Washington state approves capital gains tax • Hacker News Board

Re: Washington state approves capital gains tax

#101

Post by aazaa » Fri, Apr 30, 2021, 5:47 PM UTC

leephillips wrote: post #46

I recently came across this comment by Philip Greenspun: “if you bought an asset for $10,000 in 2000, for example, the BLS says you spent $15,700 in today’s mini-dollars; if you sell it for $15,000 in 2021 you’ve actually suffered a loss, but will owe capital gains tax nonetheless” ( https://philip.greenspun.com/blog/2021/04/29/economic-wisdom... ). I’m not a finance person, and this had never occurred to me. Does he…

Yes, he has a point. Just treading water with respect to inflation triggers a tax bill. I doubt the cap gains calculation will ever tax real gains rather than nominal gains.

Re: Washington state approves capital gains tax

#102

Post by giantg2 » Fri, Apr 30, 2021, 5:47 PM UTC

xxpor wrote: post #63

giantg2 wrote: post #22

Earlier quoted context omitted.

"Keep in mind we don't have any income taxes here." That's not really what the supporters of this bill think. They claim an excise type tax already exists and that it provides precedent for this one since income taxes are unconstitutional.

Income taxes are not unconstitutional. Progressive income taxes are. No one wants to impose a flat income tax though.

Thanks for bringing that up. It looks like local income taxes are not allowed under law and that any tax at the state level has to be flat. It seems the article may have misrepresented that with "Income taxes are unconstitutional in Washington state.". (Unless there's some obscure case law regarding flat income taxes)

Re: Washington state approves capital gains tax

#103

Post by foobiekr » Fri, Apr 30, 2021, 5:48 PM UTC

grumpitron wrote: post #6

PragmaticPulp wrote: post #3

Details are sparse in this article. Looks like 7% capital gains tax, first $250K excluded, real estate excluded. Proceeds to primarily fund childhood education (for now). > For example, stock sales higher than $250,000 would be taxed at 7%. Real estate would not be. 7% (on top of federal cap gains, which are also increasing) is a significant tax rate to start with. If it was 1-2%, I could see people rolling with it.…

It looks like Oregon has a 9.9% capital gains tax, so moving to Portland would add to the tax bill of founders relocating before selling their company instead of reducing it.

Oregon treats capital gains as regular income (so do most states, including CA).

Oregon also has one of the worst tax regimes in the country. For most earners, a resident of a state like CA without sales tax on groceries, medical care, or medical necessities will end up with a substantially lower tax burden than a similar earner in Oregon. To be more taxed than CA is crazy.

Re: Washington state approves capital gains tax

#104

Post by clairity » Fri, Apr 30, 2021, 5:49 PM UTC

these are exactly the kind of tax structures that just beg to be gamed by the wealthy. instead, there should be no cutoff at all, and especially no exemptions for real estate, much of which is unproductive rent-seeking.

the tax should be a smooth function with positive slope, not a discontinuous one with carve-outs. combined with lowering taxes elsewhere, it would encourage broader investment rather than hoarding, especially with so much excess capital sloshing around looking for returns. it actually helps an economy to principally tax this excess capital and unproductive rent-seeking behaviors, allowing an economy to cull unproductive investments in favor of productive ones.

Re: Washington state approves capital gains tax

#105

Post by ska » Fri, Apr 30, 2021, 5:49 PM UTC

leephillips wrote: post #46

I recently came across this comment by Philip Greenspun: “if you bought an asset for $10,000 in 2000, for example, the BLS says you spent $15,700 in today’s mini-dollars; if you sell it for $15,000 in 2021 you’ve actually suffered a loss, but will owe capital gains tax nonetheless” ( https://philip.greenspun.com/blog/2021/04/29/economic-wisdom... ). I’m not a finance person, and this had never occurred to me. Does he…

> Should the calculation of capital gains take inflation into account?

Isn't this one of the justifications for cap gains rates typically (jurisdiction dependent) being lower than regular income?

