Should we have additional higher income tax brackets?

[werepossum]

Exactly and no one in this thread has yet to make the case saying otherwise.

I think the two are somewhat fundamentally different in that investing presumes an informed decision minimizing chance, whereas gambling is playing on the chance or knowing the relative probabilities. Certainly there are strong similarities, but you could extrapolate that all the way to a commission sales job or even a wage job. All of us accept a certain level of chance in earning a living.

One thing I would support is taxing much of what now falls into capital gains as wage income. However - Fern, correct me if I'm wrong but isn't capital gains over less than a year already taxed at wage rates other than payroll taxes not being applied? Even with things that go over a year, much of capital gains isn't investment in society, it's merely informed gambling, mandated to have one winner and one loser, so that supports Jhhnn's point. I can see how capital gains such as stock (or mutual fund) purchases, which help fund a corporation's expansion, could morally call for preferential treatment, though even that is iffy as a broad law. If a corporation's stock-funded expansion is in China, replacing American jobs with Chinese jobs, why on Earth would we want to give that purchase preferential tax treatment?

The Devil's in the details, and I suspect Congress would never be able to make such laws based on morality or the nation's best interests, and the probable loss of federal tax income from higher capital gains rates is certainly to be kept in mind. But as a principle, taxing the man whose capital earns his bread as much as the man whose sweat earns his bread seems pretty sound.

I know that's a rambling mess, but it's not a simple subject morally or practically.

 

[ivwshane]

I think the two are somewhat fundamentally different in that investing presumes an informed decision minimizing chance, whereas gambling is playing on the chance or knowing the relative probabilities. Certainly there are strong similarities, but you could extrapolate that all the way to a commission sales job or even a wage job. All of us accept a certain level of chance in earning a living.

One thing I would support is taxing much of what now falls into capital gains as wage income. However - Fern, correct me if I'm wrong but isn't capital gains over less than a year already taxed at wage rates other than payroll taxes not being applied? Even with things that go over a year, much of capital gains isn't investment in society, it's merely informed gambling, mandated to have one winner and one loser, so that supports Jhhnn's point. I can see how capital gains such as stock (or mutual fund) purchases, which help fund a corporation's expansion, could morally call for preferential treatment, though even that is iffy as a broad law. If a corporation's stock-funded expansion is in China, replacing American jobs with Chinese jobs, why on Earth would we want to give that purchase preferential tax treatment?

The Devil's in the details, and I suspect Congress would never be able to make such laws based on morality or the nation's best interests, and the probable loss of federal tax income from higher capital gains rates is certainly to be kept in mind. But as a principle, taxing the man whose capital earns his bread as much as the man whose sweat earns his bread seems pretty sound.

I know that's a rambling mess, but it's not a simple subject morally or practically.

I'm not against shades of grey so if there are something's that make sense to be taxed lower then I'm for it but as you pointed out there are plenty of things that should not be considered capital gains (money made by hedge fund managers? Give me a break).

 

[DCal430]

mistake

 

[gingermeggs]

70%+ on over 1million for the win! free the economy of the hoarder capitalists! that offshored your future!

 

[gingermeggs]

I think the two are somewhat fundamentally different in that investing presumes an informed decision minimizing chance, whereas gambling is playing on the chance or knowing the relative probabilities. Certainly there are strong similarities, but you could extrapolate that all the way to a commission sales job or even a wage job. All of us accept a certain level of chance in earning a living.

One thing I would support is taxing much of what now falls into capital gains as wage income. However - Fern, correct me if I'm wrong but isn't capital gains over less than a year already taxed at wage rates other than payroll taxes not being applied? Even with things that go over a year, much of capital gains isn't investment in society, it's merely informed gambling, mandated to have one winner and one loser, so that supports Jhhnn's point. I can see how capital gains such as stock (or mutual fund) purchases, which help fund a corporation's expansion, could morally call for preferential treatment, though even that is iffy as a broad law. If a corporation's stock-funded expansion is in China, replacing American jobs with Chinese jobs, why on Earth would we want to give that purchase preferential tax treatment?

