Wyden's still pushing his mark to market capital gains tax, but apparently now only for billionaires. That's from press reports. I believe Biden is now backing him up on this. Originally Posted by TinyI just took another dump and saw this:
I listen to the market reports on NPR and I still don't get it. What the fuck is mark to market capital gains tax?Here's an example.
I know your money making money being taxed is a capital gain tax. That's it. I never heard the phrase or term mark to market at all this week. Not that I listen dutifully. Just want to be in the know. Originally Posted by eccieuser9500
Here's an example.
Eccieuser starts posting video links on line and becomes the equivalent of a top tier DJ (VJ?), and an extremely successful influencer on social media. He ends up with a cool $176 million. That seems like an odd number, but please bear with me.
There is no escape from death and taxes, and President Biden has done away with the Trump tax cuts, so Eccieuser pays a 43.4% tax on the $176 million, which takes his nest egg down to $100 million. Thank goodness he lives in Texas, not California, which has a 13.3% state tax rate, or he'd be down from $176 million to "only" $76 million.
He has a Forrest Gump moment and figures, what the fuck, I'm going to invest it all in Apple Stock. So he goes out and buys $100 million worth of Apple.
At the end of the year that Apple stock is worth $200 million. Normally Eccieuser wouldn't have to pay tax on that $100 million paper gain. But under mark-to-market accounting, he's going to pay 43.4% of that, or $43.4 million to the IRS, even though he didn't pocket a single cent.
Let's say the next year the stock doubles again. So now Eccieuser has a $200 million mark-to-market gain. Well at the end of the year he'll need to pay $86.8 million (43.4% tax on the gain). And so on.
Hopefully Eccieuser has a very wealthy sugarmomma to pay his taxes.
Now what if you don't just own stock? What happens if you own a bunch of small fractional interests in real estate, pieces of partnerships, a few paintings, some collectible coins and stamps, etc., etc.? You've got to know how much they appreciate in value every year to pay the tax. If the IRS works this like they do the estate tax, then you're going to have to get appraisers every year to calculate the tax, or alternately be willing to be on the hook for underpayment of tax, penalties and interest for the rest of your life if the IRS someday deems your estimated values to be too low. Some people are going to spend all their time and money getting valuations and getting info ready for their accountants, so they don't have time to work. If they don't have time to work they don't make much money and so don't pay as much in tax. I call this the "Tiny curve." It works like the Laffer curve, only the X axis is how much time you spend on your taxes:
https://www.investopedia.com/terms/l...0tax%20revenue. Originally Posted by Tiny
Oh yeah, I forgot to mention one thing. After two years, Eccieuser has paid $130.2 million in taxes under mark-to-market accounting, and he has $400 million in stock. He hasn't sold a single share. What happens if Apple goes bankrupt and Eccieuser loses everything? Will the government give him some of that $130.2 million back? Well, no, but they will let him deduct $3,000 of that loss every year against ordinary income. Originally Posted by Tiny
Here's an example.I'm a bit curious about your math. Where do you get that 43.4% tax rate from? The top marginal tax rate for income is 37%. If you add in the Medicare tax for the self employed (2.9%) that would be 39.9%. The top tax rate for capital gains is 20% and I don't believe you pay taxes on that until you sell the stock. Capital gains on collectibles (like gold) is 28% and is payed during the year they are sold. Quite frankly anyone who makes $173 million and can't figure out ways to shield any of his income from taxes deserves to pay through the nose. Even I know how to put money in tax deferred financial instruments.
Eccieuser starts posting video links on line and becomes the equivalent of a top tier DJ (VJ?), and an extremely successful influencer on social media. He ends up with a cool $176 million. That seems like an odd number, but please bear with me.
There is no escape from death and taxes, and President Biden has done away with the Trump tax cuts, so Eccieuser pays a 43.4% tax on the $176 million, which takes his nest egg down to $100 million. Thank goodness he lives in Texas, not California, which has a 13.3% state tax rate, or he'd be down from $176 million to "only" $76 million.
He has a Forrest Gump moment and figures, what the fuck, I'm going to invest it all in Apple Stock. So he goes out and buys $100 million worth of Apple.
At the end of the year that Apple stock is worth $200 million. Normally Eccieuser wouldn't have to pay tax on that $100 million paper gain. But under mark-to-market accounting, he's going to pay 43.4% of that, or $43.4 million to the IRS, even though he didn't pocket a single cent.
Let's say the next year the stock doubles again. So now Eccieuser has a $200 million mark-to-market gain. Well at the end of the year he'll need to pay $86.8 million (43.4% tax on the gain). And so on.
Hopefully Eccieuser has a very wealthy sugarmomma to pay his taxes.
