- lampey
- Mar 27, 2012
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What would the downsides be for racing capital gains at the same rate as normal income?
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Oct 13, 2015 19:39
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May 10, 2024 15:38
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- lampey
- Mar 27, 2012
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This is the real problem - the global 1% can avoid lots of taxes unless something is done internationally. IMO they should keep some tariffs with free trade 'zones' but have the revenue from them be a fund for all members of the treaty organization (NAFTA, TPP, etc).
Doesn't the US require information of foreign assets, and foreign banks largely provide this?
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Oct 21, 2015 01:47
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- lampey
- Mar 27, 2012
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The downside is that the intent is to reward investors for keeping their money in the market, instead of moving in and out as winds change. That's also some of the purpose behind tax-advantaged retirement accounts, which charge penalties for withdrawal before the age of 59½.
But some people do want their capital gains taxed as income, particularly securities traders. With capital gains taxed as income, losses are fully deductible instead of only up to $3,000, the wash-sale rule doesn't apply, and you aren't taxed on each gain individually. Those are huge benefits. And if you make less than $200,000 annually, it's cheaper to have your capital gains taxed as income.
But the IRS doesn't want people trading. They want people investing. As such, they make election bothersome and irrevocable for individuals. To get around that headache, many securities traders can set up corporate entities and elect mark-to-market accounting like any other corporation would (or trade through their retirement accounts).
If you're dealing with a decent amount of capital gains, it's probably better to do so through an entity anyway, especially if your trading puts you in higher income brackets. Corporate taxes are based off profit, not income, and profit is what's left after employee payroll, medical, insurance, retirement, etc. Working for a company that cares so dearly for its employees can be nice.
And hey, if the business environment in the United States isn't competitive, overseas corporations may be hiring.
This is a really insightful explanation for why we have the current system. Is it really worth giving a subsidy to capital gains to keep money in the market? The IRS is leaving a lot of money on the table for that upside.
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Nov 8, 2015 09:19
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- lampey
- Mar 27, 2012
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I would love to live in the world where only newly issues stocks were traded sold, But I don't think that we do.
Can shares changing hands for the Nth time even be connected to real activity going on at the issuing company?
At that point it's just money being shuffled in a spreadsheet and is no more productive (in real terms) than money stashed in a mattress.
You have to consider the effects on the whole system. If an investor could not sell stock at a later date at the market price it may not have been bought in the first place, and the company would have a harder time raising funds to make pizza emoji.
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Nov 9, 2015 10:23
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Oct 13, 2015 19:39
