1811
Temporarily embarrassed millionaires pt. 2
(sh.itjust.works)
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this post was submitted on 15 Jan 2024
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I think we're thread-mixupping here. I was directly replying to someone talking about a 70% tax on income over a certain arbitrary number ($10M/yr)
You're not wrong that a blend of flat tax and treating all material gain as income could tax that one specific scenario more. But it really is a different topic. My take on that topic is "sure, but let's not do it as a flat tax at all. Progressive tax PLUS carefully situated handling of capital gains"
Honestly, we're 99% there if we just revisit all the laws that defer or waive capital gains tax and set a networth ceiling on them. It's ok to defer retirement gains, but maybe not after you have $20M in retirement? The way it works with selling owner-occupied real-estate in my area is a $250K "grace area" for profits, then you're taxed on gains less all bills/investments into the property. For most Americans even lower-upper-class, that's $0 of liability.
We can do the same with retirement, say at the $4m mark (twice the current recommended retirement total, or just round up to $5m). With stocks "ditto, pick an arbitrary large number more than most Americans have). Whatever.
But add a flat tax to that? Why.
That's true. Voters are more than happy to spend $500 on a $400 tax cut instead of spending that same thing on something that increases their quality of life by approximately $1000 (either by increasing the buying power of the dollar or community-profiting subsidies like EBT).
$5 million is far too low for a wealth tax but maybe ok for an income tax. I'm not sure which one you were proposing. No need to alarm all the people who will reflexively vote against tax increases that don't affect them. 70% is also too high.
I think everyone could agree that a wealth tax of 2% on amounts over $1 billion would be fine. Even $100 million might be acceptable. All unearned income over $500K could be taxed at 30% as well. But these are beating around the bush.
Corporate income taxes are what really need to rise. 35% at least. Tax the income where it's generated too. I don't care if Apple says their IP is all owned by a tiny company in Ireland. They need to pay US taxes on all income generated in the US.
In context here, I was sorta referencing a capital gains tax. Note the comparison with homestead sale exemptions.
Not sure whether I agree or disagree. It's in line (if a little on the high end) for the highest marginal rate in a lot of Europe. After a certain point, no human can claim to actually need the money they're making anymore, with a logarithmic return. As such, sharp taxation increases after that logarithmic point of return make sense from a strict "utility per dollar" mindset.
I simply don't think that's true. I think it's a no-brainer. But I don't think it's true. Wealth taxes terrify people who will never see that kind of wealth.
I'm assuming you mean unrealized income? Yeah, that's where the problems start, and what my whole comment was about. Are you accounting for liquidity? For risk? Sometimes people simply have hundreds of thousands in unrealized income that they will never be able to realize because it will coincide with equivalent losses in past/future years. Again, the Bitcoin example I used elsewhere. Some people who genuinely do not have a lot of money were hit with some massive "unrealized gains" taxes greater than their entire net worth, possibly greater than they'd ever earn in their lives, due in part to the unregulated and volitile nature of bitcoin.
In fact, Bitcoin is the perfect example why we need to be incredibly careful with unrealized gains taxes. They're called unrealized for a reason, and realizing gains can be incredibly costly. You tax a single-owner business for sudden growth and the owner might find themselves owing more in taxes than money made, but selling the business to realize those gains would also involve destroying their source of income. In fact, the wrong capital gains tax would (as always it seems) decisively benefit large businesses and superwealthy individuals. They would go around buying those "taxed out of business" companies for pennies on the dollar because they could afford the taxes.
That's why it's complicated.
ALSO complicated. But I agree. There is a real risk of corporate flight, but I'm not convinced Delaware-Based corporations that primarily employ people in third-world countries are really providing much value in the US.
...they already do "pay US taxes on all income generated in the US". Apple pays a majority of their taxes to the US. The Ireland thing was largely about 10 years of crazy tax breaks back in the 80's based on loopholes that the EU cracked down on. Yes, their $170B profit is disgusting, and the $35B in taxes they pay are merely 20% of their margins... but it's not going away by just expecting them to pay based on US income. Corporate taxes are a complicated game with hundreds of deductions and thousands of defensible reasons for those deductions.
