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Washington state approves capital gains tax

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Re: Washington state approves capital gains tax

#271

Post by imtringued »

syshum wrote: post #203
evo wrote: post #152

Earlier quoted context omitted.

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?

Government taxation is very very ineffective tool, and rarely accomplishes that goal. I would love for you to cite and example of a taxation scheme in use today that is right now countering an actual negative externality Governments do not have a track record for being trust worthily enough to be placed in charge of controlling externalities, it would inevitably be used to usurp power, and liberty from the people, wh…

Singapore has high taxes on cars to reduce congestion. People stopped driving.

Germany has high taxes on gasoline. People buy more efficient cars.

Norway has taxes on ICEs but no taxes on EVs. Lots of people buy EVs.

Land value taxes reduce the economic loss caused by rent seeking.

Carbon taxes reduce CO2 emissions.

>This happens time and time again yet people still believe government is not only the "best" way to control things, but more stockily believe it is the "only" way to do so despite 1000's of years of historical record proving otherwise

Who cares about the last 1000 years of historical record when the necessity of government activity only depends on the current state of the economy? There are barely any absolutes in economics, almost everything depends on the situation in question.

Re: Washington state approves capital gains tax

#272

Post by imtringued »

ghostwriter wrote: post #227
dontreact wrote: post #225

Earlier quoted context omitted.

What are alternatives to controlling negative externalities? My understanding is that they are by definition not fixable by the free market, and anything that is not the free market is government essentially.

privatise everything so that the owners are able to sue those who negatively impact their assets https://www.washingtonexaminer.com/if-you-want-to-save-the-e...

That didn't work for pigs and chicken.

Re: Washington state approves capital gains tax

#273

Post by imtringued »

fighterpilot wrote: post #240
ghostwriter wrote: post #227

Earlier quoted context omitted.

privatise everything so that the owners are able to sue those who negatively impact their assets https://www.washingtonexaminer.com/if-you-want-to-save-the-e...

How would that work for air pollution?

In theory by owning a certain part of the atmosphere above your country. The government would then set a maximum CO2 limit in ppm that is allowed on your cubic metres of atmosphere.

In practice it is heavily simplified and you don't get to own portions of the atmosphere, instead you get usage rights, which means the right to pollute a certain amount. This is done via cap and trade already.

Re: Washington state approves capital gains tax

#274

Post by Shaanie »

tolbish wrote: post #189
BuyMyBitcoins wrote: post #41

Earlier quoted context omitted.

“ It is estimated that this tax only affects the 7000 richest individuals in Washington.” Careful, that’s how it always starts. Give it a decade or so and politicians will be upset at how few people are actually paying this tax. They’ll demand all sorts of changes to the exemption structure so that they can raise more revenue. All while saying it’s only going to effect other people.

Isn't this exactly how it works in the majority of western European and Scandinavian countries?

Nope, we have a much higher capital gains tax (and a progressive income tax) with a much smaller exemption, at least in Scandinavia.

Re: Washington state approves capital gains tax

#275

Post by imtringued »

CameronNemo wrote: post #213
tartoran wrote: post #112

Earlier quoted context omitted.

Let's be clear though, if your stock grows as little as that such that after paying capital gains on profits and adding inflation into the equation would leave you on the negative or even, then it's a pretty bad performing stock.

Why? What if I buy stocks with the intention of preservinpreserving wealth rather than growing my net worth? In such a case I am just trying to keep up with inflation with as little risk as possible, but the tax policies in place are forcing me to take on more risk. I can't just take a stake in a basket of goods and call it a day. I have to beat the risk free market substantially.

Assuming 5% inflation with 0% returns for 50 years and a 20% capital gains tax $1 turns into $11.47, a rise by $10.47, therefore you owe $2.09 in taxes. $11.47-$2.09 = $9.37.

You rightfully expect $11.47 but you instead get $9.37 after taxes. Your wealth has shrunk to 81.6% of its original value, meaning you need to net a return of 22.4% over 50 years to break even, which is equivalent to a 0.4% gain every single year or a 0.4% loss every single year.

If you could find a 4.7% interest savings account you would beat the perfect savings vehicle.

In practice inflation is laughably low right now. With current inflation (2.5% yes it's an overestimate) you would lose 14% of your savings over 50 years.

You're right that this is forcing you to take on more risk, but not substantially. You may need to put 10% of your money into the least risky stocks and keep 90% in a risk free asset.

Re: Washington state approves capital gains tax

#276

Post by imtringued »

CameronNemo wrote: post #246
tartoran wrote: post #232

Earlier quoted context omitted.

With that return your risk may be 0 but a guaranteed loss is what you choose. If you want to preserve wealth and want to beat inflation go with mutual or index funds, they go up and down with the market and the market beats inflation and appreciate quite a bit more. Or bonds.

All of those are what I had in mind. All of those incur capital gains tax, with the exception of perhaps some govt bonds (which have low yields).

Specifically, look out for funds that specialize in low volatility. Their gains are lower but so is the risk.

Re: Washington state approves capital gains tax

#277

Post by imtringued »

loeg wrote: post #234
bpodgursky wrote: post #187

Earlier quoted context omitted.

The "runaway high inflation" is exactly what I'm saying is a possibility. But it's not even necessary. Capital gains is a LOT compared to any proposed wealth tax, _and_ it affects most people (as opposed to the "billionaire tax"). 2x inflation (which is very plausible over a decade) translates into a 10% wealth tax, even at 20% cap gains. 4x inflation is 15%. Those are real numbers!

2x inflation over 10 years would require something like 7.2% annualized inflation. We're nowhere near that and haven't been for decades. Average over the last 20 years is around 3%, and it's been even lower over the past decade. 4x requires historically high inflation over a decade.

It's also unlike a wealth tax in the sense that you are not approaching a legislated minimum. If there is 1000x inflation you still only lose the capital gains taxes. If the government introduces a 5% wealth tax you lose everything after 100 years.

Re: Washington state approves capital gains tax

#278

Post by imtringued »

nate_meurer wrote: post #72
karl11 wrote: post #50

Earlier quoted context omitted.

Absolutely. But really there should not be capital gains tax as it is double taxation - you have already paid income tax on the same dollar.

"Double taxation" as a concept is complete nonsense. You pay sales tax, property tax, VAT, etc out of money (or assets bought with money) that has already been subject to your income tax. You pay both federal and local income taxes on the same money. Tax systems are naturally layered, and have been since the beginning of civilization. There are good arguments against capital gains tax, but this is not one of them.

Double taxation increases tax complexity. If possible we limit ourselves to as few taxes as possible but make those we keep count.

Re: Washington state approves capital gains tax

#279

Post by imtringued »

harshalizee wrote: post #200
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?

That's completely nonsensical. I'm in Washington. I sold my options from my startup that was basically all profit last year and it was greater than 250k. Under this law, I would have coughed up 7% more in taxes. I'm not even remotely a highly paid dev. I just got lucky after years of being underpaid. This will affect way more people than just 7000 individuals.

If it were easy to generate the necessary inflation to avoid laws like this then nobody would have bothered with a capital gains tax increase or even with the idea of a wealth tax.

Yes, the number of options are decreasing day by day...

Re: Washington state approves capital gains tax

#280

Post by egberts1 »

giantg2 wrote: post #23
jedmeyers wrote: post #20

Earlier quoted context omitted.

If you are against the bill - you are against child education. It's that easy. And stop asking questions.

Not sure if this is sarcasm...

iT’s dEfInItElY SarCaSm! so vote the grand-comment up!
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