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Old 03-21-2010, 04:31 PM   #61
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Okay, then I know you'll be in favor of a single tax rate for all income, and elimination of the standard deduction, the personal exemption, and all other deductions. . . .

Well, it seems a little extreme to me, but I guess I'd go along with your idea.
Yes, that is a little extreme but directionally correct. I'd get rid of all deductions, credits, and other nonsense except for a fairly generous standard deduction / personal exemption. Beyond what is accomplished by the standard deduction, I don't think the tax rate structure should be steeply progressive, but a single rate is not an absolute necessity.
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Old 03-21-2010, 05:13 PM   #62
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And don't forget that currently, if I have a $100K Cap Gain, I pay on those gains in that year. If I have a $100K Cap Loss, I get to take that (wait for it....).... $3,000 per year! Gains paid in ONE year, Losses taken over 34 years! Yeah, that 'massive tax advantage' is just overwhelming me!


This is actually happening to me. I took profit in 1999-2000, paid a good sum of cap gain, got back into the market, racked up huge losses in 2000-2001, I still have a good sum of "carry forward cap loss" to take advantage of. Unfortunately I won't be able to transfer that to my kids, I will never be able to use up those losses. I wish they would allow us to go back three years to offset gains/losses (just like businesses).

Talk about being unfair, what is the reason behind $3,000 offset per year which has never been CPI adjusted, why can't I offset the whole losses in the year that I incurred the losses? I paid taxes on the full amount of my gains both in 1999 and 2000.

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Old 03-21-2010, 05:35 PM   #63
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And don't forget that currently, if I have a $100K Cap Gain, I pay on those gains in that year. If I have a $100K Cap Loss, I get to take that (wait for it....).... $3,000 per year! Gains paid in ONE year, Losses taken over 34 years! Yeah, that 'massive tax advantage' is just overwhelming me!
Um, because your gains are taxed at a maximum of 15% and you are trying to deduct losses against ordinary income taxed at a maximum of 35%.

BTW, my income declined about 50% from 2007 to 2009 . . . I can't seem to find anywhere on my tax form where I get to carry forward my lost wages to offset against future gains.
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Old 03-21-2010, 05:58 PM   #64
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Um, because your gains are taxed at a maximum of 15% and you are trying to deduct losses against ordinary income taxed at a maximum of 35%.
Um, or, a minimum of as little as 10% rate on the earned income, in which case the taxpayer is getting a bad deal due to the relatively low value of the carryforward loss. The $3000n cap is an arbitrary, imprecise way of attempting to even things out. If the goal is to prevent people from taking advantage of the difference between CG and earned income rates, then apply a ratio between their CG rate and their earned income rate to the carryforward losses when they are applied. But it makes no sense to apply an arbitrary limit of $3000 per year.

What's wrong with us? Going on as if there's some rational basis for the tax code. Sheesh!
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Old 03-21-2010, 07:14 PM   #65
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Interesting what a border will do to the tax on people. Up here we pay more taxes than you guys, but:

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And don't forget that currently, if I have a $100K Cap Gain, I pay on those gains in that year. If I have a $100K Cap Loss, I get to take that (wait for it....).... $3,000 per year! Gains paid in ONE year, Losses taken over 34 years! Yeah, that 'massive tax advantage' is just overwhelming me!
We can refile and "carry back" these losses to previous years.

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Whether it is the limo, free use of the corp jet, free country club membership or free/subsidized health insurance, it should be taxed.
We have a box on our T4 (employment income) slips for "Taxable Benefits". It includes all of the above (well, business travel on the jet and limo is ok, personal is taxed). CEO (and minions) of mega-corp used to bitch about 6 digit "Taxable Benefits". Us peons thought tough sh$t, even though our bennies all had a price attached (mine were about 5% of income).
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Old 03-21-2010, 07:51 PM   #66
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...

BTW, my income declined about 50% from 2007 to 2009 . . . I can't seem to find anywhere on my tax form where I get to carry forward my lost wages to offset against future gains.

I bet you were laughing a lot when you wrote this one...

You didn't LOSE anything.... you just did not MAKE as much... and the taxes you paid were less... very stupid example IMO...
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Old 03-21-2010, 08:19 PM   #67
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What's wrong with us? Going on as if there's some rational basis for the tax code. Sheesh!


But I can't resist. If your normal income tax rate is 10%, your cap gains rate is zero . . .in which case you are getting a really, really, good deal. Pay no tax on the gains, deduct your losses.
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Old 03-21-2010, 08:22 PM   #68
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And it is equally easy to show that a married couple earning $100K in dividends or capital gains pays just $2K in federal taxes whereas a working couple will pay $12,700 in federal taxes.
I hate to keep repeating myself, because I think we are in agreement on the corporate income tax; but you keep posting these examples to try to show how advantaged dividend and capital gain income is. You continue to neglect the effect of the corporate income tax in your calculations. The top marginal corporate rate is 35%, so that 100K the investor receives in dividends could be 100 / ( 1 - 0.35) = 154K of pretax corporate income. So the corporation has already paid a tax of 54K on that income. Between the investor and the corporation, 56K of taxes have been paid on 154K of corporate income, or 36%.

