Author Topic: 43.4% tax rate on long term capital gains for high income individuals-Biden plan  (Read 11303 times)

Investor20

  • Sr. Member
  • ****
  • Posts: 412
https://www.wsj.com/articles/on-capital-gains-joe-biden-is-no-jack-kennedy-11597006775

"Then long-term capital gains and qualified dividends would be taxed at the ordinary income-tax rate of 39.6% on incomes above $1 million plus an investment-income surtax of 3.8%, bringing the total to 43.4% Finally, the step-up in basis for capital-gains taxation at death would be eliminated."

I feel stock market at least in short term will take a hit.  Long term as the article points out is not good for economy as it will lock up gains in sectors that are not most efficient.  Also it will reduce start up investment since a start up if successful, the investors hope to make more than 1 million.  When most start up investments fail and the few that are winners get 43% (plus states taxes depending on location) would kill start ups, IMO.

I am not sure how it works for Berkshire, how their equity sales are taxed.



stahleyp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 4242
Rich people will survive, I suspect.

I think there should be some benefit vs ordinary income but I do like this better than the current method.
Paul

RichardGibbons

  • Hero Member
  • *****
  • Posts: 881
I don't think it's a matter of whether rich people can afford it. It's a question of what's optimal for the country long term.

The evidence suggests that Investor20's points are correct:

https://www.jec.senate.gov/public/_cache/files/0dc035df-5637-4f47-84cf-c9f0a304f395/optimal-capital-gains-tax-policy--lessons-from-the-1970s-1980s-and-1990s.pdf
https://www.iedm.org/sites/default/files/web/pub_files/cahier0218_en.pdf

I think the stepped up in basis for capital gains taxation at death does make sense, as right now, that stepped up basis discourages people from moving capital into the investment with the highest future returns.

stahleyp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 4242
Well, you can certainly see that this level of wealth inequality is very, very "suboptimal" so I think this would help bring it closer to optimal. The purpose of a country is not to just produce as much wealth as possible after all.
Paul

TwoCitiesCapital

  • Hero Member
  • *****
  • Posts: 2721
Well, you can certainly see that this level of wealth inequality is very, very "suboptimal" so I think this would help bring it closer to optimal. The purpose of a country is not to just produce as much wealth as possible after all.

Especially given the behavior of some billionaires and CEOS recently and the very poor optics of lower and middle class Americans struggling while the billionaires get even more billions.

Don't get me wrong, I totally understand Elon Musk cutting workers' pay in a vacuum considering COVID's impact on the auto sector.

On the flip side, we don't live in a vacuum and his net worth was soaring with Tesla stock at the time and they successfully did a $5 billion offering. Couldn't it have been $5.1 billion instead to make workers whole on previously agreed upon salaries so everyone benefits instead of Musk's network quadrupling while cutting worker pay? 

Just terrible optics and outcomes for a country already very divided by wealth and the outcomes it affords you and is likely to build support for greater taxes on these assholes.


cherzeca

  • Hero Member
  • *****
  • Posts: 3571
does anyone know whether the Biden max rate on cap gains kicks in if OTHER income is >$1mm, or if the cap gain itself is included in the $1MM threshold

mbreject

  • Jr. Member
  • **
  • Posts: 62
Gah. First, they get rid of the stretch ira and now he's eyeing the step-up basis?!

RichardGibbons

  • Hero Member
  • *****
  • Posts: 881
Well, you can certainly see that this level of wealth inequality is very, very "suboptimal" so I think this would help bring it closer to optimal. The purpose of a country is not to just produce as much wealth as possible after all.

Yeah, I agree.  I think the real challenge is to make the wealth redistribution better, without killing the incentives that lead to the massive wealth generation. As of the last few years, I've been leaning toward "massive death taxes". Like, you can get as rich as you like, but when you die, your kids are only at the 99th percentile of wealth, but not 99.1th percentile.

stahleyp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 4242
Well, you can certainly see that this level of wealth inequality is very, very "suboptimal" so I think this would help bring it closer to optimal. The purpose of a country is not to just produce as much wealth as possible after all.

Yeah, I agree.  I think the real challenge is to make the wealth redistribution better, without killing the incentives that lead to the massive wealth generation. As of the last few years, I've been leaning toward "massive death taxes". Like, you can get as rich as you like, but when you die, your kids are only at the 99th percentile of wealth, but not 99.1th percentile.

I think that's pretty fair.
Paul

thepupil

  • Hero Member
  • *****
  • Posts: 2046
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.
« Last Edit: October 30, 2020, 05:47:02 AM by thepupil »