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Washington state approves capital gains tax

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Re: Washington state approves capital gains tax

#151

Post by lamontcg »

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…

That is only likely to happen with housing (although not for the past 30 years in anywhere remotely desirable), and the tax breaks on moving your primary residence pretty much address that.

Re: Washington state approves capital gains tax

#152

Post by evo »

syshum wrote: post #123
Consultant32452 wrote: post #56

Earlier quoted context omitted.

I think it’s important to recognize that taxes are not primarily about revenue. The government can just create/inflate as much money into existence as it wants. All taxes are about behavior control and signaling. We’re either trying to discourage a behavior or signal we’re sticking it to some group or other who is getting taxed. Once you see the world through this lens all of these tax laws make much more sense.

I think it is important to recognize that taxes when used for anything other then revenue are highly unethical and should be opposed by the population

I feel like they're one of the only tools we have collectively as a society to counteract "tragedy of the commons"/negative externality situations. Is a tax that brings the financial costs of an action in line with its distributed societal costs that unethical?

Re: Washington state approves capital gains tax

#154

Post by procombo »

bpodgursky wrote: post #94
sokoloff wrote: post #70

Earlier quoted context omitted.

Though they do literally seek rent from their tenants, landlords who provide housing (or commercial real-estate) are not rent-seeking in the economic sense of that phrase, which is to seek to improve your economic position without creating any benefits for others . Providing housing or office space is clearly creating benefit for others.

This is sort of an unreal conversation to be having. If you buy a house to speculate on housing prices, and then rent it out, _you aren't adding anything_. That's entire point of the phrase "rent seeking". You've dumped capital into a limited-quantity good and then extract rent as it becomes more valuable. The only exception is those actually expanding the housing supply (which is hugely valuable and should be reward…

Where I'm at they can't build houses fast enough. Overall it's a bad market because home owner's are more motived to borrow against their property value (heloc, etc) than move. And everyone else is kinda stuck.

I own several rental units. Only freestanding homes. I definitely see myself as providing a value add. I fix things when they break, provide landscaping, provide housing to great people with not-great credit. They don't have to worry about a bunch of different utility bills. All value adds. And I take on plenty of risk where lenders don't want to. I don't get compensated all too well for it either. It's a very active way of investing long term, you may not see the value of, but it's definitely there.

I could easily charge 40% more in rent right now, as could many.

Re: Washington state approves capital gains tax

#155

Post by gnopgnip »

giantg2 wrote: post #33
majormajor wrote: post #28

Earlier quoted context omitted.

Yes, if you included real estate at the 250K number, you'd hit a much broader target than you would for stocks. But eliminating real estate entirely is a huge break for rent-seeking large landlords and developers. Probably should've simply chosen a higher dollar threshold for real estate.

They probably don't want the tax inflating real estate prices. Those rental owners will just pass the cost on to renters.

The tax applying to real estate would drive down real estate prices, making investing in stocks and other alternatives more profitable.

Re: Washington state approves capital gains tax

#156

Post by gnopgnip »

medvezhenok wrote: post #120
bombcar wrote: post #25

Earlier quoted context omitted.

There's a fairness argument that can be made (but probably should only apply to primary residences only) - you buy a house for $100k in Seattle 10 years ago - now you want to move to another neighborhood into an identical house, but both are now worth upwards of $500k - you'd have to come up with the tax difference on the "profit" even though all you're doing is moving between nearly identical properties. Also stock…

That's exactly what the 1031 exchange is for

That only applies to investments

Re: Washington state approves capital gains tax

#157

Post by mattmcknight »

clairity wrote: post #144
mattmcknight wrote: post #117

Earlier quoted context omitted.

>"it would encourage broader investment rather than hoarding" why do you think a tax on investing would encourage investment? It would encourage not selling your investments, or investing in investments which don't produce capital gains, which tends to look like hoarding.

investment happens when you have positive-npv projects to invest in, regardless of tax rate (and a smooth, even tax squeezes out distortions that might otherwise redirect investment into unproductive assets). a tax might affect investments at the margin, but not in an environment where there is excess capital looking for return (e.g., the current stock market).

It still seems like a higher capital gains tax will discourage some investment in things, to the extent the NPV changes versus other investments that don't incur that tax.

Re: Washington state approves capital gains tax

#158

Post by greenearth1 »

hahaxdxd123 wrote: post #9

Ah, so this bill will tax gains from productive activities like investing in and building companies, while exempting gains from rent seeking activities like real estate. Why am I not surprised?

Have you tried managing real estate? It’s not like managing 100 shares of Tesla. Let’s just agree that taxation of any enterprise is rather detrimental to society. We should be pushing for sin and consumption taxes moreso than income, property, or capital gains taxes.

Re: Washington state approves capital gains tax

#159

Post by verst »

mattmcknight wrote: post #110
verst wrote: post #16

Earlier quoted context omitted.

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?

It won't affect most businesses however. Only those with $10M in revenue in the year preceding the sale.

> Business owners are exempt from the tax if they were regularly involved in running the business for five of the previous 10 years before they sell, own it for at least five years, and gross $10 million or less a year before the sale.

Source: https://apnews.com/article/business-government-and-politics-...

Or legal source: http://lawfilesext.leg.wa.gov/biennium/2021-22/Pdf/Bills/Sen...

See Section 8, (2)(d)(iii)

Re: Washington state approves capital gains tax

#160

Post by ac29 »

cynicalkane wrote: post #31
hahaxdxd123 wrote: post #9

Ah, so this bill will tax gains from productive activities like investing in and building companies, while exempting gains from rent seeking activities like real estate. Why am I not surprised?

Real estate has a powerful lobby and many property owners are well-connected themselves. A lot of people own property and don't see it as free money. They empathize with property owners. Though it's easier money if you're politically connected and/or already wealthy. Stocks are held by rich people and techbros, in the minds of the public. Whether something is valuable or not valuable depends on who you empathize with…

> Really you should just tax income at high rates and investment at near-0%

The article mentions income taxes are unconstitutional in Washington.

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