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Why do we have to pay cap gain taxes at all?


By dunnross   Follow   Mon, 14 May 2012, 5:49am PDT   11,720 views   127 comments   Watch (1)   Share   Quote   Permalink   Like   Dislike  

The FED is royally screwing an average citizen of this country. They create inflation, and the only way to fight it is to take risks, and buy inflation-safe securities. Yet, as soon as you sell them, you have to pay taxes on your gains. Why do we have to pay taxes on something we buy to protect ourselves from the FED, in the first place?

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freak80   befriend   ignore   Wed, 16 May 2012, 8:32am PDT   Share   Quote   Like (1)   Dislike     Comment 48

The WSJ is just another propaganda arm of NewsCorp.

rockyroad   befriend   ignore   Wed, 16 May 2012, 8:35am PDT   Share   Quote   Like   Dislike     Comment 49

wthrfrk80 says

The WSJ is just another propaganda arm of NewsCorp.

Right. WSJ data you don't believe... but charts from zillow you do believe. I thought you folks wanted the truth? or only the truth you can stomach?

freak80   befriend   ignore   Wed, 16 May 2012, 8:37am PDT   Share   Quote   Like   Dislike     Comment 50

I don't believe much of anything. I'm a radical skeptic.

swebb   befriend   ignore   Wed, 16 May 2012, 8:40am PDT   Share   Quote   Like (1)   Dislike     Comment 51

clambo says

Someone above said that the death tax should be 50%! That's not only crazy, it's stealing wealth again.

The reason I support an inheritance tax (and I am likely to be affected by it) is because of the concentration of wealth that results from inheritance. I find it hard to maintain faith in the idea that everyone has a fair shot if money is being passed down from one generation to the next. I think flatter income distributions are better for the health of the country than large disparities, and I think policies should encourage things that are better for the country. Confiscating, stealing, taxing or otherwise taking money from rich dead people to combat the disparity is fine by me (again, I'm likely to be materially affected by this) Hopefully it gets used for good things, though, and not just to tilt the tables away from multi-generational wealth accumulation.

my two cents.

rockyroad   befriend   ignore   Wed, 16 May 2012, 8:47am PDT   Share   Quote   Like (1)   Dislike     Comment 52

swebb says

Confiscating, stealing, taxing or otherwise taking money from rich dead people to combat the disparity is fine by me (again, I'm likely to be materially affected by this)

Who cares if you are affected? Doesn't make it any more legit. This is america, do you still believe in private property rights? The money was earned by someone, and you want to take half of that money just because the earner died?

What you proposing simply amounts to a cap on how long private property remains private? Wow, if you can't join 'em, tax 'em right?

Patrick   befriend   ignore   Wed, 16 May 2012, 8:56am PDT   Share   Quote   Like (2)   Dislike     Comment 53

Two seemingly contradictory facts drive a lot of this debate:

1. Most wealth in inherited, not earned.
2. Most millionaires did not inherit their money.

They are both true, but how can they both be true?

The answer is that a fairly small number of people inherit a VAST amount of wealth. Most people don't inherit very much.

rockyroad says

The money was earned by someone

No, not necessarily. The money could have been gained purely by non-productive rent-seeking. And it usually is, for the vast fortunes of the elite.

rockyroad says

do you still believe in private property rights?

Would you still be for private property rights if ONE person owned 100% of everything, and everyone else has to be their slaves, forever, because that one person owned all the land and extorted maximum rent from everyone?

The question is, what is the limit of private property, beyond which the situation is simply unfair and harmful to the whole society?

msilenus   befriend   ignore   Wed, 16 May 2012, 8:57am PDT   Share   Quote   Like   Dislike     Comment 54

rockyroad says

Who cares if you are affected? Doesn't make it any more legit. This is america, do you still believe in private property rights? The money was earned by someone, and you want to take half of that money just because the earner died?
What you proposing simply amounts to a cap on how long private property remains private? Wow, if you can't join 'em, tax 'em right?

