Capital Gains Tax

[MazeRat7]

I've seen a couple of threads tonight related to recent events in the stock market that got me to thinking about an age old Dem vs. Repug platform plank.

Capital Gains Taxes.

Once upon a time, when I was seriously uninformed, I believed "Capital Gains" were something only the "rich" payed and the more they payed the better.
That somehow, if I didn't support an increase in capital gains, I was one of them vs one of us.

But you know what... after taking the trouble many years back to learn about trading/investing, placing my hard earned saved dollars from my day job at risk, and doing the "daily" work to keep those funds growing, my position on capital gains has changed.

Every time I sell a commodity (stock, fund, bond, option, etc) I pay the same taxes on that as I pay on my day job salary. The IRS calls that a short term capital gain. To me that seems fair. I have to work to manage those funds a minimum number of hours/week or risk losing them. It's like having two jobs... A primary and one-on-the-side. If I make money in a year from investing/trading, then I should pay the same rate/bracket that I'm already in with my other income.

There are also long term capital gains, which is a slightly reduced tax rate applied to commodities that are held for over a year. This too seems fair to me in that if I didn't get burned (value went down) in a year of holding on to some commodity, then when I do sell I should be compensated (in terms of lower taxes) for having my money locked up for that long and not able to do other things.

So... the point of this poll is to see where others here stand on Capital Gains Taxes.

[dysfunctional press]

1. i think it's immoral for taxes on wages earned thru physical labor to be higher...

than taxes paid on investment income.

and i will ALWAYS feel that way.

[MazeRat7]

2. Short term CG's are taxed at the same rate as "physical labor" or your day-gig.

Also, why do you assume investing is not "labor"... it requires daily work to keep from losing your money... a lot like it takes daily work to keep from losing your job.

MZr7

[PsN2Wind]

14. They would be taxed at the same rate as my physical labor if

FICA and medicare were withheld but that isn't the case. So the tax on my "physical labor" is about 15% higher than your investment income.

[MazeRat7]

18. Once you pay the cap on those (due to your wages) its the same rate...

I pay the max every year into both due to my "physical labor"... I never see the reduction in my investment income taxes you are talking about.

MZr7

[dysfunctional press]

20. most people who earn "wages" never even APPROACH the cap.

:eyes:

[Selatius]

15. I was led to believe short-term gains are only taxed at 15 percent.

At least, that's how I understood the tax cuts pushed by Bush and the Repubs.

[dysfunctional press]

19. i'm talking about ALL capital gains...

and if you're going to compare taking a call from your broker to digging a ditch in the hot sun- you obviously have NO clue...

[1932]

3. I actively trade, but the money I make is miniscule compared to my income from working

and it would be insane for me to support policies that shift the tax burden off of investment income to and on to earned income.

[A HERETIC I AM]

4. The entire tax structure needs an overhaul but i really like your analogy.

I remember hearing years ago a TV interview with a guy that lived in Amsterdam. When asked about the American concept of "Unearned Income" he laughed and said that gains from investing - putting money into that market that helps companies grow - is absolutely earned income and found that American idea of Earned and Unearned income curious.

For the purposes of clarity, it should be noted that if you buy a stock on January 1st at $10.00 a share and on December 31st it is at $15.00 a share and you sell, you have short term capital gains of $5.00. The IRS says if you hold that stock for at least 366 days and sell, it is long term. The difference in tax rate is typically 35% (short term) vs 15%.

I think the limit or threshold should be lowered to the $250,000 AGI range and for short term gains lowering the rate to 30% and for long term, raise the rate to 20%. This would encourage investors like yourself and only slightly change the tax rate for those in the higher income bracket. The higher the AGI, the higher the rate of long term gains taxation. I would be interested in seeing how much more revenue such a change would generate for the Treasury.

I also think there needs to be a serious change in the way the income produced by an LLC is taxed.

On edit to say the above sounds confusing to me and i typed it! I am by no means a tax expert and that is why.
What i am trying to drive at is if a person makes more than say $250,000/yr in wages, they should have to pay a higher rate on their capital gains. The rate should be on a scale - the higher the AGI, the higher the cap gains tax rate.

[MazeRat7]

6. I would support that.... or something similar. I think it needs adjustment for sure..

I like the concept of basing the rate on AGI... 250k seems like a nice break point... but I dont know.