If the corporation pays an employee 100K out of that same 154K, it is deductible to the corporation, so it would pay a corporate income tax of 35% of 54K, or 18.9K. Add that to the 12.7K, the employee pays on his income tax, and the total income tax paid is 31.6K, or 21% of the the 154K. Why is that such a "sweet deal" to the investor?

If there were no corporate income tax, the investor would have received the whole 154K. If treated as ordinary income, his tax would be 26.2K, or 17% of the 154K.

Seems to me it would be a better deal for this family to have no corporate income tax and pay ordinary income tax rates on dividends. The preferential rate on dividends and LTCG is simply an attempt to level the playing field.
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Old 03-21-2010, 08:26 PM   #69
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You didn't LOSE anything.... you just did not MAKE as much... and the taxes you paid were less... very stupid example IMO...
I didn't lose anything? The present value of my future earnings decreased tremendously. That is a huge loss. What's the difference between the PV decline in my future earnings and the decline in the PV of future corporate earnings (i.e. the value of a stock).

And you paid less in taxes the year you had losses too.
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Old 03-21-2010, 08:27 PM   #70
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You continue to neglect the effect of the corporate income tax in your calculations.
That's because I keep saying the corporate tax should be eliminated.
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Old 03-21-2010, 08:38 PM   #71
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That's because I keep saying the corporate tax should be eliminated.
OK, as I said, we are in agreement on that point. But in reality it exists, so your examples are incomplete and misleading if you don't include it.
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Old 03-21-2010, 08:42 PM   #72
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BTW, my income declined about 50% from 2007 to 2009 . . . I can't seem to find anywhere on my tax form where I get to carry forward my lost wages to offset against future gains.
I bet you were laughing a lot when you wrote this one...

You didn't LOSE anything.... you just did not MAKE as much... and the taxes you paid were less... very stupid example IMO...

Exactly. GTG, you are >>>this<<< close to hitting my "no point in talking to a brick wall" limit. And I know that my limit is about 1000x the median person, I'll keep going if I think there is even a chance of a slight return on investment of time/energy.

You are clearly far too smart to not understand the difference between a reduction in income from one year to the next, versus an investment gain in one year and a loss in the next. So, if you want to have an impact here, stop playing games.

EXAMPLE: Hey, I had a $100,000 Cap Gain in 2003, but I only had a $50,000 Cap gain in 2004! Where do I claim my $50,000 'loss'? Get real - that is not apples-to-apples, and it is not what we are talking about.


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Assuming a $100k investment, 3% inflation, 10 year holding period, and top marginal rates here is what your after tax investment would look like under current law and the "deal" you just said you'd agree to . . .

Real Return Current Law ERD50's "deal"
7% 235,468 207,064
5% 198,509 183,354
3% 167,222 162,115
0% 129,233 134,392
This deal will obviously look even worse in the brackets where the 0% gains rate applies.

Notwithstanding your professed desire to take a bad deal, ...
Well, I don't have time/motivation right now to reverse engineer your calculations, but here is where old ERD50 throws a monkey wrench into your works....

I never said I wanted a 'better' (or 'worse') deal for ERD50 - I said Cap Gains taxes ought to be 'fair'. If that means I pay more (or less) on average, so be it. I actually believe in 'fairness', not 'screw the other guy , I want MINE'.

A data point - my total 2008 tax liability was... $23.00 (twenty-three dollars, no cents). That is freakin' ridiculous. I'm living a comfy lifestyle, and I feel that my 'fair share', even if the Govt was 100% efficient/effective in using funds, should be much higher than that. No, I'm not gonna donate more, because in other years I feel I got screwed with no recourse. Hopefully, it averages out, but who knows.

A friend of mine called me, this guy lives a pretty lavish lifestyle (multiple fancy overseas vacations every single year, lots of luxurious spending), and he also 'complained' that he was getting a tax CREDIT this year! In his words, ' the Federal Govt simply cannot continue to function this way'. Like me, he paid big bucks in other years, so he's taking the credit. But we both feel it is not 'fair', and we don't want that debt being pushed onto future generations..



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Um, or, a minimum of as little as 10% rate on the earned income, ...
10%? The heck with 10%, how about all those people who get paid to file (the refundable tax credit)?

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What's wrong with us? Going on as if there's some rational basis for the tax code. Sheesh!
You are right, back to earth, time for another beer. I actually had more to say to our Canadian friends (all supportive), but the quotes within quotes were just getting the best of me. Enough for now


cheers -ERD50
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Old 03-21-2010, 11:58 PM   #73
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I didn't lose anything? The present value of my future earnings decreased tremendously. That is a huge loss. What's the difference between the PV decline in my future earnings and the decline in the PV of future corporate earnings (i.e. the value of a stock).

And you paid less in taxes the year you had losses too.
The present value of a paycheck (your earnings) is the work you did to earn it... if you do not do any work, you do not get any pay... PV=0... so you did not lose anything....

