Lets talk about capital gains taxes

[laughing dog]

Inflation is an increase in the price of something.

It can be, but generally when someone refers to inflation when discussing economics, it means an increase in the general price level or a reduction in the purchasing power of currency. Certainly, in the sense you mean, inflation did not CAUSE an increase in the price of something - it simply means the price of something rose.

Looking at fairness from a horizontal equity point of view, a dollar of income should be taxed at the same rate regardless of the source of income. That would mean that all forms of capital gains should face the same tax rate as labor income or other forms of income.

But, "fairness" is in the eye of the beholder. Moreover, tax policy is not driven unilaterally by fairness or economic efficiency.

 

[SimpleDon]

The situation may be considered different in that often when someone sells their home, they must find a new place to live. If their home value went up, chances are that any other place in the area that they want to move to will also be more expensive by a similar amount. Not saying that this justifies no tax, but it is something to take into account.

Except all income is that way. So really the hatred of capital gains is that rich people get this income more, so let's tax it more.

There is no hated of capital gains. It is just that the lower capital gains tax compared to the highest marginal income tax rate hasn't produced what the people who proposed lowering it said that it would, more productive business investment. (I have a chart!)

It is nothing more than yet another tax cut for the rich that requires a tax increase on everyone else.

 

[SimpleDon]

Inflation is an increase in the price of something.

It can be, but generally when someone refers to inflation when discussing economics, it means an increase in the general price level or a reduction in the purchasing power of currency. Certainly, in the sense you mean, inflation did not CAUSE an increase in the price of something - it simply means the price of something rose.

I see, the difference hinges on whether the price increased or it just rose.

And the 'risen' price of say a share of stock didn't mean that the currency used to buy it was less valuable in terms of the stock share? What was it, more valuable?

Looking at fairness from a horizontal equity point of view, a dollar of income should be taxed at the same rate regardless of the source of income. That would mean that all forms of capital gains should face the same tax rate as labor income or other forms of income.

I don't mind that one form of income is taxed differently than another. Capital gains was taxed at a lower rate for the top earners because we were told that lowering it would result in more productive business investment and would increase the number of jobs. It hasn't done this. There is no reason to continue this favorable tax treatment of capital gains.

But, "fairness" is in the eye of the beholder. Moreover, tax policy is not driven unilaterally by fairness or economic efficiency.

This is correct. The rich and powerful drive taxation policy, especially because of the newly discovered right that money is free speech, giving the rich more free speech.

 

[coloradoatheist]

Inflation is an increase in the price of something.

More properly, inflation is defined as a devaluation of the currency. Things cost more dollars because the dollar has less value.

But we have several problems and this is a side track. There can be inflation of certain things and there can also be general inflation. Your describes overral inflation, but people also think of inflation of objects. How much is a gallon of gas, how much is a movie ticket, how much do they have to buy a house. The government when counting inflation uses a rent-derived equivalent for a house as a part of the bucket. If more things in the bucket inflate compared to the ones that deflate, there is inflation.


Inflation of one entity can be caused from more people wanting to buy it, a supply problem, or just a general increase in money flowing.

 

[SimpleDon]

More properly, inflation is defined as a devaluation of the currency. Things cost more dollars because the dollar has less value.

But we have several problems and this is a side track. There can be inflation of certain things and there can also be general inflation. Your describes overral inflation, but people also think of inflation of objects. How much is a gallon of gas, how much is a movie ticket, how much do they have to buy a house. The government when counting inflation uses a rent-derived equivalent for a house as a part of the bucket. If more things in the bucket inflate compared to the ones that deflate, there is inflation.


Inflation of one entity can be caused from more people wanting to buy it, a supply problem, or just a general increase in money flowing.

Sorry about the side track, I just mentioned that the term "capital gains" is a gilt edged term for what is otherwise called inflation. I forgot that it is one of our magic words that trigger endless roundabout discussions. Thank God I didn't mention "socialism."

 

[Loren Pechtel]

Don dismissed stock price appreciation from the productive use of money by companies in driving efficiency.

I am sorry, this came through for me as babel. Stock appreciation only converts into business investment if corporations sell new stock. These are what we call dilutive SEOs, secondary (or supplemental) equity offerings. These are so rare I haven't even seen information on the amount of money that is raised by them. The only reference that I found to them are as being one or two orders of magnitude less than the amount of IPOs, initial stock offerings, which has been averaging about 50 billion dollars a year lately. 99.9% of the capital gains made in stocks don't go to the companies whose stock it is. They are provided by the investor who buys the stock to the investor who is selling the stock.

Stock appreciation is the incentive to invest in new stock offerings.

 

[Loren Pechtel]

What I am trying to understand is this.

If I buy my house for $250K and sell it for $300K I have an extra $50K in my pocket. Capital gains tax if not rolled over

If I buy $250K worth of stock and sell it for $300K I have an extra $50K in my pocket. Capital gains tax is applied, but lower than the highest tax bracket. People want it treated as straight.

Why isn't situation a the same?

The situation may be considered different in that often when someone sells their home, they must find a new place to live. If their home value went up, chances are that any other place in the area that they want to move to will also be more expensive by a similar amount. Not saying that this justifies no tax, but it is something to take into account.

I hadn't thought of that. Yup, we either need to exempt middle class home appreciation gains or we need to allow the rolling over of those gains into a new house.


There's also a secondary issue--a house is a very big investment that isn't realistic to sell piecemeal. This means your taxable income would really spike in one year and you would be in a higher tax bracket than normal. This would be unfair. If you are of medicare age you get the added issue of it driving up your medicare premium. Supposedly you can appeal this if it's based on a one-time event that does not reflect your actual income but when we tried to do such an appeal the agent acted like there was no such rule. (We didn't escalate the matter as the spike was old and only raised her premium for 2 months. It was really unfair, though--while our "income" about doubled for one year most of it was due to one thing that counting inflation was actually a major loser.)