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  #1  
Old 04 February 2019, 07:57 PM
Bill Bill is offline
 
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Default Democratic Contenders Hoping To Run On Soaking The Rich

https://www.wgbh.org/news/politics/2...BH6VJAk811t40M

(quote from article)

Quote:
Massachusetts Sen. Elizabeth Warren is floating a 2 percent tax on all assets of people with a net worth of more than $50 million — a moon-shot plan that could face legal challenges for hitting investments, homes and cars, not just income. Vermont Sen. Bernie Sanders is pitching a steeply higher inheritance tax on large estates.
Thanks.

Bill
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  #2  
Old 04 February 2019, 08:09 PM
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Quote:
It underscores the party's march to the left
It only looks like a march to the left because the Republican party is sprinting farther right as hard as they can. There may be some issues where the Democratic party has moved left, but on some, they have moved right (pretty much abandoning any actual action on gun control).

Quote:
Schultz says he was driven from the Democratic Party by Rep. Alexandria Ocasio-Cortez, the rising star who's issued her own call for a 70 percent income tax rate on people making more than $10 million.
I'm having some doubts that a single, brand-new representative can drive someone from an entire party.
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Old 04 February 2019, 08:24 PM
RichardM RichardM is offline
 
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Trumpites won't support any increased taxes on the rich because all Trumpites are rich or at least think they are even if the want to keep the government out of their Medicare.
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  #4  
Old 04 February 2019, 09:47 PM
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Well, it's better than running on destroying the safety net for the poor.

I still haven't seen a good explanation of how we'd kill the economy by raising the top tax rates, when top tax rates were so much higher during the roaring economy of the 1950's and 1960's. All I ever seem to get is 'nobody actually paid those rates!' Which is sort of true, if you consider that the rates were of course only on the top brackets so that the average anyone pays is less than the top rate (except that that would presumably still be true); that only a small percentage of the population made enough to be hit by the highest rates (except that that would presumably still be true); and that rich people have various more-or-less legal ways to evade at least some of their taxes (except that that would almost certainly, if unfortunately, still be true.)
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Old 04 February 2019, 10:22 PM
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Given that most of the really rich people in the US's (not just the 1%) have the majority of their wealth coming from something other than income, I think it would be better to target capital gains or property.
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  #6  
Old 05 February 2019, 02:37 AM
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E. Q. Taft E. Q. Taft is online now
 
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Someone on Facebook suggested we should refer to the idea of a 70% tax bracket on top earners as "Eisenhower socialism."

Though of course, that's not really fair. I believe the top tax rate under his administration was actually around 91%....
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  #7  
Old 05 February 2019, 12:55 PM
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Quote:
Originally Posted by crocoduck_hunter View Post
Given that most of the really rich people in the US's (not just the 1%) have the majority of their wealth coming from something other than income, I think it would be better to target capital gains or property.
And, if you'll note, that's exactly what Warren suggested; not an increased tax on income or inheritances (i.e., transfers), like some of the others suggested, but directly on assets.

Thanks.

Bill
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  #8  
Old 05 February 2019, 01:21 PM
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Quote:
Originally Posted by crocoduck_hunter View Post
Given that most of the really rich people in the US's (not just the 1%) have the majority of their wealth coming from something other than income, I think it would be better to target capital gains or property.
Do you mean income subject to standard marginal tax rates? Because capital gains are income, just income that has a much lower rate.
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  #9  
Old 05 February 2019, 07:41 PM
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Yes, that's what I meant.
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  #10  
Old 05 February 2019, 08:36 PM
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Quote:
Originally Posted by GenYus234 View Post
Do you mean income subject to standard marginal tax rates? Because capital gains are income, just income that has a much lower rate.
And only long term capital gains have the lower rate. Some capital gains are conventional income. With the 70% tax bracket, then billionaires would restructure their investments to make sure essentially all of their income was long term capital gains. This could mean that dividends would become even less in favor and replaced by more stock buybacks. Most of their investments are probably done by holding companies anyway, so they have lots of tax avoidance strategies to make sure that hardly anyone is ever actually paying that 70%.
Billionaires would make a token fuss about the 70%, but if that were the only change to the tax system, then they wouldn't be too concerned since they know they'll rarely pay it. It might make sense to settle on a less eye popping number like 50%, but also overhaul all the pass through rules, low corporate tax rates, estate tax thresholds, etc, to adjust the tax rates that they actually pay.

I don't fully understand the reasoning behind why there is a long term capital gains rate at all, and we would definitely need to at least tweak the long term capital gains tax brackets along with conventional income brackets. We haven't always had the different rates, and it seems workable to not have them. Same with qualified dividends. Seems like just a handout to the rich.

The best explanation I've heard for why we have long term capital gains rates is inflation. That if a very long term holding only grows at the rate of inflation, you get taxed as if it's grown a lot when you've actually made zero money. This is a legitimate problem in extremely long term investments, but it is a fairly minor one for investments nearer to the "long term" threshold. Just giving an across the board lower tax rate is a very blunt instrument for compensating for this issue. It seems like a much more sensible and direct solution to that problem to index the cost basis for the investment to inflation, multiplying the cost whenever they bought it by some inflation index to calculate their actual capital gains. Then charge regular income tax on that.
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  #11  
Old 05 February 2019, 09:17 PM
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The best fake explanation* I've heard is that is encourages investments in businesses and the stock market instead of simple savings because dividends will be taxed at a lower rate than interest from savings.

* The real reason being that the rich make the rules and a lower capital gains tax benefits them without it being so obvious they they are paying less taxes.