What I do know is I work my ass off to make my day work pay off. That means more than having a job and bringing home a pay check. It means taking whatever minimal amount from that check is left over and "working hard" to make it grow into more.

I didn't invent this game... but I damn sure an going to learn to play it. :hippie:

MZr7

[A HERETIC I AM]

9. By what means do you do your research, Maze?

I mean what methods are you using to pick your securities? Are you using an online trading account through Ameritrade or something similar?

Just curious.

[MazeRat7]

13. Yes, most of my trading is through ETrade... but (like other brokers) has some limitations...

Mostly lack of exposure to ALL foreign exchanges. That being said....how do I research ?

Well, I read a lot, join/listen to conference calls when related to a position, shamefully speculate (mostly in alternative energy), and generally limit my $$$ to companies I would not mind saying to my wife and friends I work for.

I generally cull the field by focusing on sectors then companies in that sector I think have something to offer other than "just making money". From there I review their balance sheet, press releases, previous earnings reports, charts, etc... and if I feel good about them (and can sleep at night for investing in them), I'll take a position. Long or short.

I'm pretty limited in who I trade so the research is very sector/company specific.

I've got several I don't invest in like bio-tech or oil companies, miners, big ag, etc... regardless of how much I might make.

Most of my $$$ go into tech, solar, financial, capital equipment, consumers, and some limited commodities.

Don't know if that answered your question, but my main point is I find companies I like that are doing something worth while (like alternative energy).... then I follow that company daily like an analyst would. Making trades during their up-times and making trades during their down-times. So the research becomes more about knowing the company, what it does, it pros/cons, whats coming, whats good, whats bad, who are the officers, etc... rather than casting a baited line into a vast sea hoping something will bite and I'll have dinner.

I'm sure that was a clear as mud... sorry I tried. :)

MZr7

[southerncrone]

5. CGTx should be more than on labor wages.

Sitting by the pool drinking daiquiris & making money should not be rewarded by a lower tax rate. Busting your asssss & working for a living should garner a break on taxes.
We have an upside down situation now.
America might actually become a productive country again if tax structure was inverted.

[MazeRat7]

7. You dont sit by the "pool" and make money.. its a job like any other. Please read the OP. -nt

[dysfunctional press]

21. most people who live on investment income do NOT "work" at it...

unless of course you consider taking the occasional call from your broker as "labor".

[Warpy]

8. Odd view you have of it

However, I'd like to see all capital gains taxed at the same rate as labor, and I'd like to see both subject to a progressive tax structure.

In other words, retirees like me who make about what we did when we were wroking would pay the same we'd make if our labor were still supporting us, and that's entirely fair. People who spend their whole lives sitting by the pool and drinking daiquiris (and I can afford neither) need to pay a higher rate. Seniors who rely on the income from modest investments to eke out survival in combination with Social Security would pay very little, if anything.

Only a progressive income tax structure which is nominal for subsistence income, no matter the source, and progressively higher as disposable income rises can possibly be both fair and generate enough revenue to run this country.

One size fits all tax structures are not fair to anybody.

[southerncrone]

12. Agree there should be some ceiling on amount that is taxed at a higher rate

for those who are subsidizing SS. But it should never be lower than wage earners rate.

[Selatius]

16. The problem is there are so many tax credits and loopholes polluting the tax code

It'll take years if not decades to go through each line and delete them all, and it won't be easy because somebody either on the Dem side or the Repub side is going to come forward and challenge your deletion.

[Nevernose]

10. What about real estate CG?

What's your opinion on that?

[Orangepeel]

11. you should get a higher return for a longer term investment

why should the government "compensate" you for that? The government has an interest in encouraging you to invest in things that create jobs or infrastructure, which is likely to be related to the length of time of the investment, but if that's the case, that's what should get you a tax break, not length of time itself.

I see no reason why you should get a tax break only because you weren't able to do other things with your money.

[WCGreen]

17. Capital Gains taxes should not be afforded any special tax

benifit...

It is earned income just like wages, dividends or interest...

The long term rate was put into place to negate the negative effect of inflation on taxable capital goods...

But now that the tax tables are indexed for inflation, we don't need to give "special" treatment to money earned for investing...

Doing that in an egalitarian society is putting the government on record that they value investments over wages, interest and dividends...

Is it any wonder that the relative worth of wages has stagnated since the special tax rates for capital gains were introduced back in the early 90's...

Long Term capital gains should be taxed at the same rate as wages...