43.4% tax rate on long term capital gains for high income individuals-Biden plan

[Castanza]

Why not tax income less and establish a flat tax on consumption? The issue with income tax is it's difficult to balance incentives to earn more. I think inflation is also more detrimental with high income tax because you can't exactly scale back how much you're paying. But if tax were primarily consumption based well you can scale back. I just think this idea of creating a class warfare on the rich is misguided and ignorant of history. This hasn't ever worked long term and basically destroys incentives long term all for some short term relief?

They discourage consumption.

 

So what? Here we are in an environment where nobody has any savings and we have to pump trillions of dollars in stimulus money into the economy to keep everything moving forward. Maybe it's simplistic, but allowing people to save more and spend as they see fit is not in and of itself a bad thing no?

[stahleyp]

Speaking of the "welfare state" how about all of the tax brib...err "incentives" to move a business to a certain city/state? How about sales tax increases to fund stadiums? Is this not welfare? Would the businesses suddenly not operate if not given the "incentives?"

[TwoCitiesCapital]

Where do we draw the fairness threshold?

 

If an immigrant family toils to build a dry cleaning business/hotel/apartment worth $2 million, is it fair for that to be taxed at 50%+ at death?

 

If my grandpa sat on Gillette stock for 70 years and has a 100+ bags of P&G that he wants to put in an educational trust for my future kids,what tax rate should apply at death? (This is a real life example lol)

 

Should the rate be different because the immigrant worked harder and had a harder life than my grandpa? (This is objectively true) Or because the dry cleaning business is a “real

Family business” whereas clipping divvies from tide pods and 10 bladed razors is not?

 

What amount of dry cleaner/P&G is it fair to inherit? $500K, $1mm, $2mm? $10mm? Does it change if the money is to be spent on a Ferrari vs education?

 

I think we need higher rates from a fiscal standpoint, but think that death duties at rates which amount to seizure are antithetical to the bedrock of capitalism and freedom: property rights.

Well the whole rationale for having lower rates for capital is to stimulate economic activity. That means new real means of production. So from that perspective dry cleaning would qualify and clipping divvies would not.

 

As for inheritance taxation I would say that duties that amount to seizure are not the way to go. But I also don't think anyone is talking about that. I do think that income shouldn't be sheltered forever and has to be taxed at some point. Personally I like Canada's system where there is no estate tax but you have a deemed disposition on death. But even that system could use some improvement especially when it comes to IRAs.

 

Income is taxed when you earn it....

 

Not really. "Income" is an accounting convention. Cash is what is earned and what is spent.

 

You make make CASH that can be earned and spent off an investment property where your INCOME is 0 due to depreciation and interest write-offs. Sure, all that gets lobbed into your basis - but then you can always do 1031 exchanges or hold it to death and get the step up and never pay any taxes on the CASH or the INCOME.

 

This can apply to stocks as well. You've held Amazon for 20 years. Congrats - you've made millions and are now dying wealthy. The step up in basis ensures that you and your heirs are never taxed on those millions.

[stahleyp]

Inheritance tax is disgusting. What has the government done to stake claim to that money? They already likely taxed the heck out of that money while it was being accumulated...whether a dry cleaner business or dividends from stock.

 

15% dividends is a real killer. I mean, look at all of these people not buying stocks because of it! Perhaps if we lowered it to 10% more people would invest?

 

If we move that up a little, I'm pretty sure all of these folks are just going to ugh...put it in a savings account and not try to continue growing their wealth?

 

Besides being born from the right family, what have the heirs done to stake a claim on that money? Even at a higher tax rate, aren't they still getting more than they earned?

 

 

[SharperDingaan]

"lol.  I've never heard inflation as a justification for the estate tax.  I'm generally in favor of an estate tax on some level, but true inflation is a tax in and of itself.  So now there will be an incentive to create even more inflation to produce more capital gains taxes!  Seems counterproductive."

 

It is used every single year in most places - to raise the excluded and tax exempt thresholds! This is just the other side of the same coin.

https://www.williamsmullen.com/news/estate-planning-inflation-related-adjustments-tax-year-2021

 

We are also talking the same thing. The true annual inflation tax is just collected upon death, versus every year.

