What level of taxation is too high?

[esdoornblad]

Relative to what most people make, 200k is a lot of money. It means that (provided you are responsible with money) you don't have to worry about the little things that come up like appliances/cars breaking down, you can take a nice vacation each year, you never have to make a tough choice at the grocery store, etc. Your day-to-day life is tangibly different in a lot of small ways. There's a security in that which allows you to live with far fewer worries, but more importantly, that's the point at which you can make substantial investments without sacrificing comforts.

I agree with this perspective, but it makes a very big difference if you're a single guy making $200K+, or a family guy making that much. This amount will leave a single guy with oodles of disposable/investible income, but for a family it's really not much.

 

[panamaican]

That’s probably the best argument against it. Liquidity of public companies would fall dramatically. Imagine having to prorate the earnings of 100s of companies churned through a really high turnover portfolio. Still if returns were simplified or at least the flow through aspects, it could not much worse than having to calculate capital gains for those companies. Income for the year, days shares held, and tax basis could maybe get you there. I’m spitballing of course.

Isn't there a bigger timing issue than with cap gains? Now, you're allocating income across the time that the shares are held? Straight line or can the corporation decide on a month by month basis.

 

[Jack V Savage]

I agree with this perspective, but it makes a very big difference if you're a single guy making $200K+, or a family guy making that much. This amount will leave a single guy with oodles of disposable/investible income, but for a family it's really not much.

I live in the Bay Area, I'm married and have one kid, and we've had years in roughly that income range. I'd say that a family of three with a household income of $200K would fit @Fawlty's description. They would probably live in a small apartment, but a nice one in a nice area, and all the other stuff would apply--no fears about car-repair costs, no penny-pinching at the grocery store, vacation money, at they should at least be able to max out 401k contributions. If they're actually in the city, maybe less investment, but it's still manageable without the kind of day-to-day stresses that Fawlty is talking about.

 

[Fawlty]

I agree with this perspective, but it makes a very big difference if you're a single guy making $200K+, or a family guy making that much. This amount will leave a single guy with oodles of disposable/investible income, but for a family it's really not much.

The costs of housing scale but the costs of needs, comforts and investments don't, which is a significant pick-up for the family making 4 times as much and paying 4 times as much in rent. You can adjust that $200k number for obviously expensive places, and adjust down for a few cheaper places, but I think that's a good average number for that particular tipping point.

 

[Rational Poster]

Under your plan, what if you're self employed & roughly 50-70% of personal income is used to complete your jobs? Would you determine the tax bracket based on net or gross income?

Business expenses are already tax write offs, my dude.

 

[Gandhi]

Isn't there a bigger timing issue than with cap gains? Now, you're allocating income across the time that the shares are held? Straight line or can the corporation decide on a month by month basis.

If u own LLC units for a part year? taxable income is only reported annually so fairly certain it would have to be straight line.

 

[Gandhi]

David Stockman argued for them about 8 years ago, in the wake of the 2008 crisis, and I found the arguments convincing. Since then some European implementations (Italy) have received negative press but I would suggest this is partly due to the predictable pushback from the financial sector and partly due to the need for some reforms. There is an obvious negative impact of high-frequency trading that needs a solution.

Finance needs a better leash on regulation, separation of duties, banking reform, etc. The Tobin tax seems Like something that in can be easily avoided (much easier to move financial transactions than people) and where it can't due to national controls, it could deter needed diversification as well as speculation. It also may led to more volatility in some cases and will fail to address the root causes of market instability.

In Sweden the tax reduced liquidity, did not substantially reduce volatility, and raised little revenue.

https://www.ft.com/content/b9b40fee-9236-11e2-851f-00144feabdc0

 

[esdoornblad]

Finance needs a better leash on regulation, separation of duties, banking reform, etc. The Tobin tax seems Like something that in can be easily avoided (much easier to move financial transactions than people) and where it can't due to national controls, it could deter needed diversification as well as speculation. It also may led to more volatility in some cases and will fail to address the root causes of market instability.

In Sweden the tax reduced liquidity, did not substantially reduce volatility, and raised little revenue.

https://www.ft.com/content/b9b40fee-9236-11e2-851f-00144feabdc0

Fair enough. Perhaps there are better ways to achieve the desired goals. I am open to a discussion of the merits/flaws of a proposed solution to high-frequency trading.