4 ms·

I can speak to this - a long time coming. A HUGE amount of complexity in tax code, tax preparation, and tax audit is the characterization of earnings. Pop qui

I can speak to this - a long time coming. A HUGE amount of complexity in tax code, tax preparation, and tax audit is the characterization of earnings. Pop quiz, if you are going to be bringing in $100M, do you want to pay 40% tax or 15% tax? Long term capital gains = 15%. So a lot of hoop jumping to turn things into capital gains, then long term capital gains. What a pain. Just for simplicyt I wish they would say, for everyone making more than $150K/year (300K married) investment income is taxed as any other type of income. Cut overall rates if needed if you want it revenue neutral. The next step is to tax unrealized gains. I know, lots of hand wringing, but if you can defer gains until death (not too hard) you can come out golden in terms of family wealth (lots of like kind property exchanges etc).

ska 5y ago
Wouldn't that latter be better fixed by adjusting estate & inheritance rules? You could even make it simple, e.g. all unrealized gains upon death.
novok 5y ago
$150k may sound large for you, but $150k in california is around $90k after tax, and with $2800-$5000/month rents that is not a lot of money left over.
- toomuchtodo 5y ago
  Federal tax rates should not be optimized for localized dysfunctional housing markets.
  - BooneJS 5y ago
    Please remember that punitive changes like limiting SALT hurts actual people before it causes changes in the way state governments run.
    - toomuchtodo 5y ago
      I assume that the SALT limitation will be removed by this administration, as it was punitive and not grounded in effective policy.
      - throwaway0a5e 5y ago
        I agree that it was totally punitive but I fail to see how it's not fair policy. By letting people deduct state and local taxes you're basically saying that they don't have to pay fed dues so long as they're paying someone something. In effect this is a discount for high tax/high service states. Conversely you can look at it as being a tax on low tax/low service states (a discount for one thing is effectively a price increase for another). If some state wants to be low tax/low service they should be able to do that without the feds taxing them for it. The feds shouldn't be picking favorites when it comes to that kind of thing. I fail to see any justification for taxing states differently based on their own tax rates.
        toomuchtodo 5y ago
        We disagree on the topic.
- colinmhayes 5y ago
  California needs to fix their housing market by repealing prop 13 and opening up zoning. That's not the federal governments problem.
  - novok 5y ago
    California needs to stop subsidizing republican states with their federal tax dollars and separate from the union with the rest of the west coast if we keep on going down that road of logic.
    - seattle_spring 5y ago
      Why not both?
- em500 5y ago
  Even in California $150k places you at around the 85% household (let alone personal) income percentile, median household income is only 75k. I.e., the bulk of Californians have to make do with far less.
poundofshrimp 5y ago
Taxing unrealized gains doesn’t make any sense. Many people would end up forced to sell part of their equity to afford paying tax on the gains.
- temp667 5y ago
  Many people have to pay tax on their income before they use it too. Why should the person sitting on a fat investment portfolio not have to? Can I borrow against these unrealized gains you say make no sense to tax and still spend the money, but perhaps never pay taxes on the gains ever?? If instead of taking income I take a carried interest in my portfolio can I defer taxes - maybe forever? By the way, all these are the loopholes that are CURRENTLY being used by the well off to avoid paying taxes. Seriously - why do you think portfolio lines of credit are so popular?
- prirun 5y ago
  Not only that, but if they are going to tax unrealized gains annually, it seems they also would have to issue annual tax credits for unrealized losses. You can't just tax the unrealized gains. What if the stock goes to a penny and you sell it? The end result is the same as now, you tax the capital gain from the time you bought the stock to the time you sold it. I have heard rumblings of removing the stepped-up basis that occurs when assets pass to heirs. But I think the problem with this is keeping track of the basis over generations. What if stock has been in the family for 3 generations? Who knows and tracks what great-great grandma paid for a stock?
deleted 5y ago
[deleted]

ska 5y ago

Wouldn't that latter be better fixed by adjusting estate & inheritance rules? You could even make it simple, e.g. all unrealized gains upon death.

novok 5y ago

$150k may sound large for you, but $150k in california is around $90k after tax, and with $2800-$5000/month rents that is not a lot of money left over.

toomuchtodo 5y ago
Federal tax rates should not be optimized for localized dysfunctional housing markets.
- BooneJS 5y ago
  Please remember that punitive changes like limiting SALT hurts actual people before it causes changes in the way state governments run.
  - toomuchtodo 5y ago
    I assume that the SALT limitation will be removed by this administration, as it was punitive and not grounded in effective policy.
    - throwaway0a5e 5y ago
      I agree that it was totally punitive but I fail to see how it's not fair policy. By letting people deduct state and local taxes you're basically saying that they don't have to pay fed dues so long as they're paying someone something. In effect this is a discount for high tax/high service states. Conversely you can look at it as being a tax on low tax/low service states (a discount for one thing is effectively a price increase for another). If some state wants to be low tax/low service they should be able to do that without the feds taxing them for it. The feds shouldn't be picking favorites when it comes to that kind of thing. I fail to see any justification for taxing states differently based on their own tax rates.
      - toomuchtodo 5y ago
        We disagree on the topic.
colinmhayes 5y ago
California needs to fix their housing market by repealing prop 13 and opening up zoning. That's not the federal governments problem.
- novok 5y ago
  California needs to stop subsidizing republican states with their federal tax dollars and separate from the union with the rest of the west coast if we keep on going down that road of logic.
  - seattle_spring 5y ago
    Why not both?
em500 5y ago
Even in California $150k places you at around the 85% household (let alone personal) income percentile, median household income is only 75k. I.e., the bulk of Californians have to make do with far less.

poundofshrimp 5y ago

Taxing unrealized gains doesn’t make any sense. Many people would end up forced to sell part of their equity to afford paying tax on the gains.

temp667 5y ago
Many people have to pay tax on their income before they use it too. Why should the person sitting on a fat investment portfolio not have to? Can I borrow against these unrealized gains you say make no sense to tax and still spend the money, but perhaps never pay taxes on the gains ever?? If instead of taking income I take a carried interest in my portfolio can I defer taxes - maybe forever? By the way, all these are the loopholes that are CURRENTLY being used by the well off to avoid paying taxes. Seriously - why do you think portfolio lines of credit are so popular?
prirun 5y ago
Not only that, but if they are going to tax unrealized gains annually, it seems they also would have to issue annual tax credits for unrealized losses. You can't just tax the unrealized gains. What if the stock goes to a penny and you sell it? The end result is the same as now, you tax the capital gain from the time you bought the stock to the time you sold it. I have heard rumblings of removing the stepped-up basis that occurs when assets pass to heirs. But I think the problem with this is keeping track of the basis over generations. What if stock has been in the family for 3 generations? Who knows and tracks what great-great grandma paid for a stock?

deleted 5y ago

[deleted]