All else equal, every year the value of the house increases by the inflation amount, and the estate liability increases by the cumulative inflation PTD, leaving the original capital invested on day-1. You leave the world with what you brought into it, and the original capital worth less because you did nothing with it to outrun the inflation rate. Not what the elderly want to hear.

 

SD

 

 

 

 

 

 

[Gregmal]

All of this still eludes the main issue here...why is the government entitle to this?

[TwoCitiesCapital]

All of this still eludes the main issue here...why is the government entitle to this?

 

There is an argument that if not for the government's investments in infrastructure that businesses wouldn't be as successful today. That if not for the government's investments in research, much of the technology behind business application wouldn't exist today. That if not for the governor investment in education, that you wouldn't have a populace educated enough to work the jobs that generate the profits that these business owners are entitled and etc.

 

 

Ultimately, I think there's a pretty good case to be made for the government being entitled to SOME of the success of private enterprise that thrives on the environment the government provides and protects. 

 

The question remains how much and whether you want it to be equally distributed or equitably distributed across the population in terms of collection.

 

I am independent and tend to lean conservative right on matters of government size and finances - I'm very much OK with higher taxes if it's clear to me the benefits that the population is getting from them (a la NYC taxes support a vast infrastructure of public transportation that allowed me cheap transportation at all times without me need of a vehicle, or paying for parking, or sitting in traffic, etc). I live in St Louis now - it charges a fraction of the taxes but looking at the downtown area versus NYC it's also clear you're getting a fraction of the benefits.

[Gregmal]

I agree. But theyve already got their hands on every dime you take in from an employer. Every dime you receive from interest/dividends. Mandate(until recently) you buy inflated healthcare or pay a tax, tax your purchases(on goods that have been assembled largely with taxes incurred along the way) ranging from gas to the car itself and then year after year, DMV fees, insurance surcharges(and mandates)....after all that is settled they want a cut of your families worth, simply because someone died? Its just appalling. Sure they provide a lot of the benefits you mentioned, but thats also funded in good bit from the taxpayers pocket anyway or in a manner as I described above with the whole car/driving example. And if they didnt provide this, I am sure a private enterprise would have, if the venture made sense to begin with.

[stahleyp]

All of this still eludes the main issue here...why is the government entitle to this?

 

Well, one could argue that the government isn't entitled to it.

 

But, if the government didn't work in the specific way it does, there is a high probability that the people with that wealth wouldn't have it. For instance, if the federal reserve didn't lower interest rates after the internet melt down, there is a pretty good chance Amazon would've gone bankrupt. If that happened, I would imagine Bezos would probably still be well off...but not the richest guy in the world.

 

 

https://money.cnn.com/2000/06/23/companies/amazon/

 

So, I suppose another question is why are individuals and corporations entitled to bailouts?

 

 

[mcliu]

Government focus too much on taxing the rich instead of making the poor richer.

[rb]

Why not tax income less and establish a flat tax on consumption? The issue with income tax is it's difficult to balance incentives to earn more. I think inflation is also more detrimental with high income tax because you can't exactly scale back how much you're paying. But if tax were primarily consumption based well you can scale back. I just think this idea of creating a class warfare on the rich is misguided and ignorant of history. This hasn't ever worked long term and basically destroys incentives long term all for some short term relief?

They discourage consumption.

 

So what? Here we are in an environment where nobody has any savings and we have to pump trillions of dollars in stimulus money into the economy to keep everything moving forward. Maybe it's simplistic, but allowing people to save more and spend as they see fit is not in and of itself a bad thing no?

So what?

 

First of all it's not true that nobody has any savings. There are tons of savings. It's the poor people that have no savings. And yes there's a lot of them.

 

Second, you are aware that consumption=production right. Lowering GDP hasn't been very good for prosperity or stimulating economic activity... historically speaking.

 

Third, you want to incentivize poor people to increase their savings by hiking their tax bill?

 

This has got to be one of the worst arguments I've ever heard.

