Economy Biden plans to fix Capital Gains Tax

[HeffDoesWant]

Let's punish the successful. Good idea.

Waaaa it's not fair.

Fuck fair, this is economics.

 

[MoparOrNoCar]

For what purpose? Just leave people alone. Everyone knows they're not going to do shit to the really rich, the people that buy them off. The Covid restrictions just redistributed a ton of wealth for the lower classes to the upper ones. This isn't going to do shit to change that. If anything, its going to fuck over the normal people trying to make money. Just leave it alone.

It's always the same shit. The rich will still be rich. The poor will still be poor and the middle class will get hammered with taxes and dwindling savings accounts thanks to inflation.

 

[The Narrator]

Higher risk higher reward is fine, but why a lower tax rate?

As to the reason why people don't all do this is because they need to save from higher taxed labour and consequently their share of the pie gets smaller.
As their share of the pie gets smaller demand also falls (middle class being the real driver of demand) and then the size of the pie also shrinks.

Lower tax rates encourage investment vastly less than increased demand.

"High risk, high reward" was in reference to a company's management taking stock options in lieu of higher salaries. This incentives them to increase the value of the company because their compensation is directly proportional to the company's value. As a company's value goes up and it expands it has a direct positive impact on the economy, creating drives, increasing tax revenue, etc etc. By increasing the tax, you are discouraging the stock options route. As an executive why would I take the riskier stock option when it is going to be taxed as the same as my salary? And why would I work my hardest to improve the company's value if I'm getting paid the same either way? Not to mention this is going to drive down IPOs based on the same principles above.

For the next paragraph, I get what you are saying but you are still using abstract concepts instead of what is happening in reality. For example, if I want to the extremes you are using I could point out that a lower income person could just invest in the market and get a 0% tax rate up to 80k. That's 80k tax free. Why aren't they? Cause the market is not garunteed.

 

[The Narrator]

Offering a very expensive tax break to the section of society whose behaviour will not change in a way that will improve the economy offers no benefits. This will accordingly place more tax burden onto the section of society whose behaviour can improve the economy through increased demand thereby it is simply bad policy.

An effort to fix this issue is progress.

The economy? That seems to be doing pretty well. Do you mean wealth inequality?

 

[The Narrator]

"There are good economic and fairness reasons for the preferential rate. First, under current tax rules, all gains from investments are fully taxed, but all losses are not fully deductible. Losses can offset gains in any given year, but losses that exceed gains can only be offset against personal income up to $3,000. The preferential rate compensates for this asymmetry."

This ignores the fact loses can be carried forward to future years. Misleading at best.

"Second, gains in asset values aren’t adjusted for inflation, so investors who hold assets for an extended period pay taxes on increases that are partly illusory. "

True, gains should consider the affects of inflation. However I don't think it warrants forty odd years of inflation as a discount.


"
Third, a capital-gains tax is a second tax on corporate income. A neutral revenue code would tax all income only once. But the U.S. also taxes business profits when " there is more but hidden behind a pay wall.

This is not true for many different gains and even some corporations pay next to nothing. Tesla for example paid about 2% thus year,

I can argue point for point but you completely skipped my main idea. This tax is going to drive down selling and increase holding leading to less income for the government.

What's your real goal with this tax? To increase federal revenue or to reduce the wealth of higher income earners? To me it seems your goal is the latter

 

[kpt018]

I like that policy. I have my doubts that he will pass it.

If the Biden admin got done all the liberal/progressive things they have been "thinking about", "considering", and "weighing", he'd be the greatest president in my lifetime. They have developed a fairly brilliant system of "considering" liberal policy, not doing any of it, and somehow still getting brownie points as if they made some progress.

Yeah it’s crazy that whatever he says isn’t law. It’s like he’s not even king.

 

[jx820]

Yeah it’s crazy that whatever he says isn’t law. It’s like he’s not even king.

It depends what he says. You should look up "executive orders".

 

[JSN]

Capital gains. Fuck you. My mother, who never had any money in her life, sold our house in ruined hipster shithole Brooklyn and just had to pay a capital gains tax of 300gs. What the fuck? Why? Why do they gotta get a fuckin piece of everyone's shit? It's a racket and they're the fuckin mob.

Jesus Christ does the People’s Republic of New York make you pay capital gains on your primary residence? Luxury tax type of thing?

 

[kpt018]

It depends what he says. You should look up "executive orders".

EOs are very limited. And he’s been in office 100 days.

