6 ms·

Maybe all cap gains should just be taxed at the same rate. 1 year threshold his so artificial.

• mikeyouse 11y ago
  I think this is a fine idea.. Just tax them at whatever your marginal tax rate is less 5% and call it a day. The rich would howl at the suggestion, but it'd go a long way toward removing complexity.
  • dragonwriter 11y ago
    > Just tax them at whatever your marginal tax rate is less 5% and call it a day. The rich would howl at the suggestion Well, their accountants and financial advisers might, since their work of structuring things to make sure most gains are long-term and in the right categories would be less valuable. But cutting taxes for all taxpayers -- including the rich -- on short-term games, and for most taxpayers on several categories of long-term games, may not that widely object to by people paying capital gains taxes in the first place.
• ska 11y ago
  I don't see how that is more artificial than taxing cap gains at a different rate than salary, or any number of other examples in the tax codes. All of these things are done to change the incentives about something, you can't expect them to be consistent without reference to those goals (and even then...)
  • ska 11y ago
    really? I'm honestly confused at responding to this with downvoting.
    • tuckermi 11y ago
      I am confused as well. With that said, there is a comment from 'dragonwriter' further up in the thread that I think touches on this: "In a tax system with progressive marginal rates on annual income, treating income resulting from action over multiple years as earned in the year realized results in a artificial increase in the tax burden on those with that kind of income pattern. So, there's a sense in which treating capital gains earned over multiple years differently than capital gains earned over a single year or less (the latter taxed as general income), given the progressive nature of the tax system."
      • ska 11y ago
        Well sure, one can argue with the goals of the policy (or if it is effective, or what the unintended consequences are), but these things are not "arbitrary", and tax codes are full of them.
• dragonwriter 11y ago
  In a tax system with progressive marginal rates on annual income, treating income resulting from action over multiple years as earned in the year realized results in a artificial increase in the tax burden on those with that kind of income pattern. So, there's a sense in which treating capital gains earned over multiple years differently than capital gains earned over a single year or less (the latter taxed as general income), given the progressive nature of the tax system. Of course, irregular income from other sources that isn't simple hourly work often also can result in windfalls from work over a longer period of time, or naturally intermittent so that an a large income one year is the result of a pattern of activity that also resulted in a smaller income other years. A simple way to address this that isn't specific to capital income is to tax all income equally, but allow, within certain bounds, income to be recognized for tax purposes, and associated taxes paid, in advance of realization and, perhaps in certain cases, deferred and recognized over a period of years after realization. This would mitigate any overtaxing of cashing out events that took many years to "earn" the income, without favoring any particular kind of income or creating gameable thresholds.
• tosseraccount 11y ago
  What about inflation?
• deleted 11y ago
  [deleted]
• JoshTriplett 11y ago
  There's a massive difference between the long-term and short-term gains rates. And, hedge fund folks aside, long-term capital gains are also the taxes that apply to retirees drawing income from years of investments. Raising those rates would cause serious problems for folks who have already done all their financial planning and investing, and cannot afford to pay higher taxes.
  • gnopgnip 11y ago
    Raising those rates would have very little impact for retirees as many are in the 15%-25% marginal tax brackets as it is.
    • JoshTriplett 11y ago
      If you're in the 15% or 25% marginal tax bracket for income, you're in the 0% or 15% long-term capital gains tax bracket (respectively). That's a 15% or 10% tax hike, which is much more than "very little impact".
  • dragonwriter 11y ago
    > And, hedge fund folks aside, long-term capital gains are also the taxes that apply to retirees drawing income from years of investments. Raising those rates would cause serious problems for folks who have already done all their financial planning and investing Raise them prospectively based on the date of asset purchase, starting some specified time after the date the change is adopted. Problem solved.
    • JoshTriplett 11y ago
      That would only solve the problem of not penalizing existing retirees. It would force all people currently saving for retirement to save 10-15% more to pay this new pile of tax. And what, precisely, do they get in return for that added tax burden?
      • dragonwriter 11y ago