[fareastwarriors]

The IRS should be the best funded agency. #FundtheIRS

 

Could can we try close the tax gap a bit before even attempting to mess with all the different rates?

 

It won't solve the deficit or solve all the major problems sure. But it's good optics to make "the rich" paid their lawful share. It's good for law and order since we have these tax laws already so we should try to enforce them. More and better audits will encourage better compliance.

 

The difference between what taxpayers owe and what they pay timely is referred to as the Tax Gap. The gross Tax Gap is the amount that is owed by taxpayers before collections from IRS enforcement actions and other late taxpayer payments are taken into account and is estimated to be $458 billion annually.

 

The net Tax Gap is the difference between the amount that is owed by taxpayers and what is paid after taking into consideration the amount that the IRS enforcement efforts bring in and is estimated to average $406 billion per year for Tax Years 2008-2010. The different components of the Tax Gap reflect different types of noncompliance, such as underreporting of taxes and nonpayment of taxes, as well as the types of taxes, such as income taxes, employment taxes, and estate and gift taxes. The underreporting of income taxes comprises the largest component of the Tax Gap at $387 billion annually, with amounts attributable to nonfiling and nonpayment of taxes at $32 billion and $39 billion respectively.

 

https://www.treasury.gov/tigta/congress/congress_05092019.pdf

 

 

But y'all are way smarter than me so I'll move on as y'all argue about the rates, incentives, and the need/role of taxes.

[Castanza]

Why not tax income less and establish a flat tax on consumption? The issue with income tax is it's difficult to balance incentives to earn more. I think inflation is also more detrimental with high income tax because you can't exactly scale back how much you're paying. But if tax were primarily consumption based well you can scale back. I just think this idea of creating a class warfare on the rich is misguided and ignorant of history. This hasn't ever worked long term and basically destroys incentives long term all for some short term relief?

They discourage consumption.

 

So what? Here we are in an environment where nobody has any savings and we have to pump trillions of dollars in stimulus money into the economy to keep everything moving forward. Maybe it's simplistic, but allowing people to save more and spend as they see fit is not in and of itself a bad thing no?

So what?

 

First of all it's not true that nobody has any savings. There are tons of savings. It's the poor people that have no savings. And yes there's a lot of them.

 

Second, you are aware that consumption=production right. Lowering GDP hasn't been very good for prosperity or stimulating economic activity... historically speaking.

 

Third, you want to incentivize poor people to increase their savings by hiking their tax bill?

 

This has got to be one of the worst arguments I've ever heard.

I'm not saying tax the poor more and I'm not saying lower GDP. But you seem to be coming from the angel that GDP is all that matters. I think there is more to it than that. I don't believe higher taxes on the rich solve issues long term. It's a temporary stimulus in an of itself. I think deregulation, shrinking of govt and govt spending and allowing individuals to keep more of what they earn in general is the best way forward.

[rb]

Why not tax income less and establish a flat tax on consumption? The issue with income tax is it's difficult to balance incentives to earn more. I think inflation is also more detrimental with high income tax because you can't exactly scale back how much you're paying. But if tax were primarily consumption based well you can scale back. I just think this idea of creating a class warfare on the rich is misguided and ignorant of history. This hasn't ever worked long term and basically destroys incentives long term all for some short term relief?

They discourage consumption.

 

So what? Here we are in an environment where nobody has any savings and we have to pump trillions of dollars in stimulus money into the economy to keep everything moving forward. Maybe it's simplistic, but allowing people to save more and spend as they see fit is not in and of itself a bad thing no?

So what?

 

First of all it's not true that nobody has any savings. There are tons of savings. It's the poor people that have no savings. And yes there's a lot of them.

 

Second, you are aware that consumption=production right. Lowering GDP hasn't been very good for prosperity or stimulating economic activity... historically speaking.

 

Third, you want to incentivize poor people to increase their savings by hiking their tax bill?

 

This has got to be one of the worst arguments I've ever heard.

I'm not saying tax the poor more and I'm not saying lower GDP. But you seem to be coming from the angel that GDP is all that matters. I think there is more to it than that. I don't believe higher taxes on the rich solve issues long term. It's a temporary stimulus in an of itself. I think deregulation, shrinking of govt and govt spending and allowing individuals to keep more of what they earn in general is the best way forward.

