5 ms·

The problem isn't that it hurts the sheep as well, it's that it hurts the sheep almost entirely. Raising capital gains would be a decent idea that forces the r

by TimPC 5y ago

The problem isn't that it hurts the sheep as well, it's that it hurts the sheep almost entirely. Raising capital gains would be a decent idea that forces the rich to pay more. Basically zero support for it. Closing loopholes helps too, not what we're seeing in tax policy discussions which focus on rates instead. Raising the top rate on income when most of the ultra-rich's money comes from investment isn't making sense. There is also little interest in creating ultra-high tax brackets. I agree in principle with someone earning $5 million/year paying a higher percentage than someone earning $1 million/year. Many countries the top rate starts at $120,000ish in local currency. Taxes on the sale of a primary home is not as rare as you think. It may be a twice in a lifetime event for many people but if it costs you a fortune each time people are discouraged from buying starter homes and then upgrading as their family grows. Make this too expensive and people even choose to have fewer children rather than get a bigger house. People may also choose to avoid the real estate market early to wait for a realistic home and risk getting priced out entirely. Admittedly, capital gains taxes are less punitive than land transfer taxes in this regard but it's still a factor. A capped to $500K of capital gains on a primary residence of tax avoidance is useful for middle and upper middle class Americans. It's not a measure designed predominantly for the rich unless your definition of rich is so broad that it includes any property owner. We've seen what happens when you create markets where people can't move and it looks a lot like San Francisco. That's not something I'd want policies to try and replicate.

skybrian 5y ago
Arguably capital gains should be paid earlier so it’s a sunk cost. Being able to put it off is market-distorting. It’s hard to come up with a fair way to do it though. Maybe a requirement to save money in advance based on market price, like payroll deductions? Then once you actually sell, you might even get a bit of a refund, encouraging turnover. But that would affect people with cash-flow problems the most. And the biggest problem is that many people don’t want to sell and will resent any attempt to encourage it. Because encouraging turnover is equivalent to penalizing people who stay. There is no “natural” way to do this, anything can be considered a market distortion depending on your point of view. For large residential buildings in California, I’ve heard that apartment owners will essentially swap buildings for some kind of tax advantage. (I forgot what it was, though.)
- TimPC 5y ago
  I think being able to put off capital gains on assets like homes and start-up stock is necessary for the tax system to not do awful things like force people to sell a home because it becomes too valuable or bankrupt someone who has stock options in a company that reaches a high valuation but has untraceable stock.
  - skybrian 5y ago
    We consider these awful because of tradition. The land tax advocates would say that people who own valuable real estate should sell, they are hoarding valuable property. My scheme (which I’m not too serious about) would not force bankruptcy in the stock options scenario because you could give up some stock options to get your money back. Or possibly get a very low interest loan since it would be fully collateralized by the forced savings.
- yourapostasy 5y ago
  > For large residential buildings in California, I’ve heard that apartment owners will essentially swap buildings for some kind of tax advantage. You might be thinking of the federal-level 1031 exchange [1]. California’s particularly distortive Prop. 13-based market has led to a separate Prop. 60 tax base exchange mechanism that might also fit what you saw [2]. [1] https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx https://www.investopedia.com/financial-edge/0110/10-things-t... [2] https://www.bosinvest.com/blog/tax-planning/dreaming-of-downsizing-an-upside-property-tax-consideration/ https://www.bosinvest.com/blog/tax-planning/dreaming-of-down...
cpwright 5y ago
The problem with selling your home isn't the income tax on the gains. That would be new money you have. The problem is that the closing costs are very high and that you have to pay yearly property taxes on it whether or not you are selling it. In NYS, you would lose 2% for selling a home in transfer tax (of the value not the gain); and then if you are financing another home 1.25% of the mortgage value. So right there you've lit 3% of the two transactions on fire. That doesn't even count the non-government fees like commissions, attorneys (for you and the bank), title insurance, etc. that eat quickly eat up many thousands of dollars.
- TimPC 5y ago
  Income tax on the gains tends to be bigger than these if you hold on to a property a while in a hot market. 20% of 400,000 is much bigger than 2% of 1,000,000 if you buy at 600,000 and sell at a million for example.
ineptech 5y ago
> Raising capital gains would be a decent idea that forces the rich to pay more. Basically zero support for it. Zero support among whom, the wolves or the sheep? Taxing the rich more is generally popular[0] and this would accomplish that; it would seem like that's support. > Taxes on the sale of a primary home is not as rare as you think. I would need to see a source on this; I can't imagine a scenario in which any middle-class person pays any tax on their home at all, unless they live in an extreme-outlier of a neighborhood or find gold in their backyard. 0: https://money.com/wealth-tax-rich-tax-rates-2020-presidential-election/ https://money.com/wealth-tax-rich-tax-rates-2020-presidentia... for example
- zepto 5y ago
  > Taxing the rich more is generally popular[0] and this would accomplish that; it would seem like that's support. This is a circular argument. Taxing the rich is popular, but the argument is that it would hurt everyone else. Hurting everyone else is not popular.
- rascul 5y ago
  > I would need to see a source on this; I can't imagine a scenario in which any middle-class person pays any tax on their home at all, unless they live in an extreme-outlier of a neighborhood or find gold in their backyard. Could you elaborate on why they wouldn't pay tax on their home?
  - ineptech 5y ago
    Because there's a tax shelter for that case - see https://en.wikipedia.org/wiki/Taxpayer_Relief_Act_of_1997 https://en.wikipedia.org/wiki/Taxpayer_Relief_Act_of_1997
    - rascul 5y ago
      Are you referring to this? > The act permanently exempted from taxation the capital gains on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. This exemption applies to residences the taxpayer(s) lived in for at least two years over the last five. Taxpayers can only claim the exemption once every two years. As I interpret the text, the middle-class homeowner will have to live in a home for two out of five years before they can claim an exemption. This matches the experience of my father, who sold his home after about four years and had to pay federal tax on the profit. Is there something I'm missing or interpreting incorrectly?
teachingassist 5y ago
> Basically zero support for it. Wealth taxes are extremely well-supported, despite the media as an industry [and politicians] being owned by people strongly motivated to campaign against it all costs, e.g.: https://www.reuters.com/article/us-usa-election-inequality-poll-idUSKBN1Z9141 https://www.reuters.com/article/us-usa-election-inequality-p...
- ping_pong 5y ago
  Wealth taxes don't work. It was tried in Europe in many countries and they ended up rolling them back.
  - teachingassist 5y ago
    First, this is not true. I live in a country in Europe and I paid a wealth tax today, in fact. Second, please re-read my comment above as to why you might have understood that.
    - ping_pong 5y ago
      Nothing you said contradicts what I said.
  - bernawil 5y ago
    That's interesting, can you expand?
  - neolog 5y ago
    https://en.wikipedia.org/wiki/Wealth_tax#Past_repeals https://en.wikipedia.org/wiki/Wealth_tax#Past_repeals There are two studies cited. One on the repeals is by "Institut de l'Entreprise" which seems to be a wealthy people's think tank [1] and the other is about why the wealth tax wasn't introduced in the UK [2]. I'm not convinced by the evidence here. [1] https://fr.wikipedia.org/wiki/Institut_de_l%27Entreprise https://fr.wikipedia.org/wiki/Institut_de_l%27Entreprise [2] http://eprints.lse.ac.uk/42582/1/Why_was_a_wealth_tax_for_the_UK_abandoned_(lsero).pdf http://eprints.lse.ac.uk/42582/1/Why_was_a_wealth_tax_for_th...
weaksauce 5y ago
I think the only thing that would solve almost all the issues is taxing the movement of money in all forms at a small rate. there have been some thoughts on it by people smarter than I but the gist is you tax money every time it moves at a tiny percentage rate. the rate is so small that for the commoners are not affected much but the people that trade money or move money off shore or buy up large commodities would be the ones that pay the most. I'm sure there are some downsides to it but there are many upsides too.
- teachingassist 5y ago
  I would say in general that you want to motivate money to move as much as possible - and the problem with excessive wealth is that the money is not moving. In an ideal world, I would tax money only when it is static.

