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Washington state approves capital gains tax

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Re: Washington state approves capital gains tax

#171

Post by bpodgursky »

grumpitron wrote: post #167
bpodgursky wrote: post #107

Earlier quoted context omitted.

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.

That's the point! Inflation causes fake capital gains on held property, which then turns into a wealth tax if you ever try to exchange the asset for another one!

Re: Washington state approves capital gains tax

#172

Post by AnimalMuppet »

ska wrote: post #105
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?

Not that I've ever heard. The only justification I've heard is that long-term investing is good for the overall economy, and therefore should be encouraged.

Re: Washington state approves capital gains tax

#173

Post by AnimalMuppet »

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.

So, this is a tax on certain kinds of income rather than all income. And it exempts the first $250K, so it's a progressive tax. So...

Re: Washington state approves capital gains tax

#174

Post by seattle_spring »

vineyardmike wrote: post #150
seattle_spring wrote: post #130

Earlier quoted context omitted.

> 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? They are this year, but the Biden proposal wants to raise tax for any income over $1m (LTCG included) to the top marginal rate of 39.6%. Add that to the proposals to increase SS to 12% for income over $400k, ~3% medicare tax, etc. > why is the employee selling all of their stock in one ye…

Risk mitigation isn’t free. It’s 7% now.

... or, in this case, free if you just work for a FAANG or other public company and realize your income yearly rather than in a lump sum. If your end goal is to further dissuade engineers from joining startups, then "mission accomplished" I guess.

Re: Washington state approves capital gains tax

#175

Post by ska »

AnimalMuppet wrote: post #172
ska wrote: post #105

Earlier quoted context omitted.

> 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?

Not that I've ever heard. The only justification I've heard is that long-term investing is good for the overall economy, and therefore should be encouraged.

I could swear I've heard it brought up but I'm not on top of these discussions, so who knows.

Re: Washington state approves capital gains tax

#176

Post by whydoibother »

AnimalMuppet wrote: post #169
whydoibother wrote: post #86

Earlier quoted context omitted.

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?

It is one less house people can buy.

Re: Washington state approves capital gains tax

#177

Post by giantg2 »

gnopgnip wrote: post #155
giantg2 wrote: post #33

Earlier quoted context omitted.

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.

That might work if this were a property tax. That would only for prices though, and that annual tax would still be passed in to renters.

The real estate tax they are talking about here applies to the net gain when you sell a property. People price things for what value they want to get out of them (and what the buyer is willing to pay). If you have a 7% tax on profit from a home sale (or appartment building) theybwill be priced higher to make up for it. That cost will be put on the renter in the form of slightly higher rent to cover the owners mortgage or target return.

Re: Washington state approves capital gains tax

#178

Post by rileywatkins »

jdonaldson wrote: post #124
zacharycohn wrote: post #19

As a Washington resident, I think this is great. WA has one of the most regressive tax systems in the country, and this is a move in the right direction. It's crafted to have a very narrow impact. It is capital gains, but essentially only for stock sales, and only for stocks sales over a quarter million dollars. If someone sells half a million dollars worth of stock, it seems very fair the state gets some cut of that…

I'm not a fan of labelling tax code as "regressive" in this case. It hasn't moved "backwards", it's stayed the same. I also question the rationale behind giving our city and state more money... they haven't exactly exhibited forthright stewardship of existing tax resources. I have doubts that taking more capital gains taxes will be a net positive. This will in all likelihood negatively impact the region's yearly char…

I believe zacharycohn meant "regressive" as in "imposes a harsher burden on lower-income households than on households with higher incomes."[0] In this sense, Washington state does have a regressive tax system, in part thanks to 0% income tax and higher than average sales tax.

[0] https://www.thebalance.com/regressive-tax-definition-history...

Re: Washington state approves capital gains tax

#179

Post by jukabo »

vineyardmike wrote: post #145
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…

If you had 10k in 2000 then didn't invest, in 2021, you'd lose even more money due to inflation than if you invested. Because cash obviously doesn't grow with inflation. You're only option to "get ahead" is to pick a better stock :)

But there’s a risk associated with picking stocks. These taxes keep poor people poor. They will never get ahead.

Re: Washington state approves capital gains tax

#180

Post by AnimalMuppet »

whydoibother wrote: post #176
AnimalMuppet wrote: post #169

Earlier quoted context omitted.

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

It is one less house people can buy.

And one more they can rent.

If I buy a house, don't live in it, and don't rent it, that's limiting supply.

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