Sorry but that's exactly when you're saying when you're talking about regressive taxes to encourage saving among the poor. You pretending it's not so doesn't change it.

 

The whole shrink the government so that people can keep more is also pretty much bullshit. Most of the government spending is on healthcare, education and military. Those aren't discretionary items. People will have to consume those. In order for the people to keep more of what they earn the private sector will have to provide those goods cheaper.  Out of those 3 (2 really) which one does the private sector offer at a lower price?

[Castanza]

Why not tax income less and establish a flat tax on consumption? The issue with income tax is it's difficult to balance incentives to earn more. I think inflation is also more detrimental with high income tax because you can't exactly scale back how much you're paying. But if tax were primarily consumption based well you can scale back. I just think this idea of creating a class warfare on the rich is misguided and ignorant of history. This hasn't ever worked long term and basically destroys incentives long term all for some short term relief?

They discourage consumption.

 

So what? Here we are in an environment where nobody has any savings and we have to pump trillions of dollars in stimulus money into the economy to keep everything moving forward. Maybe it's simplistic, but allowing people to save more and spend as they see fit is not in and of itself a bad thing no?

So what?

 

First of all it's not true that nobody has any savings. There are tons of savings. It's the poor people that have no savings. And yes there's a lot of them.

 

Second, you are aware that consumption=production right. Lowering GDP hasn't been very good for prosperity or stimulating economic activity... historically speaking.

 

Third, you want to incentivize poor people to increase their savings by hiking their tax bill?

 

This has got to be one of the worst arguments I've ever heard.

I'm not saying tax the poor more and I'm not saying lower GDP. But you seem to be coming from the angel that GDP is all that matters. I think there is more to it than that. I don't believe higher taxes on the rich solve issues long term. It's a temporary stimulus in an of itself. I think deregulation, shrinking of govt and govt spending and allowing individuals to keep more of what they earn in general is the best way forward.

Sorry but that's exactly when you're saying when you're talking about regressive taxes to encourage saving among the poor. You pretending it's not so doesn't change it.

 

The whole shrink the government so that people can keep more is also pretty much bullshit. Most of the government spending is on healthcare, education and military. Those aren't discretionary items. People will have to consume those. In order for the people to keep more of what they earn the private sector will have to provide those goods cheaper.  Out of those 3 (2 really) which one does the private sector offer at a lower price?

 

Arguably both healthcare, education

 

Consumption tax is regressive if you view it plainly as you do. There are many ways to structure a consumption tax that even has attributes of a progressive tax while still allowing this to be mostly volunteer. Canada has done quite a few studies on this in the mid 2000's and the results were positive. There is more than one way to skin a cat. The straight up progressive tax bracket has been anything but perfect here in the US.

 

https://ideas.repec.org/p/sek/iacpro/5808138.html

 

I also prefer a Negative Income Tax structure as well.

 

 

[rb]

Why not tax income less and establish a flat tax on consumption? The issue with income tax is it's difficult to balance incentives to earn more. I think inflation is also more detrimental with high income tax because you can't exactly scale back how much you're paying. But if tax were primarily consumption based well you can scale back. I just think this idea of creating a class warfare on the rich is misguided and ignorant of history. This hasn't ever worked long term and basically destroys incentives long term all for some short term relief?

They discourage consumption.

 

So what? Here we are in an environment where nobody has any savings and we have to pump trillions of dollars in stimulus money into the economy to keep everything moving forward. Maybe it's simplistic, but allowing people to save more and spend as they see fit is not in and of itself a bad thing no?

So what?

 

First of all it's not true that nobody has any savings. There are tons of savings. It's the poor people that have no savings. And yes there's a lot of them.

 

Second, you are aware that consumption=production right. Lowering GDP hasn't been very good for prosperity or stimulating economic activity... historically speaking.

 

Third, you want to incentivize poor people to increase their savings by hiking their tax bill?

 

This has got to be one of the worst arguments I've ever heard.