I've never loved that businesses pay taxes on profit, but individuals pay taxes on income. It's "understood" that hitting a business on the bottom-line is unreasonable, but individuals are often taxed on the very remediation techniques taken to deal with overwhelming debt (yes, in the US, debt forgiveness is taxed as income!)
No, I meant unearned income. "Earned income" is income from a W-2 or 1099-Misc or something similar. "Unearned income" is dividends, interest, distributions from a trust or partnership, etc.
Basically it's income you don't work for and it's taxed less than income from your job. You don't pay FICA taxes on it (and conversely you don't get credit for social security in the future). This is part of the reason why wealthy people pay lower % taxes than people who work. And it should be addressed.
So are you saying we need to add an oppressively high tax on retirement accounts? Or are they going to be an exception?
Oh I agree. Realized capital gains really should differentiate estate gains or home appreciation vs stock. As long as we're careful.
Not wealthy, but I pay less taxes because a percent of all my assets and expenses are used in my 1099 job. My boss (the owner of the company) pays far less than I do because almost everything he does with his vehicle (for example) is work-related. My experience with wealthy people is that being able to deduct their (sometimes expensive) lifestyle is a huge part of why they pay less in taxes. That's not the ultra-wealthy, but it is the 1%.
The ultra-wealthy it's because of unrealized gains, not unearned gains. If we do not solve unrealized gains, Bezos will still have years where he nets $80,000 in income while his net worth doubles. He's already not taxed on his unrealized gains, so raising the capital gains rate will just disincentivise him from liquidating some of it. Flip-side, I have known a few "lifestyle investors" who invest just enough to live but live super-small to do. Programming retirees mostly. Looking at them (and the taxes they pay), the issue seems more about needing to raise the top gains rate cutoff, not just raising capital gains across the board.
Agreed, but …
I’d argue this is too low. I do t know how long it’s been like that but doubt it has risen with inflation. It affects more people every year and arguably shouldn’t, and it is too much impact on people who own their house a long time
I live in a high cost of living area. Despite this being low percentage growth, my house has gained that much over the 20 years I’ve lived here. I suppose you could argue I should pay more but I’m certainly not wealthy. Maybe it wouldn’t hurt me too bad while I’m working, but…
what happens to someone retired after owning a house for decades. You’d easily gain more than this just by time. However now we have a trap of no income do can no longer afford taxes on your home and taxed take a bite out of selling, making it harder to pay for retirement, healthcare, nursing home
Any adjustment needs to be kind to the elderly, plus I’d argue someone like me is not the target so should not be affected
I'm on the fence here. Realistically, if you can show "normal" bills related to wear&tear and maintenance, that gets you out of paying taxes in even the most expensive parts in the country. I live outside of Boston and have never come close to owing a penny on selling my home.
So the problem is the paper trail, and a good real estate attourney can help you maneuver it. What have your expenses been on the house over the last 20 years? They all count. Profit isn't just "selling price minus buying price" in this situation. At least in my state.
That does get complicated. To my understanding, normally the law works reasonably well in situations like these, but I don't know all the nuances. It's a "lawyer-up" situation, especially if there's an estate involved. I'm sure there are edge cases, but largely people end up not owing taxes on their home residence even in very pricy areas, unless their gains on it are absurd. If you bought a Boston apartment building when it was cheap and sell now, then you're likely going to be paying taxes on some of that $5M+ windfall.
But is that realistic? Who would keep such things over potentially their whole adult life? Even knowing that, I replaced my roof about 5 years ago and already misplaced those receipts. I do t know how people do it
I'd ask a lawyer. I'm pretty sure estimated costs and maintenance averages can be applied. I've known people who have sold their life-long residences in MA and not a one that I know has ever had to pay a penny in taxes.
Only person I know who ever had to pay taxes on a house sale like that was a friend who suddenly came into a lot of money and chose to sell their house (bought way undervalue and sold for much higher) before the 2 year residency mark that would trigger homestead protections.
And remember, if your'e selling something for hundreds of thousands of dollars there's always financial crap you gotta figure out. You always want an expert on your side telling you like it is.