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mikesilvia
10-03-2012, 11:10 AM
One of the many false talking points of the Obama administration is that a rich man like Warren Buffett should not be paying a lower tax rate than his secretary. But anyone whose earnings come from capital gains usually...

More... (http://www.townhall.com/columnists/ThomasSowell/2012/10/03/capital_gains_taxes)

Wickabee
10-03-2012, 11:35 AM
How is capital gains different?
You didn't work for it.

AUTaxMan
10-03-2012, 12:10 PM
How is capital gains different?
You didn't work for it.

Categorically false. You think people who do all of the due diligence and take all of the the risk of investing in capital assets aren't working for it?

Wickabee
10-03-2012, 12:33 PM
Categorically false. You think people who do all of the due diligence and take all of the the risk of investing in capital assets aren't working for it?

I think sitting and reading is much easier than, say, logging.

pghin08
10-03-2012, 12:39 PM
Categorically false. You think people who do all of the due diligence and take all of the the risk of investing in capital assets aren't working for it?

Cap gains are so fungible though. Part of my job is minimizing the tax consequence on our clients. Say client x has 20 stock positions. I decide to sell a position that has a $25K gain (pat on the back for making a good investment!). But oh no! I have to pay a 15% tax on that $25K gain! Not so fast. Maybe I go back to the portfolio and see that I have another position that has a $25K loss. I sell that and POOF! No more tax consequence. Loss harvesting is an extremely common practice, as you know. Plus, cost basis can even be disingenuous at times. Example:

Let's say I have $100,000. I put that $100,000 into an intermediate-term bond fund that pays a 4% dividend every year. Rather than reinvesting, I simply take that 4% dividend ($4K) in cash rather than reinvesting it. If I hold that for 10 years, the NAV of that bond fund could actually go down (let's say I bought the bond fund at $10 a share, and it's now at $9.90 a share). So my cost basis will be $100,000, but my current position in the bond fund is $99,000. So technically, if I were to sell that fund, I would show a loss of $1,000. But really, I made almost $40K on that particular investment.

Plus, when you consider that you can carry your losses forward (We have tons of clients who are still carrying forward losses from 2008), it makes it somewhat easy to avoid or minimize capital gains.

Wickabee
10-03-2012, 12:48 PM
Which brings up another point. Most people don't sit there and do everything themselves. People get hired to do it for them. I just don't understand why it's any different than regular income. Regular income is guaranteed? Really? So the company I work for can never go out of business or fire me or lay me off? Because that's what "guaranteed" would mean to me.

AUTaxMan
10-03-2012, 01:06 PM
Cap gains are so fungible though. Part of my job is minimizing the tax consequence on our clients. Say client x has 20 stock positions. I decide to sell a position that has a $25K gain (pat on the back for making a good investment!). But oh no! I have to pay a 15% tax on that $25K gain! Not so fast. Maybe I go back to the portfolio and see that I have another position that has a $25K loss. I sell that and POOF! No more tax consequence. Loss harvesting is an extremely common practice, as you know. Plus, cost basis can even be disingenuous at times. Example:

Let's say I have $100,000. I put that $100,000 into an intermediate-term bond fund that pays a 4% dividend every year. Rather than reinvesting, I simply take that 4% dividend ($4K) in cash rather than reinvesting it. If I hold that for 10 years, the NAV of that bond fund could actually go down (let's say I bought the bond fund at $10 a share, and it's now at $9.90 a share). So my cost basis will be $100,000, but my current position in the bond fund is $99,000. So technically, if I were to sell that fund, I would show a loss of $1,000. But really, I made almost $40K on that particular investment.

Plus, when you consider that you can carry your losses forward (We have tons of clients who are still carrying forward losses from 2008), it makes it somewhat easy to avoid or minimize capital gains.

I understand all of that, but the tax consequences are still following the economic realities. In the first example, you have a real gain of $25K offset by a real loss of $25K. In the second, you may have a $1,000 capital loss on the fund, but you are still paying dividend tax on the $40K in gain.

pghin08
10-03-2012, 01:30 PM
I understand all of that, but the tax consequences are still following the economic realities. In the first example, you have a real gain of $25K offset by a real loss of $25K. In the second, you may have a $1,000 capital loss on the fund, but you are still paying dividend tax on the $40K in gain.

Yes, but that dividend tax could be lower than the capital gains tax if it's a qualified dividend.

Wickabee
10-03-2012, 01:37 PM
My point is income should be income.

AUTaxMan
10-03-2012, 03:46 PM
My point is income should be income.

Those items have always been given preferential tax treatment to encourage investment.

Wickabee
10-03-2012, 04:11 PM
Those items have always been given preferential tax treatment to encourage investment.

So it should remain the way it's been because that's the way it's been?

That's not a very good reason...

AUTaxMan
10-03-2012, 05:09 PM
So it should remain the way it's been because that's the way it's been?

That's not a very good reason...

No. It should be that way because in a bad economy, we need to continue to encourage investment.