Your argument seems to have outlived your memory.

swebb   befriend   ignore   Wed, 16 May 2012, 8:58am PDT   Share   Quote   Like   Dislike     Comment 55

Lots to respond to here

clambo says

There is no moral explanation for the government stealing my money by force of prison simply because a group of people have the stupid idea that government knows what to do with my money better than I do.

I haven't ever justified taxation with the stupid idea that government knows what to do with the money better than you do. The way I make sense of it is that the government fills a vital role in providing infrastructure, security, and big program spending that private entities would not (or in a way that private entities would not). Think bridges and highways, military, and the 60s space program. I think these are good things that you and I have benefited from, and they have to be paid for somehow. Taxing the people, especially the ones who benefit the most, seems reasonable. Is there a limit? Absolutely. Are we taxing and spending beyond the "reasonable limit"? Perhaps. But it's obvious to me that some amount of tax is necessary, and it seems justified to me.

clambo says

Obviously this is false. Fannie&Freddie, Solyndra, and other examples abound.

Good examples, but just anecdotes. The plural of anecdote is not data.

clambo says

You liberal fools don't seem to be aware. The next target of Reid, Pelosi, Obama and their asshole ilk is your 401K. Oh, you think that rich pot of gold will be left sacrosanct? You're smoking dope.

Indeed if they come after my IRA/401K, I'm going to be livid. I put the money in with certain rules in place, and I expect the "contract" to be honored. I'm saying that it would lead to a guns blazing on the capital steps for me, but yes, I'd be pissed off and I might even join you in the republican/libertarian ranks if that happens.

swebb   befriend   ignore   Wed, 16 May 2012, 9:00am PDT   Share   Quote   Like   Dislike     Comment 56

rockyroad says

swebb says

Confiscating, stealing, taxing or otherwise taking money from rich dead people to combat the disparity is fine by me (again, I'm likely to be materially affected by this)

Who cares if you are affected? Doesn't make it any more legit.

Just preempting the "of course you are in favor of it because it doesn't affect you" argument. You are right, though, it doesn't justify it.

rockyroad   befriend   ignore   Wed, 16 May 2012, 9:07am PDT   Share   Quote   Like   Dislike     Comment 57

Patrick says

Two seemingly contradictory facts drive a lot of this debate:

1. Most wealth in inherited, not earned.
2. Most millionaires did not inherit their money.

They are both true, but how can they both be true?

Both are not facts. NO research supports that most wealth are inherited. All research find that modern wealth are earned, not inherited.

Patrick says

No, not necessarily. The money could have been gained purely by non-productive rent-seeking. And it usually is, for the vast fortunes of the elite.

Who's the judge of non-productive income? Tax patent-income more? Patent royalties sky-rocket. Tax rent-income more? rent increases.

Patrick says

Would you still be for private property rights if ONE person owned 100% of everything, and everyone has to be their slave, forever, because that one person owned all the land and extorted maximum rent from everyone?

Who owns everything? Mathematically, that can't happen. There are laws to prevent biz monopoly; are you suggesting a law to prevent private wealth monopoly? A cap on how rich you can be?

msilenus   befriend   ignore   Wed, 16 May 2012, 9:30am PDT   Share   Quote   Like (1)   Dislike     Comment 58

Patrick, what would you think of moving this thread to the Politics forum?

Just floating a suggestion. This topic doesn't seem to be related to investing at all.

clambo   befriend   ignore   Wed, 16 May 2012, 12:50pm PDT   Share   Quote   Like   Dislike     Comment 59

OK Swebb,
The infastructure you mention is funded by 1. special taxes on gasoline, etc. 2. money raised by selling Bonds. You may even see them around from time to time, they are like the bonds to build a bridge, etc. Often the revenue bonds are paid by the bridge tolls, etc.
Airports are paid this way. The users of airplanes pay for the airport in the ticket.
Is it necessary to have a military and a space program. Sure. This of course should not grow huge however.
Evidently you weren't even aware that the target of the Democrats IS your retirement investments. There is so much money there they find it almost irresistible.
RE: Wealth inherited v made.
The richest people today didn't inherit their wealth. The richest people however also may seek ways to prevent the grave robbers in Washington from taking it after they are dead.
Both Bill Gates and Warren Buffet are not charitable people. They are getting their money out of the hands of Uncle Sam in their favorite way, rather than letting it be taken after they are dead.
It is true that robber barons existed and still exist. A good example is Carlos Slim, the richest man on earth. Telephones of all kinds are super expensive to use in Mexico and the people are gouged to the benefit of Telmex.
The answer to this problem is not within this discussion. I am talking about not stealing money from Dunross because Pelosi and Reid want to give it to someone in the slums who gets sec 8, food stamps, etc.
The guy bumming from me this afternoon at mcdonalds ($1 smoothies, I'm lovin it) told me about how he gets SSI but the meanie wants him to "narc out some people". The conclusion is this bum is getting SSI but they withhold it when he misses his meetings with the parole guys. So it goes.
Since "baby carries no cash" I had to let him bump off.