Now what if you don't just own stock? What happens if you own a bunch of small fractional interests in real estate, pieces of partnerships, a few paintings, some collectible coins and stamps, etc., etc.? You've got to know how much they appreciate in value every year to pay the tax. If the IRS works this like they do the estate tax, then you're going to have to get appraisers every year to calculate the tax, or alternately be willing to be on the hook for underpayment of tax, penalties and interest for the rest of your life if the IRS someday deems your estimated values to be too low. Some people are going to spend all their time and money getting valuations and getting info ready for their accountants, so they don't have time to work. If they don't have time to work they don't make much money and so don't pay as much in tax. I call this the "Tiny curve." It works like the Laffer curve, only the X axis is how much time you spend on your taxes:
https://www.investopedia.com/terms/l...0tax%20revenue. Originally Posted by Tiny
Parse this with sober energy. I like the numbers you use.Thanks, no cigar in his mouth this time! I used a passive investment in shares of stock as an example because that's an easy way to explain how a mark to market tax would work. But the majority of the people affected own their own businesses. They're investing their blood, sweat, tears, and most importantly business profits back into their companies. If you make them write a pay the IRS every year for profits they never realized, it's going to hurt them, their employees, and their customers. There are exceptions, but most of the profits are invested in worthwhile ways, not in third homes and yachts and the like.
To all that shit: I am reminded of a dear Senior High School English (I just realized the significance) teacher. I don't remember the work, but essentially an industrial revolution picture piece. Perplexed, I asked him how these people could do nothing all day and still be angry at the staff? "Living off investments."
I work for a living. Worrying about; or in the case of the late nineteenth century English gentry, not worrying about, how I'm going to eat tomorrow is something I shouldn't have to worry about.
Are you worried how you will eat tomorrow? It is a sad state of affairs when those seeking asylum from a politically unstable country hit by two earthquakes in ten years don't want to come hear out of fear. Where people still get to keep their three vacation homes after paying a little tax.
Thanks, no cigar in his mouth this time! I used a passive investment in shares of stock as an example because that's an easy way to explain how a mark to market tax would work. But the majority of the people affected own their own businesses. They're investing their blood, sweat, tears, and most importantly business profits back into their companies. If you make them write a pay the IRS every year for profits they never realized, it's going to hurt them, their employees, and their customers. There are exceptions, but most of the profits are invested in worthwhile ways, not in third homes and yachts and the like.
I'm a big believer in the invisible hand. Provide a basic social safety net, insure our children are able to make it, provide for decent public infrastructure, and leave as much as possible in the private sector. The federal government is inefficient and mucks up a lot of what it touches. I don't feel so strongly about local and state government though. Where I live, I think they do a good job with the money we pay them. Originally Posted by Tiny
I'm a bit curious about your math. Where do you get that 43.4% tax rate from? The top marginal tax rate for income is 37%. If you add in the Medicare tax for the self employed (2.9%) that would be 39.9%. The top tax rate for capital gains is 20% and I don't believe you pay taxes on that until you sell the stock. Capital gains on collectibles (like gold) is 28% and is payed during the year they are sold. Quite frankly anyone who makes $173 million and can't figure out ways to shield any of his income from taxes deserves to pay through the nose. Even I know how to put money in tax deferred financial instruments. Originally Posted by billthecat46Please note that I made the assumption that "President Biden has done away with the Trump tax cuts." If he didn't then the tax would be 37% plus the net investment income tax (Obamacare tax) of 3.8%, or 40.8% total. The 43.4% is the 39.6% base rate under Obama plus the 3.8% Obamacare tax.
Please note that I made the assumption that "President Biden has done away with the Trump tax cuts." If he didn't then the tax would be 37% plus the net investment income tax (Obamacare tax) of 3.8%, or 40.8% total. The 43.4% is the 39.6% base rate under Obama plus the 3.8% Obamacare tax.
You say, "Quite frankly anyone who makes $173 million and can't figure out ways to shield any of his income from taxes deserves to pay through the nose. Even I know how to put money in tax deferred financial instruments." Well, that's not the way the system should work. People shouldn't be motivated to sell risky businesses and investments and invest the proceeds in tax free municipal bonds and the like. But that's what happens when tax rates are too high. It's much better to get rid of the loopholes.
Midnight and I were discussing this somewhere in this thread. If government is going to take 50%+ of the profits IF your investment works out, what's the motivation to invest? Or to start a business? It's a sucker's game. Originally Posted by Tiny
I don't subscribe to the belief that the people exist for the benefit of the government. Rather, the government should exist for the benefit of the people. We're not their slaves, even though many of them think we are. Originally Posted by Tiny