 

[HeffDoesWant]

"High risk, high reward" was in reference to a company's management taking stock options in lieu of higher salaries. This incentives them to increase the value of the company because their compensation is directly proportional to the company's value. As a company's value goes up and it expands it has a direct positive impact on the economy, creating drives, increasing tax revenue, etc etc. By increasing the tax, you are discouraging the stock options route. As an executive why would I take the riskier stock option when it is going to be taxed as the same as my salary? And why would I work my hardest to improve the company's value if I'm getting paid the same either way? Not to mention this is going to drive down IPOs based on the same principles above.

For the next paragraph, I get what you are saying but you are still using abstract concepts instead of what is happening in reality. For example, if I want to the extremes you are using I could point out that a lower income person could just invest in the market and get a 0% tax rate up to 80k. That's 80k tax free. Why aren't they? Cause the market is not garunteed.

Is a less preferable stock options route really going to decrease American competitiveness?

I can't really address this properly without digging into what personally think is the biggest unreported problem of our time, The Agency Problem. Stock options are not the best way to align shareholders and management as it encourages risk, while only shareholders bare significant downside risk.

I do however doubt that CEO effectiveness is really affected by tax rates.

I don't understand your concerns about IPOs. Please expand.

I agree lower income people have a lower risk tolerance simply due to lower financial means. But doesn’t this support my stance that tax breaks aren't needed to encourage passive incomes.

 

[jx820]

EOs are very limited. And he’s been in office 100 days.

Well based on these revelations, I'm sold, Biden should get praise for everything he considers. Thank you internet stranger.

 

[kpt018]

Well based on these revelations, I'm sold, Biden should get praise for everything he considers. Thank you internet stranger.

You’ll notice I’m not praising him for proposals, so this post is weird. I’ll lot a lot of the stuff he wants to do but I’ll hold off and evaluate what, if anything, becomes law.

I just responded to you nonsensical criticism.

 

[The Narrator]

Is a less preferable stock options route really going to decrease American competitiveness?

I can't really address this properly without digging into what personally think is the biggest unreported problem of our time, The Agency Problem. Stock options are not the best way to align shareholders and management as it encourages risk, while only shareholders bare significant downside risk.

I do however doubt that CEO effectiveness is really affected by tax rates.

I don't understand your concerns about IPOs. Please expand.

I agree lower income people have a lower risk tolerance simply due to lower financial means. But doesn’t this support my stance that tax breaks aren't needed to encourage passive incomes.

Sorry, by stock "options" I meant stock ownership. Mixed up some terminology. Stock ownership encourages executives to perform in the best interest of the company.

https://www.investopedia.com/managing-wealth/guide-ceo-compensation/

A CEOs effectiveness will absolutely be indirectly influenced by an increased capital gains tax. As a CEO negotiating compensation, why would I push for stock compensation over salary if at the end of the day, the tax is going to be the same? Expecially considering that the stock isn't garunteed to go up while my salary is garunteed. Once on salary I'm less inclined to care about the overall performance of the business.

For IPOs, a large incentive for a company owner is the money they will make off the sale of their stock. With an increased capital gains tax reducing profit, companies will be more likely to keep the company private or look for private funding. This in turn will reduce the companies growth.

The position I was arguing against is that market income is garunteed and therefore any tax on capital gains is acceptable. Are you also in favor of increasing the lowest bracket of long term capital gains tax? Currently it's at 0% up to 80k but that seems like a high incentive to invest.

Like i said in another post is that it seems like you don't care about increasing the federal revenue and more reducing the income of the higher income class.

 

[HeffDoesWant]

I can argue point for point but you completely skipped my main idea. This tax is going to drive down selling and increase holding leading to less income for the government.

What's your real goal with this tax? To increase federal revenue or to reduce the wealth of higher income earners? To me it seems your goal is the latter

Holding and not selling doesn't serve the owner any interest. There will be a slow down in selling on the hope a future government will repeal it but that would be politically difficult. Sure Trump did similar but it's a fucking hard sell.

How did you conclude the latter? What part of me talking about the economic advantages this would give the country made you think that? Please quote it and I'll happily clarify it.

 

[HeffDoesWant]

The economy? That seems to be doing pretty well. Do you mean wealth inequality?

It's doing OK.

Depends if you want to stay ahead of China.

Wealth equality is a serious economic issue, more resources in fewer hands reduces demand, discouraging investment in the country with reduced demand.