Patrick   befriend   ignore   Wed, 16 May 2012, 12:51pm PDT   Share   Quote   Like (1)   Dislike     Comment 60

rockyroad says

NO research supports that most wealth are inherited. All research find that modern wealth are earned, not inherited.

Really? You don't seem to have researched the subject very well.

Look up the paper by Kotlikoff and Summers "The Role of lntergenerational Transfers in Aggregate Capital". Most wealth is in fact inherited and they proved it.

rockyroad says

Who owns everything? Mathematically, that can't happen

Actually, it's mathematically inevitable. Whoever has the most just has to get interest and rent from everyone else without any inheritance taxes. Game over.

msilenus says

Patrick, what would you think of moving this thread to the Politics forum?

OK.

CBOEtrader   befriend   ignore   Wed, 16 May 2012, 1:53pm PDT   Share   Quote   Like   Dislike     Comment 61

zzyzzx says

Why do we have to pay cap gain taxes at all?


Because millions on welfare/food stamps/section 8 housing/etc. depend on you!


honest question: do you vote democrat, republican, either/or, or neither?

I'm not judging either way-- just curious.

thomas.wong1986   befriend   ignore   Wed, 16 May 2012, 2:11pm PDT   Share   Quote   Like   Dislike     Comment 62

Patrick says

Look up the paper by Kotlikoff and Summers "The Role of lntergenerational Transfers in Aggregate Capital". Most wealth is in fact inherited and they proved it.

Next time, you give a dollar to your son or daugher ..
I want the Govt to be there to take half of it !

rockyroad   befriend   ignore   Wed, 16 May 2012, 2:16pm PDT   Share   Quote   Like   Dislike (1)     Comment 63

Patrick says

Look up the paper by Kotlikoff and Summers "The Role of lntergenerational Transfers in Aggregate Capital". Most wealth is in fact inherited and they proved it.

We live in 2012. The paper you reference is dated 1981. The WSJ article I dated is 2008 (using 2001 data, latest available). WSJ asserted since 1989 inherited wealth has declined from 23%+ to less than 10% in 2001. Since we like extrapolations on this site, it's not a stretch to see inherited wealth dropping to well below 5% in 2012.

So yes, if we lived back in 1981, you'd be right. But we are discussing "modern" wealth correct?

----------------------------------------------------------------------------
Ideology aside, isn't the definition of rich/wealth to own significantly more than the average? So, as long as wealth is distributed unevenly, there will be rich and poor. Unless you want even distribution of wealth... but that's a different topic, and I hope none of us want that?

What about "fair" distribution of wealth? Unless you are Midas, I don't think anyone can be "fair". Which is what I began arguing... that fairness is a pipe dream, especially a fair tax. Heavily officiated activities, such as the Olympics, with enormous emphasis and motivation to enforce "fairness" see some of the most unfair results. Why do Russians and Chinese dominate gymnastics? Can't be economics... as Africans dominate marathon events. Can it be race? But that can't be; we are all equal; one human race right?

Fairness-anything is a misguided lesson to teach your kids. Asian Americans weren't treated fairly at anytime in US history. Jews certainly weren't treat fairly throughout world history. Yet, as a group, they are performing exceedingly well in modern America. I rarely hear about these groups marching on Washington, or occupying the Man. They simply study, work, emphasis on the family and respect the elderly.