Star_Cards
10-03-2012, 05:53 PM
I think sitting and reading is much easier than, say, logging.

while buying stocks and mutual funds isn't physically as difficult as logging doesn't really mean it's not harder. It just depends on the person's skill set. There are things that a lot of people do that someone who makes more or less money wouldn't be able to do.

I'm typically okay with capital gains taxes being lower than normal income taxes, but also see the argument that income is income.

Wickabee
10-04-2012, 01:09 PM
while buying stocks and mutual funds isn't physically as difficult as logging doesn't really mean it's not harder. It just depends on the person's skill set. There are things that a lot of people do that someone who makes more or less money wouldn't be able to do.

I'm typically okay with capital gains taxes being lower than normal income taxes, but also see the argument that income is income.

Hey, I don't think it should be higher, I just can't understand why it's lower, except that it's a tax richer people pay and richer people own those who make tax policy.

AUTaxMan
10-04-2012, 01:23 PM
Hey, I don't think it should be higher, I just can't understand why it's lower, except that it's a tax richer people pay and richer people own those who make tax policy.

it is an incentive to encourage investment.

Wickabee
10-04-2012, 01:40 PM
it is an incentive to encourage investment.

So an incentive for people to sit on their butts and let their money work because they don't have to invest is a good thing, but there's no incentive to work hard. Makes total sense!


Income is income, end of story.

AUTaxMan
10-04-2012, 01:47 PM
So an incentive for people to sit on their butts and let their money work because they don't have to invest is a good thing, but there's no incentive to work hard. Makes total sense!


Income is income, end of story.

No, investment requires risk. There is a chance of loss. Manual labor does not. The incentive is the paycheck.

Wickabee
10-04-2012, 01:52 PM
No, investment requires risk. There is a chance of loss. Manual labor does not. The incentive is the paycheck.

I've heard before that labour is "guaranteed". Now a guarantee would mean one can't get laid off, the company can't go out of business etc etc. From what I've seen, there is no such thing as a guarantee.

Also, are these investors so greedy they will only invest if they make $6million instead of $4million? If the Psyche k is the incentive for me, why is the profit not incentive enough for them?

Oh right. Greed.

shrewsbury
10-04-2012, 02:19 PM
investment is not only vital but takes numerous skills. why do you think most 401k's, 403b's, and retiremnt planning took a big hit? because people do not know what they are doing with their money. you need to not only know what do to with your money but have some in the first place to invest.

Wickabee
10-04-2012, 02:46 PM
investment is not only vital but takes numerous skills. why do you think most 401k's, 403b's, and retiremnt planning took a big hit? because people do not know what they are doing with their money. you need to not only know what do to with your money but have some in the first place to invest.

Do you not think working takes numerous skills?
There is just as much (arguably more) risk to working a regular 9-5 job as being an investor.
Both labour and investment are vital to the nation's economy.

Why are they taxed at different rates? It makes no sense to me. I suppose it would if I were rich and wanted to keep as much money for myself (hey, who doesn't?) but it doesn't change the fact that you're taxed less simply for already being rich and not just sitting on it.

AUTaxMan
10-04-2012, 03:05 PM
I've heard before that labour is "guaranteed". Now a guarantee would mean one can't get laid off, the company can't go out of business etc etc. From what I've seen, there is no such thing as a guarantee.

Also, are these investors so greedy they will only invest if they make $6million instead of $4million? If the Psyche k is the incentive for me, why is the profit not incentive enough for them?

Oh right. Greed.

Without investment, there are no jobs. Companies need capital to expand and hire.

Wickabee
10-04-2012, 03:08 PM
Without investment, there are no jobs. Companies need capital to expand and hire.

Without workers, there is no company. Companies need workers to operate.

mrveggieman
10-04-2012, 03:09 PM
Without workers, there is no company. Companies need workers to operate.

CHURCH!!! :love0030::love0030::love0030:

AUTaxMan
10-04-2012, 03:50 PM
Without workers, there is no company. Companies need workers to operate.

But that has nothing to do with tax policy.

Wickabee
10-04-2012, 04:14 PM
But that has nothing to do with tax policy.

If that has nothing to do with tax policy, then neither does this:


Without investment, there are no jobs.

I still see nothing but a legislated double standard.

"Workers depends on companies. Therefor, anyone who invests in a company shall pay X% in taxes on their income"
"Companies depend on workers. Therefor, anyone who works for a company shall pay X+Y in taxes on their income"

pghin08
10-04-2012, 05:13 PM
Without investment, there are no jobs. Companies need capital to expand and hire.

Corporations have unholy amounts of cash on their balance sheets. They aren't deploying it.

AUTaxMan
10-04-2012, 05:26 PM
Corporations have unholy amounts of cash on their balance sheets. They aren't deploying it.

Why do you think that is? It's fear that Obama is going to raise capital gains rates and marginal income rates.

Wickabee
10-04-2012, 05:44 PM
Why do you think that is? It's fear that Obama is going to raise capital gains rates and marginal income rates.

They should never have been this low in the first place. The idea that without a tax incentive no one will invest is as ridiculous as, if you distribute the money to the wealthy, they will in turn trickle it down to the working and poor.

mrveggieman
10-05-2012, 10:26 AM
Big business already have obscene amounts of money, raise prices and layoff workers. Now they want a tax break? Get out of here.