The Devil's in the details, and I suspect Congress would never be able to make such laws based on morality or the nation's best interests, and the probable loss of federal tax income from higher capital gains rates is certainly to be kept in mind. But as a principle, taxing the man whose capital earns his bread as much as the man whose sweat earns his bread seems pretty sound.

I know that's a rambling mess, but it's not a simple subject morally or practically.

China needs to show some real human and environmental responsibility to be ALLOWED to be free market....your top end sold you down the muddy river of fraud against the Union of states! time to live up to your Constitution, lamb!

 

[Sureshot324]

Capitalism has diminishing returns the farther you take it. If you go full socialism, you take away people's motivation to excel, but if the top tax rate is 35%, increasing it by another 5% isn't going to stop anyone from starting a business, trying to get ahead in their career, or an already successful businessman from doing what he does. The tax rate would need to be much higher for it have any significant effect discouraging people.

 

[child of wonder]

I'd just like to see a simple, progressive flat tax system that eliminates all credits and loopholes.

All money earned up to the poverty line is taxed at 0%, any money earned from the poverty line up to $50,000 is taxed at 5%, $50,001 to $100,000 is taxed at 10%, and so on all the way up to any money earned beyond $5,000,000 is taxed at 35%.

No more loopholes, no more confusing tax system.

 

[Anarchist420]

No, that will only make the situation worse than it already is

I disagree but you're on the right track. Let the Democrats raise the top marginal rate to 100% because then they'd be proven wrong plus it would reduce the amount of money going into the coffers of the state... govts are revenue constrained primarily because if they just printed money no one would accept it, at least under the Articles of Confederation. They ought to just print money, collect it, re-collect it and repeal legal tender and that way the money would be fiat and be an illusional, but not as much as with legal tender. That said, the Republicans have a good oppurtunity, but they're going to waste it because the Republican Party is too irrational and anti-market to realize. They'd just cave and they couldn't even logically justify it... they'd just cry like a bunch of pu55ies.

 

[Atomic Playboy]

No it won't it will stop the excess gains of wealth. People will think twice before making 500,000+ a year and companies will think twice before paying anyone more than 500,000 a year.

I can see how a punitive tax for high salaries would make companies think twice about paying exorbitant salaries to executives, but how on Earth would that tax system make people think twice about earning more than $500k? "Oh, they want to pay me $10,000,000, but since that only nets me $4,750,000 after taxes, I better just take an offer at $500,000..." Unless you're arguing for replacing progressive taxation with a strict percentage, in which case, why on Earth would it change based on income level? Taxation is never going to prevent personal greed. How could it? The only thing that would change someone's motivation is setting a maximum wage and taking 100% taxation on any money earned above it. Guess how likely that is to happen?

 

[dank69]

I'd just like to see a simple, progressive flat tax system that eliminates all credits and loopholes.

All money earned up to the poverty line is taxed at 0%, any money earned from the poverty line up to $50,000 is taxed at 5%, $50,001 to $100,000 is taxed at 10%, and so on all the way up to any money earned beyond $5,000,000 is taxed at 35%.

No more loopholes, no more confusing tax system.

You are not describing a flat tax system. You are describing a progressive tax system, which is what we already have. What you want is a progressive tax system with no credits or loopholes (deductions). Guess what? Most deductions on income tax (not LTCG) favor the middle class.

 

[Fern]

Exactly and no one in this thread has yet to make the case saying otherwise.

If so, it's because the definition of gambling has been stretched so as to include virtually every action.

I drove into work this AM with no certainty or assurance that I wouldn't be in an auto accident. Did I gamble or merely drive to work?

Gambling != risk.

I've been to Las Vegas, Tahoe, Monte Carlo, the Bahamas etc all gambling. For the vast majority of people gambling is entertainment, not investing. Conversely, for most people investing is not entertainment. Some may find it interesting, but that is different than entertainment.

Are there some investments that are virtually gambling? Sure, watching amateurs play in the options market is like watching casino gambling. They'd have better odds putting down money on a single number in roulette. On the other hand, options done correctly is a useful tool for hedging losses, whether it be currency for an international business or a sophisticated investor making a stock play. One is gambling, the other is not.