America is still the most upwardly mobile society in history. You only need the drive, work ethic, and a little luck to be extremely successful. Family wealth is not a requirement, and has never been in America.

rockyroad   befriend   ignore   Wed, 16 May 2012, 2:29pm PDT   Share   Quote   Like   Dislike (1)     Comment 64

All this talk of the "rich" is relative. If you make $45k annually in America, that puts you in lower middle class in fly-over states, and barely surviving on the East/West coast. Yet the same salary puts you in the TOP 1.72%
richest people in the world! Maybe we should tax you more? Kids in Africa are starving, and that's not fair!

http://www.globalrichlist.com/

How you be "fair"? Do something with your talents/ideas, accumulate wealth and share the wealth with projects that seek to preserve culture and save lives. It's a never ending effort, as this is the human condition. BUT, seeking fairness by taking (too kind of wording) wealth from others based on perceived "justice" is dangerous.

CBOEtrader   befriend   ignore   Wed, 16 May 2012, 3:09pm PDT   Share   Quote   Like   Dislike (1)     Comment 65

rockyroad says

BUT, seeking fairness by taking (too kind of wording) wealth from others based on perceived "justice" is dangerous.

Sure. Also, what may be "perceived justice" by the voting public, is actually a bought politician demagoguering for the aristocracy to buy more votes/power.

Obama presents himself as robin hood. This might be accurate if Robin Hood were stealing from his fellow countrymen, giving half to the sheriff of nottingham, using the rest to buy loaves of bread at an inflated price from his brother's bakery, then tossing the bread into the ghetto for the poor to fight over.

The government is not a proper charity, and most here seem to agree.

Wealth disparity, or specifically limiting the political power resulting therof, is thus far the only valid argument for Obama's tax hikes on capital gains.

Is tax policy a valid tool to limit the political influence of the extreme rich? The government itself is owned by these very same extreme rich people. A few hundred or so in the government/aristocracy have convinced the masses that we need to take extra wealth away from the estimated 500k american millionaire tax filers last year. Taking money from the mini-rich, and giving this power to the super rich isn't going to remove private money-fluence from politics.

Vicente   befriend   ignore   Wed, 16 May 2012, 4:14pm PDT   Share   Quote   Like (2)   Dislike (1)     Comment 66

Returning to the original question:

"Why do we have any capital gains tax at all?"

Well because if you didn't, the WEALTHY, and I differentiate them from merely "rich", would pay no taxes at all.

You see wealth learned a long time ago, to get paid mostly in dividends and stock options and such a long time ago. Look at even the merely "rich" your average CEO, their salary income is miniscule and dwarfed by the rest of their compensation. This practice expanded dramatically when capital gains taxes were cut, and who agitated for that?

I'm sure Richie Rich likes best the state of affairs where they get to enjoy all the trappings of a first-world country, no bloody street riots, National Parks, first-class military, etc. they just don't want to pay for any of it. And it has to be paid for, so in a sensible tax policy we don't leave them an out. Worst of all, it really messes with the American sense of fair play when Mittens is paying a lower tax rate than you and I.

Failing that, you get as Iwog likes to point out, a game of Monopoly. We know how that ends.

swebb   befriend   ignore   Thu, 17 May 2012, 1:21am PDT   Share   Quote   Like   Dislike     Comment 67

clambo says

s it necessary to have a military and a space program. Sure. This of course should not grow huge however.

And it's that question of where to draw the line (what should/shouldn't the government do) that most of the argument (generally) is really about. We probably don't agree on what services the government should provide. I understand why the government taxing you and spending it on things you don't agree with would boil your blood...but we are never all going to agree on where that line should be drawn, so we have to all get comfortable with being uncomfortable. At the end of the day the whole is greater than the sum of the parts, and I believe most of us benefit from the big society (along with the government) that we have built. No, it's not perfect, yes we should strive to improve things, but capital gains taxes and inheritance taxes aren't the battles I'm going to choose -- after all the wealthy have benefited from our great society more than anyone else (notwithstanding their hard work, risk, etc).

clambo says

Evidently you weren't even aware that the target of the Democrats IS your retirement investments. There is so much money there they find it almost irresistible.