It is not the same as an investment... you put MONEY into an investment to get money back... sometimes it is a debt with a stated earnings... so in a way a bond can be 'a paycheck' if you want to deal with that... you put money in, you get money back... no money in, no money back.. but INTEREST is taxed as ordinary income, just like your paycheck...

Now, if you buy equity, you are hoping to buy a stream of future earnings... and you will be taxed on those future earnings (as a corporate tax).. every once in awhile you might want some of your money back, so you pay a second tax to remove some of your investment... that could be dividends or capital gains.. again, it is not like a job.. but then again, I think you know that...
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Old 03-22-2010, 12:04 AM   #74
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WOW..... ERD... I was north of $25K in 2008... and I have been north of $20K for many years...

But for 2009 it looks like it will be less than $4K with the credits... a cut in salary, a wife and two kids gives me a LOT off of being single...
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Old 03-22-2010, 09:54 AM   #75
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WOW..... ERD... I was north of $25K in 2008... and I have been north of $20K for many years...
I was in your 2008 ballpark in 2007 - one miss-timed Cap Gains transaction made me 'rich' for that one year. Yet my taxes that year were as if I had that income every year. That is one reason I like the NST over all the attempts to determine what is 'fair' or equitable.

Lets say a business person is in a line of work where they occasionally make a big profit/earnings. But then they have 5 dry years. And that is just the nature of the work they do. If they are smart, they will spend accordingly ( as if they made ~ 20% of the big years each year) to even out their earnings ebb and flow. An NST would tax them at that even rate of spending. Since the tax code did away with income averaging (except for select groups), there is no way to make that 'fair' or 'equitable'.

When I had that big Cap Gain, I knew I wasn't any 'richer' that year than previous years - it is my whole portfolio of unrealized gains/losses that determine by ability to pay, or my overall 'wealth'. These tax regs simply do not measure that in any reasonable way. My spending was a better, fairer, more equitable measure of my 'wealth' than anything I can think of. Not perfect, but much closer to reality.

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The present value of a paycheck (your earnings) is the work you did to earn it... if you do not do any work, you do not get any pay... PV=0... so you did not lose anything....


again, it is not like a job.. but then again, I think you know that...
Yep, and it is getting pointless to try to learn anything from a discussion with someone who continually frames things in order to get a point in, w/o really making that point. It's getting to be a lot of babbling.

-ERD50
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Old 03-22-2010, 10:04 AM   #76
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Yep, and it is getting pointless to try to learn anything from a discussion with someone who continually frames things in order to get a point in, w/o really making that point. It's getting to be a lot of babbling.

-ERD50
That's the conclusion I came to.

But if you want to continue to believe that the gains rate isn't favorable and provide no objective information supporting that view (other than some vague theory that all capital gains are due to inflation) then its best to agree to disagree.
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Old 03-22-2010, 10:14 AM   #77
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That's the conclusion I came to.

But if you want to continue to believe that the gains rate isn't favorable and provide no objective information supporting that view (other than some vague theory that all capital gains are due to inflation) then its best to agree to disagree.
Yep, time for me to stop wasting time.

Case in point, I never said nor implied that 'all capital gains are due to inflation'. I merely said that accounting for inflation in the cap gains calc would make it more comparable to earnings. Could result in more or less tax compared to the current rates, on a case-by-case basis.

If you have to resort to misquoting/misrepresenting me, it says a lot about the basis you have for support. Over.

Perhaps along the way I can look forward to having a meaningful and/or interesting discussion with you on some other topic. But this isn't it.

-ERD50
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Old 03-22-2010, 10:20 AM   #78
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Case in point, I never said nor implied that 'all capital gains are due to inflation'.
Agreed that "all" is an overstatement. But . . .

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You might be able make the case that some investment income is tax advantaged.
"Might" and "some" (emphasis original) implies most, if not all, of investment income is not advantaged. You haven't posted any evidence to support this.
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Old 03-22-2010, 10:27 AM   #79
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Agreed that "all" is an overstatement. But . . .



"Might" and "some" (emphasis original) implies most, if not all, of investment income is not advantaged. You haven't posted any evidence to support this.
ohhhhh.... Cap Gains are not the only type of investment income. As I said earlier, I had not thought through the whole issue of dividends and interest income (and all the various forms of 'unearned income', like rent, etc....), so I used 'might' and 'some' to give some leeway on those forms.

This is why I'm over this with you. You parse and twist everything not to learn, but to avoid giving an answer. Bye-Bye (on this subject)


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Old 03-30-2010, 06:20 AM   #80
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Soda, sugar, salt, fat, taxes coming your way soon

Why not mandatory exercise or pay a fine

Maybe we could hire more IRS agents to enforce it

How about taxing and rationing energy use next

We can can have more agents conduct regular energy audits on our homes

Personal carbon credits

How about a national Id and get rid of cash

Nationwide broadband internet and all electronic money...

Gee this Progressive new world is gonna be utopia
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