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Washington state approves capital gains tax

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Re: Washington state approves capital gains tax

#161

Post by ovulator »

snapetom wrote: post #88
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.

If I have a liquidity event at my startup, I'm going to be hit with this, right? Like many startup engineers, I've been taking less pay for shares for several years now. Funny, I don't feel like one of the richest 7000 individuals in Washington. And I guarantee you as an early engineer, I'm likely going to hit 250k, but get nothing close to founder cashout money.

If you got a $300k liquidity event. You will pay $3,500 in tax on it.

If you worked at that job for 10 years at $30k less than normal, that is $7,600 a year that you didn't pay in federal income taxes on that missed income.

Do the math, had you taken the income that would have been $76,000 in taxes over ten years vs $3,500 in taxes in one year.

Re: Washington state approves capital gains tax

#162

Post by ac29 »

aatharuv wrote: post #65
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.

The Alternate Minimum Tax was only supposed to affect less than 100 millionaires in the 1960's who were paying no taxes. Now, it is impacting 20+% of California tax payers most of whom earn under a million dollars a year and many of whom are not millionaires.

"In 2019, the AMT impacted just 0.1 percent of households overall. This includes 0.2 percent of households with income between $200,000 and $500,000, 1.8 percent of those with incomes between $500,000 and $1 million, and 12.5 percent of households with incomes greater than $1 million"

https://www.taxpolicycenter.org/briefing-book/who-pays-amt

Re: Washington state approves capital gains tax

#163

Post by verst »

philwelch wrote: post #39
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.

These taxes always start off only affecting the richest of the rich, until the government decides it needs more revenue.

What if I told you that as an ordinary engineer I am perfectly OK with paying state income taxes and capital gains taxes here in Seattle?

Why? For the benefit of all.

I am not wealthy by any means given local expenses but I live comfortably. As someone who is better off than the majority of people (as are most of us on HN when compared to the people around us wherever it is we live) I feel it is important to invest in shared infrastructure and services for all. This is one of the important roles of government and I trust government a lot more to attempt to do the right thing (after all in the US we have a representative republic) with all people in mind versus a bunch of individual directly giving their funds to their favorite causes and projects. The patchwork of nonprofits for example doesn't have the ability to address systemic problems.

Altruism and empathy are not incompatible with capitalism (and rewards for your hard work or ingenuity). Some people here really should consider investing in their local community more.

Re: Washington state approves capital gains tax

#164

Post by ac29 »

ggreer wrote: post #136

There are several issues with this tax. First, the ultra-rich won't pay it. They'll take out loans against their stock instead of selling it. Second: The 14th amendment to the state constitution[1] says: > All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected for public purposes only. The word "property" as used here…

I dont buy that this tax will meaningfully reduce investment. With interest rates on bank accounts and and bonds so low, there really is no way to keep up with even relatively low levels of inflation without investing in stocks. People aren't stupid, they aren't going to make investments with a 0.5% rate of return just to spite the state.

Re: Washington state approves capital gains tax

#165

Post by seattle_spring »

verst wrote: post #159
mattmcknight wrote: post #110

Earlier quoted context omitted.

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 lega…

In other words, the rich founders get richer while the early employees continue to get screwed.

Re: Washington state approves capital gains tax

#166

Post by clairity »

mattmcknight wrote: post #157
clairity wrote: post #144

Earlier quoted context omitted.

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.

yah, that’s the investment at the margin, but that’s currently overwhelmed by excess capital looking for any returns, even net negative, as long as it’s less negative than the next best alternative. excess capital decouples the risk-reward relationship. that’s why it makes the most economic sense to tax it back into line (and not other things), leaving money in the hands of spenders & more constrained investors to direct the market back to productivity, rather than extraction (for no good economic reason).

Re: Washington state approves capital gains tax

#167

Post by grumpitron »

bpodgursky wrote: post #107
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.

What you're describing is a wealth tax, not capital gains. Capital gains taxes are applied to gains on capital, not to held property.

Re: Washington state approves capital gains tax

#168

Post by seattle_spring »

lawnchair_larry wrote: post #113
Relys wrote: post #34

Earlier quoted context omitted.

When I lived there a few years ago, there was an increasing amount of tech companies from Seattle opening up offices in Portland.

It has changed a lot with antifa having free reign for the last year. Lots of businesses boarded up and leaving. Even the Apple store was just set on fire again .

Part-time Portlander here! You have absolutely no idea what you're talking about. Please stop basing your worldview on Infowars talking points.

Re: Washington state approves capital gains tax

#169

Post by AnimalMuppet »

whydoibother wrote: post #86
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.

No, they don't. Landlords are complete drains on society. They don't 'provide' housing. They limit supply and drive up costs for everyone else.

I have a house. I rent out the house. How am I limiting supply?

Re: Washington state approves capital gains tax

#170

Post by AnimalMuppet »

ac29 wrote: post #160
cynicalkane wrote: post #31

Earlier quoted context omitted.

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.

Then how is this constitutional? We can't have an income tax, but we can have a tax on certain kinds of income? How does that work?
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