I'm still not aware of it. You have asserted it a few times -- it's something I will have to look into.

swebb   befriend   ignore   Thu, 17 May 2012, 1:24am PDT   Share   Quote   Like (2)   Dislike     Comment 68

rockyroad says

Unless you want even distribution of wealth... but that's a different topic, and I hope none of us want that?

Even, as in everyone has the same amount? No, of course not. More even? Flatter? Yes! I think it's better for the country. Scary things happen when the wealth disparity grows too severe.

swebb   befriend   ignore   Thu, 17 May 2012, 1:27am PDT   Share   Quote   Like (1)   Dislike     Comment 69

rockyroad says

America is still the most upwardly mobile society in history.

I don't believe this is true, or at least not generally accepted as such.

http://moneyland.time.com/2012/01/05/the-loss-of-upward-mobility-in-the-u-s/

"Both pieces cite numbers from the Pew Charitable Trusts’ Economic Mobility Project and other studies that found that 42% of American men with fathers who were in the bottom fifth of the earning curve stay there. Meanwhile, only a quarter of Danes and Swedes and 30% of Britons born into the lower-income bracket will die in that same bracket."

zzyzzx   befriend   ignore   Thu, 17 May 2012, 1:33am PDT   Share   Quote   Like (1)   Dislike     Comment 70

Vicente says

Whatever bracket I'm in, it torques me that capital gains is taxed at 15%. It should be higher. I hold dividend-paying and some long equities I would not be unaffected myself.

Anything to prevent people for saving for their retirement, right?

Just trying to understand your line of thinking.

thunderlips11   befriend   ignore   Thu, 17 May 2012, 1:35am PDT   Share   Quote   Like (3)   Dislike     Comment 71

Left out from this conversation is not only income tax, but the de facto regressive tax on wages and salaries paid by workers:

Social Security and Medi- care/caid withholding.

Someone working and being paid ~$100k is paying a marginal rate of ~40%.

I think it bizarre that somebody could make ten times more by NOT working, but rather off dividends, and pay far lower tax rate.

Our tax code seems to say:
"Productive endeavors bad, laying on beach collecting dividends good."

Patrick   befriend   ignore   Thu, 17 May 2012, 1:40am PDT   Share   Quote   Like (2)   Dislike     Comment 72

thomas.wong1986 says

Patrick says

Look up the paper by Kotlikoff and Summers "The Role of lntergenerational Transfers in Aggregate Capital". Most wealth is in fact inherited and they proved it.

Next time, you give a dollar to your son or daugher ..

I want the Govt to be there to take half of it !

Wow, are you determined to misunderstand or what?

Not talking about a dollar. We're talking about VAST UNEARNED HEREDITARY wealth. Meaning permanent ruling class whose ownership of all resources (especially land) makes everyone else into a permanent servant class with no escape no matter how hard they work.

Can't happen? Hmmm....

French revolution
Russian revolution
Chinese revolution
and 1,000 other examples

Why did those people revolt?

GUAB   befriend   ignore   Thu, 17 May 2012, 1:50am PDT   Share   Quote   Like   Dislike     Comment 73

Vicente says

clambo says

Go get hired by Goldman and join the squids. Go work for stupid B of A or their other ilk.

No thanks, I just want to see these vermin taxed at LEAST the same rate I am. Why should I have to pay anything north of 30% when they pay 15%?

One founding principle is that "all men are created equal" and thus they should be treated equally before the law. Giving special tax privileges to "squids" should be a no-brainer even for no-brainers.

“Eagles are dandified vultures” - Teddy Roosevelt

How is % they pay even relative? You're saying your tax situations are identical?

Vicente   befriend   ignore   Thu, 17 May 2012, 1:51am PDT   Share   Quote   Like (5)   Dislike (1)     Comment 74

zzyzzx says

Anything to prevent people for saving for their retirement, right?

Well the line we've been sold the last few decades, is that your HOUSE is your retirement nest egg. Because pensions all had to be kicked to the curb in the name of cost-savings. Oh right, or your 401K and Roth are going to take care of you. How is that corporate/banking promise working out? Me I mostly see people prayin