I'm not saying tax the poor more and I'm not saying lower GDP. But you seem to be coming from the angel that GDP is all that matters. I think there is more to it than that. I don't believe higher taxes on the rich solve issues long term. It's a temporary stimulus in an of itself. I think deregulation, shrinking of govt and govt spending and allowing individuals to keep more of what they earn in general is the best way forward.

Sorry but that's exactly when you're saying when you're talking about regressive taxes to encourage saving among the poor. You pretending it's not so doesn't change it.

 

The whole shrink the government so that people can keep more is also pretty much bullshit. Most of the government spending is on healthcare, education and military. Those aren't discretionary items. People will have to consume those. In order for the people to keep more of what they earn the private sector will have to provide those goods cheaper.  Out of those 3 (2 really) which one does the private sector offer at a lower price?

 

Arguably both healthcare, education

 

Consumption tax is regressive if you view it plainly as you do. There are many ways to structure a consumption tax that even has attributes of a progressive tax while still allowing this to be mostly volunteer. Canada has done quite a few studies on this in the mid 2000's and the results were positive. There is more than one way to skin a cat. The straight up progressive tax bracket has been anything but perfect here in the US.

 

https://ideas.repec.org/p/sek/iacpro/5808138.html

 

I also prefer a Negative Income Tax structure as well.

Yeah. That's bullshit on the education and healthcare.

 

The paper that you've posted here is. Not really a paper or a study. It pretends to be a paper but it's really more like a deck for a conference. It was written by some political prof at Mount Royal junior high and it's clear that he doesn't know what a regressive tax is. It employs a series of other fallacies as well to try to make its "thesis".

 

At this point it's pretty clear that you're not dealing in facts here. This from someone who didn't want to make it political.

[Castanza]

Why not tax income less and establish a flat tax on consumption? The issue with income tax is it's difficult to balance incentives to earn more. I think inflation is also more detrimental with high income tax because you can't exactly scale back how much you're paying. But if tax were primarily consumption based well you can scale back. I just think this idea of creating a class warfare on the rich is misguided and ignorant of history. This hasn't ever worked long term and basically destroys incentives long term all for some short term relief?

They discourage consumption.

 

So what? Here we are in an environment where nobody has any savings and we have to pump trillions of dollars in stimulus money into the economy to keep everything moving forward. Maybe it's simplistic, but allowing people to save more and spend as they see fit is not in and of itself a bad thing no?

So what?

 

First of all it's not true that nobody has any savings. There are tons of savings. It's the poor people that have no savings. And yes there's a lot of them.

 

Second, you are aware that consumption=production right. Lowering GDP hasn't been very good for prosperity or stimulating economic activity... historically speaking.

 

Third, you want to incentivize poor people to increase their savings by hiking their tax bill?

 

This has got to be one of the worst arguments I've ever heard.

I'm not saying tax the poor more and I'm not saying lower GDP. But you seem to be coming from the angel that GDP is all that matters. I think there is more to it than that. I don't believe higher taxes on the rich solve issues long term. It's a temporary stimulus in an of itself. I think deregulation, shrinking of govt and govt spending and allowing individuals to keep more of what they earn in general is the best way forward.

Sorry but that's exactly when you're saying when you're talking about regressive taxes to encourage saving among the poor. You pretending it's not so doesn't change it.

 

The whole shrink the government so that people can keep more is also pretty much bullshit. Most of the government spending is on healthcare, education and military. Those aren't discretionary items. People will have to consume those. In order for the people to keep more of what they earn the private sector will have to provide those goods cheaper.  Out of those 3 (2 really) which one does the private sector offer at a lower price?

 

Arguably both healthcare, education

 

Consumption tax is regressive if you view it plainly as you do. There are many ways to structure a consumption tax that even has attributes of a progressive tax while still allowing this to be mostly volunteer. Canada has done quite a few studies on this in the mid 2000's and the results were positive. There is more than one way to skin a cat. The straight up progressive tax bracket has been anything but perfect here in the US.

 

https://ideas.repec.org/p/sek/iacpro/5808138.html

 

I also prefer a Negative Income Tax structure as well.

Yeah. That's bullshit on the education and healthcare.

