4 ms·

Rich people love sales taxes, since their spending is a very small percentage of their net worth. For example, Bezos's $500M yacht might look expensive in abso

by jfim 5y ago

Rich people love sales taxes, since their spending is a very small percentage of their net worth. For example, Bezos's $500M yacht might look expensive in absolute terms, but his net worth went up $74B last year. I'm sure that given the choice, he'd rather pay sales taxes than capital gains taxes.

annoyingnoob 5y ago
That $74B isn't cash though, its in stock value. Jeff can hold that stock for a while and only pay long term capital gains. He can probably also make any W2 income like $1, giving him a 0% tax rate on those capital gains. Which means he'll pay more in sales tax than income tax, even under the current system.
- toast0 5y ago
  The 0% on capital gains is nice, but as he's now single, it's only applicable for his first $40k of taxable income. So, if he can live on $40k in cap gains, and $1 of w-2, he can get off with no taxes. If he cashes in $1M in cap gains, most of that is taxed (about half at 15% and half at 20%, and most of it will also get the 3.8% net investment income tax) I ignored deductions, including standard deduction. The point is the 0% capital gains rate isn't a magic loophole to channel billions through, it only has a small amount of room.
  - adabyron 5y ago
    But you can take a dirt cheap loans due to low interest rates on your stock. The more stock value you have the cheaper interest rate you get. Therefore you don't need to sell your stock as long as it makes more than the <3% interest rate you're being charged. Even if it doesn't, it's still cheaper than paying taxes.
  - annoyingnoob 5y ago
    All of this complication is the problem. Jeff ends up getting benefits that most people don't get, at least not most younger people. 15% and/or 20% plus 3.8% is still less than the 22% to 32% range that a lot of people will fall into. And that 22-32% is on 100% of taxable income, there is no break on part of it.
    - toast0 5y ago
      Ok, but you're moving the goalposts a lot. The government is clearly incentivising long term capital gains here. The nice thing is it's easier than ever to get into a brokerage account and buy sensible funds without paying a lot of fees. Robinhood may have started it, but fidelity and maybe others will let you buy fractional shares in etfs as long as you're putting in at least $1. Mutual funds have let you do fractional shares for a long time too, but minimums are higher and $1,000 to get into a vanguard target date fund might be too much for some people.
      - annoyingnoob 5y ago
        That is kinda the point, the current policy helps richer people, and older people that have amassed some investments, but for many and for most younger people there isn't much benefit. Why should the burden be shifted to labor? Wouldn't the investment plan work even better if everyone got the same tax break to say 15-20%? I mean people would have more to invest every year and so compounding works even better. It doesn't make sense to punish labor - its all income, why does the source matter?. Our current system shifts taxes to labor and stifles labor's ability to invest and realize gains.

by jfim 5y ago

annoyingnoob 5y ago

That $74B isn't cash though, its in stock value. Jeff can hold that stock for a while and only pay long term capital gains. He can probably also make any W2 income like $1, giving him a 0% tax rate on those capital gains. Which means he'll pay more in sales tax than income tax, even under the current system.

toast0 5y ago
The 0% on capital gains is nice, but as he's now single, it's only applicable for his first $40k of taxable income. So, if he can live on $40k in cap gains, and $1 of w-2, he can get off with no taxes. If he cashes in $1M in cap gains, most of that is taxed (about half at 15% and half at 20%, and most of it will also get the 3.8% net investment income tax) I ignored deductions, including standard deduction. The point is the 0% capital gains rate isn't a magic loophole to channel billions through, it only has a small amount of room.
- adabyron 5y ago
  But you can take a dirt cheap loans due to low interest rates on your stock. The more stock value you have the cheaper interest rate you get. Therefore you don't need to sell your stock as long as it makes more than the <3% interest rate you're being charged. Even if it doesn't, it's still cheaper than paying taxes.
- annoyingnoob 5y ago
  All of this complication is the problem. Jeff ends up getting benefits that most people don't get, at least not most younger people. 15% and/or 20% plus 3.8% is still less than the 22% to 32% range that a lot of people will fall into. And that 22-32% is on 100% of taxable income, there is no break on part of it.
  - toast0 5y ago
    Ok, but you're moving the goalposts a lot. The government is clearly incentivising long term capital gains here. The nice thing is it's easier than ever to get into a brokerage account and buy sensible funds without paying a lot of fees. Robinhood may have started it, but fidelity and maybe others will let you buy fractional shares in etfs as long as you're putting in at least $1. Mutual funds have let you do fractional shares for a long time too, but minimums are higher and $1,000 to get into a vanguard target date fund might be too much for some people.
    - annoyingnoob 5y ago
      That is kinda the point, the current policy helps richer people, and older people that have amassed some investments, but for many and for most younger people there isn't much benefit. Why should the burden be shifted to labor? Wouldn't the investment plan work even better if everyone got the same tax break to say 15-20%? I mean people would have more to invest every year and so compounding works even better. It doesn't make sense to punish labor - its all income, why does the source matter?. Our current system shifts taxes to labor and stifles labor's ability to invest and realize gains.