AUTaxMan
10-05-2012, 12:13 PM
Big business already have obscene amounts of money, raise prices and layoff workers. Now they want a tax break? Get out of here.

Who said they wanted a tax break?

mrveggieman
10-05-2012, 12:46 PM
Who said they wanted a tax break?

Who dosen't want a tax break? If Romney gives them one I guarantee that they will take it.

AUTaxMan
10-05-2012, 01:06 PM
Who dosen't want a tax break? If Romney gives them one I guarantee that they will take it.

What are you talking about? What does that have to do with the discussion of whether capital gains should or should not receive preferential tax treatment?

mrveggieman
10-05-2012, 01:07 PM
What are you talking about? What does that have to do with the discussion of whether capital gains should or should not receive preferential tax treatment?

To answer your question NO capital gains should not recieve preferential tax treatment. Trickle down economics has been proven time and time again as an epic fail.

AUTaxMan
10-05-2012, 01:25 PM
To answer your question NO capital gains should not recieve preferential tax treatment. Trickle down economics has been proven time and time again as an epic fail.

So you think that risk should not be incentivized? If I have $1,000 and a choice between saving and investing, both of which are projected to provide me with an equal after-tax return (assuming my investment pays off), why would I ever assume the risk of loss?


Having lower capital gains rates than ordinary income rates is not trickle down economics.

habsheaven
10-05-2012, 01:30 PM
Capital gains should be taxed at twice the rate of regular income tax. The ONLY reason it is not taxed at a higher rate is the fact that those it affects the most are in the pockets of the politicians. Investors invest to make money, The tax rate is irrelevant. If a million dollar investment is going to make you a 15% profit and you know that 50% of that is going to be paid in taxes, You are still going to invest the money to get your 7.5%, rather than sit on the million as inflation outpaces it.

Wickabee
10-05-2012, 01:35 PM
So you think that risk should not be incentivized? If I have $1,000 and a choice between saving and investing, both of which are projected to provide me with an equal after-tax return (assuming my investment pays off), why would I ever assume the risk of loss?
Do you really think workers don't take risks by working? You think possibly losing a couple million, or .01% of your wealth, is more risky than going to work for 20 years only to found that your job has now been moved to China to "avoid risk for the investors"? Do you really thin that paper cut is as much a "risk" as having a tree fall on you while cutting trees for contract paper?

Do you really think there are less risks to working a real job? There isn't, for the simple fact that the investors own the workers. So if you're going to tell me an unfair tax amount is to incentivize the risk, you're telling me that workers take no risk.

Meanwhile investors steal their jobs and send them overseas (then turn around and tell the workers it was immigints coming in, not jobs going out!), but hey, they're the ones taking "risk" because they might lose their investment and be forced to "just get by" on the rest of their millions. Must be tough. But a guy who has his job shipped to India? No risk whatsoever, he'll just lose his house and everything else he owns. That's not risk though because his job is guaranteed!

Do you see my point. You're getting a better tax rate for less real risk and trying to act like investing is just one step below Jesus.



I disagree with your assertion that trickle down economics has been proven to fail. When was it employed, and when did it fail?
AUT, I'm not going to argue with you on whether it was proven to fail or not (I think it was, but I digress) however, this is yet another of your "I'm gonna trip him up" questions. Look, either you're trying to trip people up, or you're the smartest moron I know. You already know the answers, yet you ask. I don't like your tactics. I find they go against an environment of actual discourse and just breed contempt.

mrveggieman
10-05-2012, 02:15 PM
So you think that risk should not be incentivized? If I have $1,000 and a choice between saving and investing, both of which are projected to provide me with an equal after-tax return (assuming my investment pays off), why would I ever assume the risk of loss?


Having lower capital gains rates than ordinary income rates is not trickle down economics.

Life involves risks. You may be risking more by investing but you are getting more of a return. Using that same token one should say since I am getting less of a reward by working for someone instead of being a business owner and investing my money I should be entitled to a tax break.

Wickabee
10-05-2012, 02:59 PM
Life involves risks. You may be risking more by investing but you are getting more of a return. Using that same token one should say since I am getting less of a reward by working for someone instead of being a business owner and investing my money I should be entitled to a tax break.

Don't by into this fallacy, veg. Who is risking more:
The guy who stands to lose a few million but still have more than enough to live comfortably and be considered wealthy

or

The guy who works for a company that some investor can up and move, stealing his job, at any time, causing this guy to lose EVERYTHING HE WORKED FOR in order to minimize the investor's risk

?

mrveggieman
10-05-2012, 03:37 PM
Don't by into this fallacy, veg. Who is risking more:
The guy who stands to lose a few million but still have more than enough to live comfortably and be considered wealthy

or

The guy who works for a company that some investor can up and move, stealing his job, at any time, causing this guy to lose EVERYTHING HE WORKED FOR in order to minimize the investor's risk

?

Great point.

Wickabee
10-05-2012, 03:43 PM
Great point.

Don't tell AUT, he'll just call it liberal spin.