 

The paper that you've posted here is. Not really a paper or a study. It pretends to be a paper but it's really more like a deck for a conference. It was written by some political prof at Mount Royal junior high and it's clear that he doesn't know what a regressive tax is. It employs a series of other fallacies as well to try to make its "thesis".

 

At this point it's pretty clear that you're not dealing in facts here. This from someone who didn't want to make it political.

 

Hey you guys heard it here first. The World Tax Czar rb scoffs at individuals like Friedman, Hayek, Sowell and their puny intellect. Stop recording tax history because the only way forward is a progressive tax! Not only that but he has also found a foundational truth that the private market cannot provide cheaper healthcare and education than the government! JFC, lets make this guy the supreme leader now and call it a day.

 

Enjoy your weekend rb

 

exiting stage left.

[rb]

I'm not saying that it's not possible. I'm just saying that the empirical evidence is lacking.

 

Stay classy my friend.

[Greg]

And most of the rest gets eaten up by inflation. Better to spend than save. Have fun!

[RichardGibbons]

All of this still eludes the main issue here...why is the government entitle to this?

 

Money is taxed when it is transferred between individuals. When someone dies, their money is transferred to a new individual. It's as reasonable to tax that money transfer as any other money transfer like wage payments, capital gains, revenue.

 

Plus, if you're actually going to use the word "entitled", it's unclear to me why anyone is entitled to the money, since the only person who was actually entitled to the money is dead.

[SharperDingaan]

Most recognize that in any 'western' economy, 'government' is an obvious need. The problem is that the government is a monopoly buyer, it's often corrupt, and it's more effective/efficient if someone OTHER than government makes the goods/services purchased. Corruption isn't great, but it obeys the iron laws of economics - to live longer, and maximize the 'take' from a democracy, a ruler needs to keep the little people employed, spending money, and the 'oversight' as lean as possible.

 

Create monopolies, regulate/sell ongoing licences to the few, and pass some of the wealth down as income for the little people. Sure a good/service will cost more than otherwise, but if the little people have more income, the cost as a % of that now higher income is LOWER than it would otherwise be. No higher income, pay the military more to put down the civil unrest, and risk losing your head. As in any good drug cartel - all are replaceable; simply follow the rules, and everyone does well.

 

So what? If you don't like the tax regime regime, leave - you are readily replaceable: you just cant take your gains &/or knowledge with you. Different industries just use different solutions, 'sleep with the fishes' through to extradicial 'expropriation/liberation' - same net result.

 

Every libertarian has to live/eat somewhere.

Choose your poison wisely  ;)

 

SD

 

 

 

 

 

[Greg]

The United States is one of the few countries where you have to pay the full federal income taxes even if you do leave.

[Investor20]

I watch Shark Tank regularly.

 

I believe such innovativeness and enterpreneurship is very important for not only employment generation but new and innovative products or services to be introduced in market.

 

Now we are telling these investors and enterpreneurs that there will be 28% tax on profit and 44.3% long term capital gains when they cash out, in a situation the failure rate in a start up is very high.

 

28+44.3 = 72.3%.  Will there be anything left for inheritance with this type of taxes on startups?

[stahleyp]

I watch Shark Tank regularly.

 

I believe such innovativeness and enterpreneurship is very important for not only employment generation but new and innovative products or services to be introduced in market.

 

Now we are telling these investors and enterpreneurs that there will be 28% tax on profit and 44.3% long term capital gains when they cash out, in a situation the failure rate in a start up is very high.

 

28+44.3 = 72.3%.  Will there be anything left for inheritance with this type of taxes on startups?

 

Do you think highly driven people will let their money sit in a savings account and let inflation dwindle their relative wealth away because they're paying more in taxes?

 

 

[scorpioncapital]

The United States is one of the few countries where you have to pay the full federal income taxes even if you do leave.

 

Not if you renounce your permanent residency or citizenship. If you have permanent residency you 100% have a 2nd passport. If you renounce the citizenship you may have a 2nd one (e.g. European heritage).

If your estate is under something like 2 million there is also no capital gains tax on unrealized gains.