Fern

 

[berzerker60]

"That guy says we shouldn't drink 10,000 gallons of water per day! Just imagine when his party eliminated drinking water entirely, people will DIE!!!" Not everyone suggesting change is arguing for an absolutist maximal creed with no compromise or middle ground.

Calls for raising the top marginal tax rate to something like the 90%+ that it was during the 1940s-1960s, a period of great economic growth for the country, don't mean 100% and complete confiscation. Top marginal tax rates are much, much, much lower than most times in post-Civil War American history and much lower than much of the Western world. Yet there were and are very rich people in all of these times and places, and people continued to work hard. Imagine!

 

[child of wonder]

You are not describing a flat tax system. You are describing a progressive tax system, which is what we already have. What you want is a progressive tax system with no credits or loopholes (deductions). Guess what? Most deductions on income tax (not LTCG) favor the middle class.

I'd just like to see a simple, PROGRESSIVE flat tax system that eliminates all credits and loopholes.

I used the word "flat" to describe it in that the rate itself is flat and cannot be altered through credits and deductions. Additionally, I would treat all income the same and a CEO that makes $25 million in capital gains would be taxed no different than a sports player with a $25 million salary or another CEO who receives a $25 million cash severance package.

This tax would also be a lump sum of income tax and FICA, rather than separating them out.

I'd also set up the 5% jumps in tax rate to occur at high incomes, 5% starts after the poverty line, 10% after $50,000, 15% after $150,000, 20% after $500k, 25% after $1 million, 30% after $5 million, and 35% after $10 million.

So today someone who earns $50,000 to support a family of four (4 exemptions) would take home $2,794 every 4 weeks after 6% 401k, $250 premium for family health insurance, and all federal taxes are withheld (income, SS, and Medicare).

Under what I propose that same person would bring home $3012 every 4 weeks (income earned up to $23,050 taxed at 0%, remaining at 5%).

The big difference is that this person would no longer receive a ~$3,000 refund every April (EIC, Child Credits, plus other various credits and deductions).

When you factor that in, this person is paying the same taxes overall.

Mitt Romney, on the other hand, would pay $3.96 million in taxes in 2011 rather than $1.94 million. An effective tax rate of 28.9% rather than 13.9%.

I made far less than Romney last year and my effective tax rate was 4.61% which includes a $2,500 college credit because my wife is going to school. Romney makes millions more than I do but his effective rate should only be 9 points higher? That's not right.

 

[BoberFett]

I made far less than Romney last year and my effective tax rate was 4.61% which includes a $2,500 college credit because my wife is going to school. Romney makes millions more than I do but his effective rate should only be 9 points higher? That's not right.

4.61% and you have the gall to complain about tax rates? I think you need to pay more. I certainly do.

 

[child of wonder]

4.61% and you have the gall to complain about tax rates? I think you need to pay more. I certainly do.

That's because of the $2,500 college tax credit my wife qualifies for.

Without that our effective rate would be higher.

 

[dank69]

I used the word "flat" to describe it in that the rate itself is flat and cannot be altered through credits and deductions. Additionally, I would treat all income the same and a CEO that makes $25 million in capital gains would be taxed no different than a sports player with a $25 million salary or another CEO who receives a $25 million cash severance package.

This tax would also be a lump sum of income tax and FICA, rather than separating them out.

I'd also set up the 5% jumps in tax rate to occur at high incomes, 5% starts after the poverty line, 10% after $50,000, 15% after $150,000, 20% after $500k, 25% after $1 million, 30% after $5 million, and 35% after $10 million.

So today someone who earns $50,000 to support a family of four (4 exemptions) would take home $2,794 every 4 weeks after 6% 401k, $250 premium for family health insurance, and all federal taxes are withheld (income, SS, and Medicare).

Under what I propose that same person would bring home $3012 every 4 weeks (income earned up to $23,050 taxed at 0%, remaining at 5%).

The big difference is that this person would no longer receive a ~$3,000 refund every April (EIC, Child Credits, plus other various credits and deductions).

When you factor that in, this person is paying the same taxes overall.

Mitt Romney, on the other hand, would pay $3.96 million in taxes in 2011 rather than $1.94 million. An effective tax rate of 28.9% rather than 13.9%.