by TimPC 5y ago

skybrian 5y ago

Arguably capital gains should be paid earlier so it’s a sunk cost. Being able to put it off is market-distorting. It’s hard to come up with a fair way to do it though. Maybe a requirement to save money in advance based on market price, like payroll deductions? Then once you actually sell, you might even get a bit of a refund, encouraging turnover. But that would affect people with cash-flow problems the most. And the biggest problem is that many people don’t want to sell and will resent any attempt to encourage it. Because encouraging turnover is equivalent to penalizing people who stay. There is no “natural” way to do this, anything can be considered a market distortion depending on your point of view. For large residential buildings in California, I’ve heard that apartment owners will essentially swap buildings for some kind of tax advantage. (I forgot what it was, though.)

TimPC 5y ago
I think being able to put off capital gains on assets like homes and start-up stock is necessary for the tax system to not do awful things like force people to sell a home because it becomes too valuable or bankrupt someone who has stock options in a company that reaches a high valuation but has untraceable stock.
- skybrian 5y ago
  We consider these awful because of tradition. The land tax advocates would say that people who own valuable real estate should sell, they are hoarding valuable property. My scheme (which I’m not too serious about) would not force bankruptcy in the stock options scenario because you could give up some stock options to get your money back. Or possibly get a very low interest loan since it would be fully collateralized by the forced savings.
yourapostasy 5y ago
> For large residential buildings in California, I’ve heard that apartment owners will essentially swap buildings for some kind of tax advantage. You might be thinking of the federal-level 1031 exchange [1]. California’s particularly distortive Prop. 13-based market has led to a separate Prop. 60 tax base exchange mechanism that might also fit what you saw [2]. [1] https://www.investopedia.com/financial-edge/0110/10-things-to-know-about-1031-exchanges.aspx https://www.investopedia.com/financial-edge/0110/10-things-t... [2] https://www.bosinvest.com/blog/tax-planning/dreaming-of-downsizing-an-upside-property-tax-consideration/ https://www.bosinvest.com/blog/tax-planning/dreaming-of-down...

cpwright 5y ago

The problem with selling your home isn't the income tax on the gains. That would be new money you have. The problem is that the closing costs are very high and that you have to pay yearly property taxes on it whether or not you are selling it. In NYS, you would lose 2% for selling a home in transfer tax (of the value not the gain); and then if you are financing another home 1.25% of the mortgage value. So right there you've lit 3% of the two transactions on fire. That doesn't even count the non-government fees like commissions, attorneys (for you and the bank), title insurance, etc. that eat quickly eat up many thousands of dollars.