ETA: Personally, I think any marginal tax rate over 50% is too much.

FETA: That is predicated on the person actually paying something close to what the marginal tax rate says they should on all income. I would suggest a tax rate of 50% with the alternative minimum tax using the same schedule for all types of income.
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  #12  
Old 05 February 2019, 10:36 PM
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Quote:
Originally Posted by GenYus234 View Post
The best fake explanation* I've heard is that is encourages investments in businesses and the stock market instead of simple savings because dividends will be taxed at a lower rate than interest from savings.
Then why have the long term threshold at all, if it's to encourage stock market investment in general? At least the inflation issue has to do with length of investment. The stock market has had much higher returns than bonds or CDs for pretty much as long as there's been a stock market, so that's motivation enough to not park too much money in a bank savings account. I think unlike this explanation, the inflation thing for "gains" on long term investments is a legit consideration, it's just that the long term capital gains rate is a really dumb way to address it.

And yes, the true reason is that rich people want to pay as little tax as possible, and have the power to implement policies to make that happen. And they can count on the fact that voters have only a vague concept of taxes that don't apply to them, and the fact that rich people pay taxes very differently from working people.
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  #13  
Old 05 February 2019, 11:02 PM
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Because people looking for long-term investments create more stability in the market and company than short-term investors would. And I don't know that length of investment would have much to do with it as g-you would have to try hard to find a long term investment that didn't keep up with inflation.
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  #14  
Old 05 February 2019, 11:23 PM
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Originally Posted by GenYus234 View Post
And I don't know that length of investment would have much to do with it as g-you would have to try hard to find a long term investment that didn't keep up with inflation.
That's not true, first of all, and it would be irrelevant even if it was, because that's not the point.

Say you buy $100k worth of a S&P500 index fund in the year 2000, when it's at 1400, then sell it 13 years later in 2013 when it's at 1600. Your investment has yielded a 14% "profit", but inflation in that time has been 35%.

So you are taxed on a capital gain of $14k, but really, you actually had a LOSS of $21k.

Not all investments are winners. A properly diversified investment portfolio is likely to do well in the long term, yes. But someone buying a house isn't buying a diversified house portfolio, they're buying a house. Someone partnering in a business isn't partnering in a diversified business portfolio. They have a lot riding on one investment that may not do as well as they'd hoped. Under some conditions they may take a bath when they have to sell that house or business, but if they've held on to it for many decades, it could look like capital gains in non-inflationary terms, even if it's depreciated in real value.

But the point isn't whether the investment beats inflation or not. Even if it returns more than inflation, they're being taxed on the component of the returns that are actually just inflation and not a profit. The longer the investment, the more significant this can be.

It would be a lot more rational to just index the cost basis in the capital gains calculation. If there are economic benefits to privileging long term investments over short term investments, then this would just extend that by making it more effective the longer the investment. A sharp cutoff where you get the full benefit after 1 year is arbitrary and doesn't reflect a truly long term investment.
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  #15  
Old 06 February 2019, 01:14 PM
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ETA: We'll have to agree to disagree which pretend explanation that the wealthy claim is the reason for lower capital gains taxes is the best.
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  #16  
Old 06 February 2019, 04:02 PM
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A question of understanding:

In Germany, income tax has several rates for several brackets, the higher the bracket, the higher the rate. However, you pay the higher rate only on the part of your income that actually is in the bracket.

If for example, there were tax brackets for an income of EUR 0 to 20,000 (tax rate 15%), EUR 20,001 to 50,000 (25%) and EUR 50,001 to 100,000 (50%), and you earned EUR 75,000, you would pay 15% tax on your first EUR 20,000, 25% on the next EUR 29,999 (for a total of EUR 50,000), and 50% tax only on the last EUR 24,999.

Is that the same in the US? Or is all of your income taxed according to the rate for the highest bracket you reach?

ETA: And how is it in other countries? UK? Australia?
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  #17  
Old 06 February 2019, 04:09 PM
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Quote:
Originally Posted by Don Enrico View Post
Is that the same in the US?
Yes it is, I.E. Marginal Tax Rate, with different brackets and rates. But lots of people who want to minimize their taxes like to try and confound other people by misinterpreting taxes.
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  #18  
Old 06 February 2019, 04:11 PM
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Quote:
Originally Posted by Don Enrico View Post
Is that the same in the US?
Yes, income tax brackets in the US works exactly the same as they do in Germany. A lot of people here don't seem to understand how they work, though.
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  #19  
Old 06 February 2019, 05:17 PM
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Originally Posted by iskinner View Post
Yes it is, I.E. Marginal Tax Rate, with different brackets and rates. But lots of people who want to minimize their taxes like to try and confound other people by misinterpreting taxes.
I notice the word "marginal" keeps getting dropped from a lot of conversations on social media (or not understood). No, Ocasio-Cortez isn't saying the entire income should be taxed at 70%.
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  #20  
Old 06 February 2019, 05:52 PM
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And that was iskinner's point - those who don't want the higher tax rates at the higher brackets will intentionally leave off the "marginal" to confuse the issue. Yes, it sounds OUTRAGEOUS that we would tax the rich at 70% of their income. However, if we're only taxing 10% of their income at the 70% rate, it doesn't sound as bad.

BTW - I think the original idea behind taxing capital gains at a lower level was for things like home ownership - my parents bought our house at $6,000 and sold it at $150,000. Yes, I know that there are homestead exemptions (or at least there were....) and other things, but Joe Average can get behind it if you explain it as "when you sell your house, you're not getting soaked." Yes, Joe Average may benefit some, but Sir I. Percent will make additional bundles.
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