I made far less than Romney last year and my effective tax rate was 4.61% which includes a $2,500 college credit because my wife is going to school. Romney makes millions more than I do but his effective rate should only be 9 points higher? That's not right.

Good luck convincing the Republicans that your plan won't be the end of the free market as we know it. You're gonna need it.

 

[BoberFett]

That's because of the $2,500 college tax credit my wife qualifies for.

Without that our effective rate would be higher.

So you're using a loophole to lower your effective rate. That makes you a tax dodge.

 

[child of wonder]

Good luck convincing the Republicans that your plan won't be the end of the free market as we know it. You're gonna need it.

Naturally. However, we could save a few billion cutting the IRS by having a simpler tax code.

But then you'd get H&R Block lobbyists taking congressmen on vacations to convince them otherwise.

Our country is a lost cause.

 

[child of wonder]

So you're using a loophole to lower your effective rate. That makes you a tax dodge.

Do you have invest in a 401k or pay health insurance premiums? You'd be a tax dodge, too.

 

[BoberFett]

Do you have invest in a 401k or pay health insurance premiums? You'd be a tax dodge, too.

And when you pay a higher effective rate than me, then you can complain.

 

[ivwshane]

If so, it's because the definition of gambling has been stretched so as to include virtually every action.

I drove into work this AM with no certainty or assurance that I wouldn't be in an auto accident. Did I gamble or merely drive to work?

Gambling != risk.

I've been to Las Vegas, Tahoe, Monte Carlo, the Bahamas etc all gambling. For the vast majority of people gambling is entertainment, not investing. Conversely, for most people investing is not entertainment. Some may find it interesting, but that is different than entertainment.

Are there some investments that are virtually gambling? Sure, watching amateurs play in the options market is like watching casino gambling. They'd have better odds putting down money on a single number in roulette. On the other hand, options done correctly is a useful tool for hedging losses, whether it be currency for an international business or a sophisticated investor making a stock play. One is gambling, the other is not.

Fern

That's all well and good but that's not a case for why risk should be subsidized.

And as you pointed out there are people that gamble professionally and not for entertainment...so.

 

[ivwshane]

Do you have invest in a 401k or pay health insurance premiums? You'd be a tax dodge, too.

And when you pay a higher effective rate than me, then you can complain.

Actually both of you would be considered part of the 47% that are moochers and dependent on government because all of the above are government handouts.

Good job!

 

[BoberFett]

Good luck convincing the Republicans that your plan won't be the end of the free market as we know it. You're gonna need it.

Many Republicans would gladly welcome a simple tax code. Not sure where you're getting your misinformation from, but the howls against a simple tax code seem to come from the left side of the aisle.

An taxing all capital gains as income would absolutely harm the economy. If you think investors think short term now, it would get far worse under that scenario, as long term investment would shrink to zero as long term RORs would have to increase greatly to make up for the losses to inflation combined with the now significantly higher tax. Property values would plummet, ensuring another crash.

Of course all that Democrats can think about is how to get more money from people. If you think Republicans are greedy, you've never looked in the mirror. "You have money and I want it!!!!" That's pure greed.

 

[Fern]

That's all well and good but that's not a case for why risk should be subsidized.
-snip-

Risk is not subsidized.

(First thing you on the left should get straight is that a "subsidy" is when the govt hands out taxpayer (other peoples' money) money to someone or something. I.e., Solyndra. A tax benefit is when you keep more of your own money.)

A tax benefit - lower rates for LTCG - is for (at least) two reasons: (1) to compensate for inflation and (2) incentivize investment. It's not for risk. There is no mention of risk in the tax code. Instead, to qualify for the low rate the tax code defines "investment" and limits the low rate to transaction smeeting that definition (including a holding period now set at + one year).

In fact it can be argued that the tax code discourages risk. If you lose money in an investment your deduction is severely limited. Likewise with gambling losses.

Fern

 

[child of wonder]

And when you pay a higher effective rate than me, then you can complain.

Wanting to fix our broken tax system isn't complaining about rates. The effective tax rates you or I pay doesn't change the fact our system is broken and overly complicated.