Originally Posted by DawgyNWindow
|
|
|
|
|
Yep, restoring the state and local tax deductions for those in highly-taxed blue states will mostly benefit what the dems call "the rich" because the increase in the standard deduction didn't cover the heavy tax burden for high earners (and owners of high-value property) in those states.
It's a dem argument that Guiss has used here (the tax breaks for "the rich" being the cause of the budget deficit argument), and I believe it fits here just as well. I am surprised he didn't make it himself.
Cause it makes so much sense to pay taxes on earnings that have already been taken by the state government - earnings you never had a right to.
"Excessive" earnings. Tax the rich.
I think I am going to register as a dem. This is easy.
The tax break that the rich take advantage of is the favorable capital gains tax rate. They make their money off of trading assets - not making ordinary income.
I have capital gains...virtually every year. I guess I am rich too. Besides, if that is how they are making out, the rate should be the same regardless of your income for ALL of your income. If you are in favor of a "progressive" punative tax system, this makes as much sense as the graduated rates.
This is what is wrong with the entire progressive tax system. Everyone thinks it is great, until it hits them.
This just makes the tax code more "progressive". Make so much that your state and local taxes are more than your increased federal standard deduction....get punished. It's only fair.
I am not a progressive. I just think long term capital gains should not be distinguished from ordinary income.
And I think we should abandon the progressive income tax entirely. A very low rate income tax (like 1 or 2 percent) on all income along with a federal sales tax from which no one is exempt.
Bet that would never get passed. Too many sitting on Capitol Hill with hordes of cash from under-the-table deals and bribes they don't want touched when they purchase nice things.
They are just fighting about who they get to steal the most money from. Note the use of the word "targeted" when they discuss the possibility of allowing someone to keep what they have worked for.
Isn’t the capital gains rate basically an incentive to participate in the economy? Those with high ordinary income already pay a higher rate. Furthermore, it incentivizes diversification for folks like small business owners. Take it away and you’ll see investment dollars poured into businesses that have better take treatment. In my view, that would cause more bubbles and much higher volatility in the market as a whole.
Do people need tax incentive to participate in the economy? I don’t think so.
I have already posted the statistics that show that gains from productivity have gone to benefit owners over workers. In the base case it is better to own than to work. No additional incentive needed.
And it isn’t true that those that pay high capital gains also have high ordinary income. That would require them to also take a high wage or have high short term capital gains. I would bet that most don’t. And in a small business situation, where they can choose their compensation, they would prefer not to pay themselves a high wage.
There are also people that saved and retired early that live off gains in their assets, work small jobs and collect wage to qualify for EITC and milk the system that way. Anecdotes are just that.
If you “worked for it” it sounds like it should be treated like ordinary income. If it were just passive use of an appreciating asset, I wouldn’t call that work. Just risk taking.
You guys have gotten off on a tangent. This is the Immigration thread. But, since we're here. My advice to all LEGAL immigrants is to have both active and passive income, AND! build wealth with it. There is a difference between income and wealth. Most people know that...or at least I assume most know that. But it often fails to manifest with some.
The single most important metric for anyone is....NET WORTH. Create a balance sheet for yourself. See where you stand.
"We now return you to your regularly scheduled program..."
….speaking of immigration. BUILD THAT WALL!
Perhaps, but not of that changes the fact that the increase in bubbles and volatility will have a disproportionately negative impact on the middle class investor...particularly if a bubble bursts during their early retirement.
I see the bubble/volatility going the other way. Btw, the markets are extremely volatile right now.
Essentially, bubbles happen because of overspeculation. Too much capital deployed in a specific sector that is overvalued based on real demand. I don’t see how taxing capital gains the same as ordinary income causes that to get worse.
As far as investors and unfortunate economic events happening early in retirement, well, that is why it is important to have a well diversified portfolio when you stop making active income and not be overexposed to stocks. You have to protect yourself against a collapse of any given asset class. Stocks have historically recovered but you need enough other investments that don’t positively correlate with stocks to make it through those periods. Real estate, bonds, treasuries, CDs usually have lower correlation. Fortunately, with the Fed raising rates, fixed income folks are starting to get some ultr-safe alternatives. Unfortunately, interest rates have been so low so long, doing that now is creating some jitters for fixed income investments that compete with CDs and even stocks in such a volatile bearish environment.
Posting Permissions
Reply With Quote