Re: Washington state approves capital gains tax

#106

Post by tartoran » Fri, Apr 30, 2021, 5:49 PM UTC

procombo wrote: post #78

endisneigh wrote: post #54

Earlier quoted context omitted.

I don’t think you understand how capital gains work... If you invest a dollar today and get ten dollars tomorrow you’ve gained 9 dollars. When were you taxed for that?

They're saying if that growth occured over 60 years then you've just kept up with inflation. Might as well have just put it in a standard savings account and NOT get capital gains tax. *Well, maybe a standard money market account or bond.

Wait, wouldn't you get taxed capital gains on a standard savings account? I'm genuinely curious even though right now saving accounts are not saving anything at all.

Re: Washington state approves capital gains tax

#107

Post by bpodgursky » Fri, Apr 30, 2021, 5:50 PM UTC

leephillips wrote: post #46

I recently came across this comment by Philip Greenspun: “if you bought an asset for $10,000 in 2000, for example, the BLS says you spent $15,700 in today’s mini-dollars; if you sell it for $15,000 in 2021 you’ve actually suffered a loss, but will owe capital gains tax nonetheless” ( https://philip.greenspun.com/blog/2021/04/29/economic-wisdom... ). I’m not a finance person, and this had never occurred to me. Does he…

And as reduced down, it essentially gives the Fed the ability to seize 20% (soon to be 40%) of all property in the name of the IRS, by printing arbitrary amounts of money (which the Fed board can do independently of congress) to blow up the nominal "capital gains" on any asset, triggering capital gains tax.

It hasn't been an issue historically, in an era of hawkish fed leadership, but this year... we'll see.

Re: Washington state approves capital gains tax

#108

Post by rkevingibson » Fri, Apr 30, 2021, 5:50 PM UTC

seattle_spring wrote: post #83

For those that support this, I have a question: Combined with the federal tax changes, this may increase LTCG rates for Washington residents to more than 60%. I can see folks wanting this for people that regularly make more than a million a year, but what about the situation more common amongst this community where you take below-market pay in exchange for a potential lump payout in one year. For example, say a start…

Not sure how you arrived at 60% - aren't federal capital gains topped off at 20%, and this bill only 7% for gains over $250,000?

Even if it is 60%, I think that's reasonable. In your case, why is the employee selling all of their stock in one year? If they sell over multiple years, they could get gains of up to $250,000 without paying any state tax, which is plenty.

I'd also be in favor of a state income tax, since the sales tax regime in Washington is very regressive.

Re: Washington state approves capital gains tax

#109

Post by lowbloodsugar » Fri, Apr 30, 2021, 5:51 PM UTC

egberts1 wrote: post #8

Proceeds to fund child education. Like the state gas tax, you still won’t get itemization of its breakdown to ensure that it is really where it is going to go. So, color me surprise.

Even if it does go there, any money that previously went there will go somewhere else. So its the "somewhere else" that benefits.

Re: Washington state approves capital gains tax

#110

Post by mattmcknight » Fri, Apr 30, 2021, 5:51 PM UTC

verst wrote: post #16

PragmaticPulp wrote: post #3

Details are sparse in this article. Looks like 7% capital gains tax, first $250K excluded, real estate excluded. Proceeds to primarily fund childhood education (for now). > For example, stock sales higher than $250,000 would be taxed at 7%. Real estate would not be. 7% (on top of federal cap gains, which are also increasing) is a significant tax rate to start with. If it was 1-2%, I could see people rolling with it.…

The first 250k in profits from capital gains are exempt. It is estimated that this tax only affects the 7000 richest individuals in Washington. Keep in mind we don't have any income taxes here.

It's more like the 7000 highest filers in any given year. The richest people may not be realizing capital gains. It's likely to affect people who happen to be selling their businesses that year, probably the only year they would ever fall into that group. It makes creating such a business and selling it while living in the state less attractive. Have to move to Texas before you sell?