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Capital Gains Tax Should Be Raised - Not Lowered

S

shifrbv

Senior member
This past year my friend had capital gains for the first time in his life. Hearing people moan about how horrible the tax is, I thought he would be in for a big hit. Instead, after filing his taxes with $7,000 of stock gains, he saw only an increase of $800 in his tax burden.

Not bad considering he didn't work a day in his life for that money.

Why are people always bitching about the gains rate? Considering the high return on such a large sum, I would think the government would raise it. Other European countries have a higher rate than the US, yet you hear people wanting to abolish the gains tax. Why? So the middle class can pick up the tab?
 
well, it does kinda suck to earn the money in the first place, then invest it, then get taxed on what you make on your smart investment.

Pisses me off too. 🙂
 
Sure...why not raise all taxes? I just don't think we pay enough.

It has nothing to do with the middle class picking up the tab, it has to do with people being able to keep more of the money they earned.

 


<< Instead, after filing his taxes with $7,000 of stock gains, he saw only an increase of $800 in his tax burden. >>

Well, a lot of it has to do with the fact that many people use their AFTER-TAX income to invest, only to see their income from AFTER-TAX money be taxed YET AGAIN. Sorta sucks....
 
Shinerburke - I'm hoping you use the term &quot;earned&quot; in a loose manner. Come on, the guy saw a $6,200 windfall for a couple of weeks of investing. I would hardly call it &quot;earning&quot; in the traditional sense of the word. Did he really earn this money, or was it off the backs of the corporate employees who were probably downsized sometime earlier this year?

Bacillus - No, I don't work for the IRS. This was just an observation I made on my own.

Scorp00 - Really? To be taxed on a windfall occurs in every other strata of the tax code. Why should there be an exclusion here?

It seems like the middle class keeps getting squeezed so the upper and lower classes can come out a little better. This gains area is one way in which I noticed this to be true.
 
Capital investments are the backbone of our economy. Taxing them at high rates only harms growth, and gives less incentive for investments. Investing IS work, because it is risk.

Your friend got off easier than the rest of us. For some reason, he paid less than 12% in captital gains, when the minimum tax rate for long term CG is 20%, short term CG is taxed at your income tax level.
 


<< It seems like the middle class keeps getting squeezed so the upper and lower classes can come out a little better. This gains area is one way in which I noticed this to be true. >>


Really? Most middle class folks have captital investments by the time they reach retirement. Just about all middle class folks with any smart retirement savings plan make capital investments many times throughout their lives.

And no middle class folks would have jobs, if the incentive to invest was removed, or severely reduced.

Shif, instead of displaying blatent class envy, try to look at the bigger picture.
 
<< Other European countries have a higher rate than the US, yet you hear people wanting to abolish the gains tax. >>
I don't think we want to look to European countries for insight on how to tax people.



<< To be taxed on a windfall occurs in every other strata of the tax code. Why should there be an exclusion here? >>

How about life insurance? When someone dies, the beneficiary gets a &quot;windfall&quot;. Should we tax that too?
 


<< Instead, after filing his taxes with $7,000 of stock gains, he saw only an increase of $800 in his tax burden. >>



I find this very hard to believe and your friend had better watch out for a audit. When I (and every one of my investing friends) get hit with capital gains tax it is generally %40-45 depending on short-term or long-term capital status.

You make me sick by saying capital gains should be raised. That is my money that has already been taxed. it is ridiculous that it is taxed again. Don't get me started on estate tax. Think about every dollar you earn and see how many times that same dollar is taxed. 5-10 times.
 
AmusedOne - If investing equates to work because it involves risk, maybe everyone who buys lotto tickets should get a tax break as well.

spidey07 - His taxes were done with Turbotax. I've no reason to doubt the calculation is correct.

This was a short-term gain which was taxed at his normal income limit. But considering the phenominal rise in stocks that have been witnessed over the past few years, I'm thinking 20% is still a bargain.

I'm sure next we'll see legislation to allow the maximum loss carryover to exceed $3K if the markets continue to underperform over the next few years.
 
It seems like you are saying, &quot;This guy made a bunch of money. He didn't &quot;earn&quot; it. Somebody should take a lot of it away.&quot;
 
Ryudo - If you won the lottery tomorrow, you could expect your earning to be halfed once the government got through with you. Taxing these &quot;windfall&quot; gains at only 20% seems like a hot deal to me.

I also question the theory of gains being the backbone of the economy. If this were true, why do European countries have higher gains rates (yet the Euro is coming closer and closer to the dollar), and certain economies which have 0% gains rates (like Japan) are still in the tanker.
 


<< AmusedOne - If investing equates to work because it involves risk, maybe everyone who buys lotto tickets should get a tax break as well.

This was a short-term gain which was taxed at his normal income limit. But considering the phenominal rise in stocks that have been witnessed over the past few years, I'm thinking 20% is still a bargain.

