not (i.e. including positive changes in net worth as income). But I don't remember hearing any liberals suggest taxing unrealized capital gains. Every CG proposal I have heard in decades involves realized CGs.

Quote:

Originally Posted by MichaelB Including unrealized capital gains as taxable income is part of the Treasury study.

That is a big document. Feel free to digest the whole thing and point out where it indicates that the typical liberal would recommend taxing unrealized gains. Maybe it is in there in some historical reference to the Wobblies but I'm not digging for it. I did see the issue discussed on page 75 but the then (an now) current approach to CGs and the "model tax plan" presented would tax only realized CGs. Again, I don't know any of my fellow travelers who want to tax unrealized gains. After all, we effete liberal snobs are home owners.

[ERD50]

donheff, I'm not trying to argue with you about this, it's a small point, but your words are your words, I'll quote them directly (with emph):

Quote:

Originally Posted by donheff ... But I don't remember hearing any liberals suggest taxing unrealized capital gains. ...

Then I said:

Quote:

I do think that some people have suggested a wealth tax.

Quote:

Originally Posted by donheff I'm sure some people out there may propose a wealth tax on net worth but that is a completely marginal segment. ...

Quote:

Originally Posted by donheff .... Feel free to digest the whole thing and point out where it indicates that the typical liberal would recommend taxing unrealized gains.

You are jumping from 'not any' to 'some might' to 'the typical' - you're a moving target! No big deal, just trying to clarify which comment I was addressing ('not any').


-ERD50

[RetireBy90]

Quote:

Originally Posted by donheff I'm sure some people out there may propose a wealth tax on net worth but that is a completely marginal segment. Raising such fantasies amounts to a red herring. I would be accused by many of being a "yellow dog..." and yet I haven't seen any of my fellow travelers proposing anything like that.

Not sure about red or yellow, but does sound like Joe Biden and wealth redistribution. Not trying to be political but strange things have been proposed from all over the place.

[donheff]

Quote:

Originally Posted by ERD50 donheff, I'm not trying to argue with you about this, it's a small point, but your words are your words, I'll quote them directly (with emph): Then I said:

Not to argue with you, but then arguing anyway , It is too difficult to re-post all my posts but I think your are correct nitpicking the ones referenced above. You did say some.

But this quote:

Quote:

Originally Posted by donheff .... Feel free to digest the whole thing and point out where it indicates that the typical liberal would recommend taxing unrealized gains.

to which you responded

Quote:

You are jumping from 'not any' to 'some might' to 'the typical' - you're a moving target! No big deal, just trying to clarify which comment I was addressing ('not any'). -ERD50

Was not directed at you. It was directed to another poster writing about some Treasury report to support some 1970s guy who said the typical liberal wants to tax unrealized gains. At least, I don't think it was you. At this point I have lost track and my ADD won't let me refocus.

[REWahoo]

Look! Up in the sky!

Is it a bird? Is it a plane?

No, it's Porkyman!

[Midpack]

Good! This one has run it's course IMHO...

[Alan]

Thanks folks....

http://www.youtube.com/watch?v=gBzJGckMYO4