TimPC 5y ago
Income tax on the gains tends to be bigger than these if you hold on to a property a while in a hot market. 20% of 400,000 is much bigger than 2% of 1,000,000 if you buy at 600,000 and sell at a million for example.

ineptech 5y ago

> Raising capital gains would be a decent idea that forces the rich to pay more. Basically zero support for it. Zero support among whom, the wolves or the sheep? Taxing the rich more is generally popular[0] and this would accomplish that; it would seem like that's support. > Taxes on the sale of a primary home is not as rare as you think. I would need to see a source on this; I can't imagine a scenario in which any middle-class person pays any tax on their home at all, unless they live in an extreme-outlier of a neighborhood or find gold in their backyard. 0: https://money.com/wealth-tax-rich-tax-rates-2020-presidential-election/ https://money.com/wealth-tax-rich-tax-rates-2020-presidentia... for example

zepto 5y ago
> Taxing the rich more is generally popular[0] and this would accomplish that; it would seem like that's support. This is a circular argument. Taxing the rich is popular, but the argument is that it would hurt everyone else. Hurting everyone else is not popular.
rascul 5y ago
> I would need to see a source on this; I can't imagine a scenario in which any middle-class person pays any tax on their home at all, unless they live in an extreme-outlier of a neighborhood or find gold in their backyard. Could you elaborate on why they wouldn't pay tax on their home?
- ineptech 5y ago
  Because there's a tax shelter for that case - see https://en.wikipedia.org/wiki/Taxpayer_Relief_Act_of_1997 https://en.wikipedia.org/wiki/Taxpayer_Relief_Act_of_1997
  - rascul 5y ago
    Are you referring to this? > The act permanently exempted from taxation the capital gains on the sale of a personal residence of up to $500,000 for married couples filing jointly and $250,000 for singles. This exemption applies to residences the taxpayer(s) lived in for at least two years over the last five. Taxpayers can only claim the exemption once every two years. As I interpret the text, the middle-class homeowner will have to live in a home for two out of five years before they can claim an exemption. This matches the experience of my father, who sold his home after about four years and had to pay federal tax on the profit. Is there something I'm missing or interpreting incorrectly?

teachingassist 5y ago

> Basically zero support for it. Wealth taxes are extremely well-supported, despite the media as an industry [and politicians] being owned by people strongly motivated to campaign against it all costs, e.g.: https://www.reuters.com/article/us-usa-election-inequality-poll-idUSKBN1Z9141 https://www.reuters.com/article/us-usa-election-inequality-p...

ping_pong 5y ago
Wealth taxes don't work. It was tried in Europe in many countries and they ended up rolling them back.
- teachingassist 5y ago
  First, this is not true. I live in a country in Europe and I paid a wealth tax today, in fact. Second, please re-read my comment above as to why you might have understood that.
  - ping_pong 5y ago
    Nothing you said contradicts what I said.
- bernawil 5y ago
  That's interesting, can you expand?
- neolog 5y ago
  https://en.wikipedia.org/wiki/Wealth_tax#Past_repeals https://en.wikipedia.org/wiki/Wealth_tax#Past_repeals There are two studies cited. One on the repeals is by "Institut de l'Entreprise" which seems to be a wealthy people's think tank [1] and the other is about why the wealth tax wasn't introduced in the UK [2]. I'm not convinced by the evidence here. [1] https://fr.wikipedia.org/wiki/Institut_de_l%27Entreprise https://fr.wikipedia.org/wiki/Institut_de_l%27Entreprise [2] http://eprints.lse.ac.uk/42582/1/Why_was_a_wealth_tax_for_the_UK_abandoned_(lsero).pdf http://eprints.lse.ac.uk/42582/1/Why_was_a_wealth_tax_for_th...

weaksauce 5y ago

I think the only thing that would solve almost all the issues is taxing the movement of money in all forms at a small rate. there have been some thoughts on it by people smarter than I but the gist is you tax money every time it moves at a tiny percentage rate. the rate is so small that for the commoners are not affected much but the people that trade money or move money off shore or buy up large commodities would be the ones that pay the most. I'm sure there are some downsides to it but there are many upsides too.

teachingassist 5y ago
I would say in general that you want to motivate money to move as much as possible - and the problem with excessive wealth is that the money is not moving. In an ideal world, I would tax money only when it is static.