I'm sure next we'll see legislation to allow the maximum loss carryover to exceed $3K if the markets continue to underperform over the next few years. >>



Short term CG should have a minimum of 20%, or so I thought. I don't know, my tax rate hasn't been 20% in a long time.

This isn't a tax break, it's an incentive to keep capitalism working. And it works. The lottery does nothing for the economy. It's just another tax... on people who are bad at math. Apples and oranges.
 
Sitting at a desk in front of a computer in an air conditioned office isn't really &quot;work&quot; either so maybe people in the computer industry should get taxed more than a construction worker.
 
LOL. Let's see.

He took after-tax money, invested it, assumed the risk and now has the privilege of giving a portion of that money to the government.

SEEMS LIKE A GOOD DEAL FOR THE GOVERNMENT!!!!!!!!!!

The government had nothing to do with the investment and is skimming the cash off the top. What additional services did the government provide for its 20% cut? Certainly the government did less to &quot;earn&quot; that money than the investor.

Your analysis is moronic.
 
shifrbv - The lottery issue is a whole 'nother can of worms. I don't think it should exist at all, so comparing it to capital gains taxes is fruitless for me.

But to get back to the issue, it almost seems like you think that it's &quot;unfair&quot; for people to make money by investing; therefore, someone should take a large chunk of it away. Simply because they either

1)got lucky or
2)didn't do backbreaking menial labor to earn it or
3)didn't &quot;deserve&quot; it

Am I correct?
 
Noone said &quot;gains&quot; were the backbone of the economy. But access to capital most definitely is a large factor. Cutting the cap gains rates encourages the public to invest thereby making capital more readily available to businesses, something the government should want to encourage.

Some times it pays to actually feed that goose that lays the golden eggs so it won't starve....
 


<< Ryudo - If you won the lottery tomorrow, you could expect your earning to be halfed once the government got through with you. Taxing these &quot;windfall&quot; gains at only 20% seems like a hot deal to me. >>


They're not &quot;windfalls,&quot; Shif. They're EARNED income. Windfalls are unearned and unexpected gifts.


<< I also question the theory of gains being the backbone of the economy. If this were true, why do European countries have higher gains rates (yet the Euro is coming closer and closer to the dollar), and certain economies which have 0% gains rates (like Japan) are still in the tanker. >>


Yeah, that's why the phrase &quot;the European dream&quot; doesn't exist.

Go to Europe, Shif. Try to earn a living, or better yet, try to start your own business and become upper middle class or better. When you fail, I'll see you back here. K?

 


<< spidey07 - His taxes were done with Turbotax. I've no reason to doubt the calculation is correct. >>



did this guy not make any money the whole year and just take the earned income credit? He had to take some kind of capital loss to have that small of a tax burden on $7000 capital.

Please let me know how he did this so I can become very rich very quickly!!!!
 
shifrbv - If your friend paid an additional $800 in taxes on short term gains, then that $7000 was worth $5000 when he started. His gain was $2000 which when taxed at 40% gives you $800 due. The sum of $7000 was his proceeds not his gain.


To address some of your other remarks, let's assume you and I both have $5000 in the bank. You leave it there and earn 3% interest in a federally insured account. I put mine into the commodities market and turn it into $10,000. There are a couple of differences between what we have done. There is zero risk for you and 100% risk for me. Consequently the potential gains are different. I'll add that to Total Refracted Power's comments
 
Well, I didn't realize I would be challenging the status quo so much. I've never received capital gains so when I saw the math, it seemed like an unbelievably good deal for an activity which seems not unlike gambling. There are &quot;strategies&quot; or &quot;methodoligies&quot; for that as well.

TRP - What additional services did the government provide for its 20% cut?
I think we may have had this argument before in another thread. But how about highways, air traffic control, defense, prisons, just to name a few. You know, all those expensive endeavors which we need to keep ourselves from going back to the middle ages. Sorry, but I am pro these things and I know you are not. I guess we'll just have to live with our differences.

ryudo - I think it should be taxed at least the same way income taxes are done. 20% seems awfully low. Especially when you look at it in the context of what similar markets (European) are charging. It should at least be 30% with an exclusion for the first $10-15K.
 
I think we may have had this argument before in another thread. But how about highways, air traffic control, defense, prisons, just to name a few. You know, all those expensive endeavors which we need to keep ourselves from going back to the middle ages. Sorry, but I am pro these things and I know you are not. I guess we'll just have to live with our differences.

You just don't get it. Nice try changing the subject though. The need for taxation is obvious. No one denies that. You are obfuscating the issue because you are wrong about cap gain tax increases.

What would happen if we all only invested in savings accounts? The taxes generated on that money would be 80% less than if people invest their after-tax money with the associtated risk in the markets. Just plain dumb to encourage this by high taxation. Where would your projects be at that point? Plus, there would less capital available to companies to invest in themselves, grow and create jobs which provides the revenue base for the government in the first place!

Taxes are necessary but to encourage growth and investment, not to retard it!!!!!!
 
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