 

[Lead]

Capital gains. Fuck you. My mother, who never had any money in her life, sold our house in ruined hipster shithole Brooklyn and just had to pay a capital gains tax of 300gs. What the fuck? Why? Why do they gotta get a fuckin piece of everyone's shit? It's a racket and they're the fuckin mob.

How much did the house sell for?

 

[The Narrator]

Holding and not selling doesn't serve the owner any interest. There will be a slow down in selling on the hope a future government will repeal it but that would be politically difficult. Sure Trump did similar but it's a fucking hard sell.

How did you conclude the latter? What part of me talking about the economic advantages this would give the country made you think that? Please quote it and I'll happily clarify it.

Really depends on your strategy. The average holding time is less then a year so falls outside of a long term capital gains tax. Most people that this is targeting have the financial means to hold for a very long time.

I disagree that it would be a hard sell. The capital gains tax is constantly changing.
https://taxfoundation.org/biden-capital-gains-tax-rate-historical/
There's an image in there detailing the changes. Plus as seen on here it's hit or miss whether or not people are in favor of it and even less people that actually understand it.

You've said how it wouldn't hurt the markets which I agreed with but you haven't pointed out how this would increase revenue. As I pointed out this will lead to increased holding which in turn leads to less revenue. I think I've also brought up some decent points about how this will influence business owners.

Also thanks for the debate. Fun to discuss this with someone that understands what they are talking about.

 

[HeffDoesWant]

Sorry, by stock "options" I meant stock ownership. Mixed up some terminology. Stock ownership encourages executives to perform in the best interest of the company.

https://www.investopedia.com/managing-wealth/guide-ceo-compensation/

A CEOs effectiveness will absolutely be indirectly influenced by an increased capital gains tax. As a CEO negotiating compensation, why would I push for stock compensation over salary if at the end of the day, the tax is going to be the same? Expecially considering that the stock isn't garunteed to go up while my salary is garunteed. Once on salary I'm less inclined to care about the overall performance of the business.

For IPOs, a large incentive for a company owner is the money they will make off the sale of their stock. With an increased capital gains tax reducing profit, companies will be more likely to keep the company private or look for private funding. This in turn will reduce the companies growth.

The position I was arguing against is that market income is garunteed and therefore any tax on capital gains is acceptable. Are you also in favor of increasing the lowest bracket of long term capital gains tax? Currently it's at 0% up to 80k but that seems like a high incentive to invest.

Like i said in another post is that it seems like you don't care about increasing the federal revenue and more reducing the income of the higher income class.

The CEO doesn't decide their remuneration in isolation. If the board feels payment in shares is appropriate that can do that. I really dont think the government really needs to provide universal tax incentives here, this is a company decision.

IPOs are vastly more about capital raising than founders cashing out. A higher tax rate on the capital gains of the ultra rich will not have material affect. The ultra rich will still choose less of something, over all of nothing.

As a rule I'd say capital gains should be taxed like income after accounting for inflation. There is no public advantage by the significant administration costs incurred by restructuring towards gains over income for the tax break.

As to the $80k, I think that level is too high but I can see benefits in encouraging more people to invest. $80k gains per year is maybe a million In assets.

 

[The Narrator]

The CEO doesn't decide their remuneration in isolation. If the board feels payment in shares is appropriate that can do that. I really dont think the government really needs to provide universal tax incentives here, this is a company decision.

IPOs are vastly more about capital raising than founders cashing out. A higher tax rate on the capital gains of the ultra rich will not have material affect. The ultra rich will still choose less of something, over all of nothing.

As a rule I'd say capital gains should be taxed like income after accounting for inflation. There is no public advantage by the significant administration costs incurred by restructuring towards gains over income for the tax break.

As to the $80k, I think that level is too high but I can see benefits in encouraging more people to invest. $80k gains per year is maybe a million In assets.

I mean a company can negotiate for that but it's going to be harder to negotiate with stock with people that are in demand.

Again agreed but insider profit plays a major factor. Coinbase (coin) recently went to a direct listing (so a higher selloff). So far company insiders are up to 291M sold. As an insider would you push to go public knowing that's going to be cut in half? Coinbase is fairly large and didn't need to raise capital but did so to expand faster. Discouraging companies to go public will hurt the economy.

Don't necessarily agree with the next paragraphs as I think you are ignoring the risks investors take when investing but based off your previous points I see where you are coming from.

 

[jx820]

You’ll notice I’m not praising him for proposals, so this post is weird.

My "nonsensical" criticism the one that started this discussion... was that he gets credit for considering things.

So your confusion is weird.