Capital Gains

Off Topic Politics & World Issues
21

Just going to address the quotes randomly since I hate getting huge posts ;).

http://www.taxpolicycenter.org/...t.cfm?Docid=200
I was meaning how things were funded prior largely prior to 1913. Though some time frames did have income tax prior and obviously our budget is much more complicated and larger than back then.

I am not saying companies or corporations are at fault in a vacuum I think the entire culture has changed. There were obviously some huge cultural problems then but I’d say bottom to top people had some different ideas about work. Obviously though there were business owners that were shitty then too. I had the good fortune of working with a business owner that retired from a large corp started by a very ethical guy who believed all of his employees should have as good a pay as possible and good benefits and the opportunity to move. This ethic had clearly been transferred and in “retirement” as a business owner this guy operated the same way. Went way out of his way to move people up and to give benefits beyond the norm. He also still made plenty he just didn’t make maximizing it his sole goal.

Part of this is likely the wage gap between the lowest worker and the highest. I don’t think it should necessarily should be mandated to be no more than a certain percent. Some people that are higher level execs have absolutely no fucking clue what their bottom workers make. I was part of making a hiring plan and had to meet with a top level guy. And part of it was well we need to accept that in certain areas to hire competitively we have to be willing to eat a higher labor cost. He was all no way percent this percent that. Eventually I asked him if he knew what the bottom people were making per hour. Many of them were at minimum. He absolutely had no clue that was what the bottom workers were making.

The only way feasible to privatize social security(which I’d say isn’t necessarily a Republican idea by nature certainly not in electoral politics) is to not allow new participants and likely you’d have to fund people’s private accounts with some type of factor of how much they’ve paid in with how many credits they have over how many years. Probably you’d have to pick a top age 55 or something where the people would get current benefits because its rough to switch them so late in the game. Overall it would be a mess and such a political nightmare no one would do it. Perhaps if somehow a lame duck president could push it through in a weird quasi legal way.

Mostly I think labor has been devalued through the ease which domestic manufacturing moved to cheaper foreign markets. Obviously we are no longer an industrial nation of any kind and if so the wages for the types of jobs we do need , have to provide a reasonable living or eventually there will be a crisis that won’t be able to be solved politically. At some point technology won’t be able to hide income disparity at such a huge level.

22

As a separate aside I bet a large portion of small investors don’t realize until absolutely too late that stockbrokers and insurance agents have no primary duty to their clients.

23

Your post deserves a better reponse than I have time for right now. I will though.

24

[quote]pittbulll wrote:

[quote]Sifu wrote:

[quote]pittbulll wrote:
I am curious what is the difference between me investing my time for a capital gain

as apposed to investing my money for a capital gain ?[/quote]

If by investing your time you mean working at a job for a wage at an agreed upon rate of compensation ,that you can have a very high degree of receiving, versus investing money hoping for a return on your investment, with absolutely no guarantee you won’t lose all your money, I would say it’s self evident. [/quote]

I can tell you have never been self employed[/quote]

I’ve owned more than one business. The biggest one I was incorporated and had to meet a payroll every week for several employees. I paid workmans compensation taxes, unemployment taxes, liability insurance etc…

I’ve made profits, I’ve had losses. Contrary to what Obama says I built that business. I started with myself, worked my ass off and eventually employed several people.

While there was one large corporation that didn’t pay me for a project I completed successfully, my employees always got paid. Because that’s how I roll. In addition to that I was friends with them and didn’t want there ever to be a situation where they had to drag me through the courts to force me to pay them money that was rightfully owed to them.

That experience with not getting paid by a customer taught me the difference between being an investor and an employee. I had a business that it took me years of working and saving to build on the line. All my employees ever had on the line was that weeks paycheck and if I hadn’t paid them they could have immediately gone down to the Michigan Employment Security Commission, started a case against me for their back wages and claimed unemployment.

That is why capital gains tax is and should be, less than income tax. The level of risk is very different. Risk is why most people take the safe bet and spend their entire working life as an employee.

The important point is if it wasn’t for the risk takers investing money and creating enterprise, it wouldn’t be possible for the less ambitious and risk averse to earn money as employees.

Keeping capital gain tax low stacks the deck in favor of investors so they have a greater chance of success. This opens investment opportunities to the greatest number of people because most people are not Warren Buffet and they are not always going to make the worlds most brilliant investments. So it’s the most egalitarian.

Raising capital gains tax stacks the deck against investors by unfavorably reducing the rewards versus risk. This makes it much more difficult for the average investor to succeed forcing them out of the business of investing or they have to give their money to a brilliant investor to invest it for them, like Warren Buffet. This is the most elitist.

25

You all deserve a better response than I have time to post. But I will throw this out .I see no difference in me investing my time into manufacturing making a bunch capital products and making profit on selling them . I am sorry I see NO DIFFERENCE

26

[quote]pittbulll wrote:
You all deserve a better response than I have time to post. But I will throw this out .I see no difference in me investing my time into manufacturing making a bunch capital products and making profit on selling them . I am sorry I see NO DIFFERENCE[/quote]

What do you mean by “capital products?”

27

[quote]pittbulll wrote:
You all deserve a better response than I have time to post. But I will throw this out .I see no difference in me investing my time into manufacturing making a bunch capital products and making profit on selling them . I am sorry I see NO DIFFERENCE[/quote]

Here is the thing:

You invest in and create a company, you make a product. You sell the product. You pay ordinary rates on the profits. When you are old you sell your ownership of the company because you want to go bang young chicks in the tropics in yoru old age. When you sell the company you pay long term capital gain rates on excess of the sales price over your equity.

Buying stocks in public companies is buying tiny little pieces of ownership of those companies. You may or may not (dividends) get a share of the profits from year to year, and you may or may not make a profit on the sale of your ownership in 366 days (at least).

I could keep going, but does this clear it up at all?

edited.

28

As far as capital gains go, why don’t they just tax what you make out of the investment progressively.

Make a tiny bit and pay a very low tax rate.

Make more and pay a higher tax rate.

Make bukko bucks and pay a higher tax rate.

Lose money and get it counted as a tax deduction on the money you used in the first place to put into the market.

It seems simple to me, but I understand economy can be complex so is there a good reason this isn’t done?

29

[quote]usmccds423 wrote:

[quote]pittbulll wrote:
You all deserve a better response than I have time to post. But I will throw this out .I see no difference in me investing my time into manufacturing making a bunch capital products and making profit on selling them . I am sorry I see NO DIFFERENCE[/quote]

What do you mean by “capital products?”[/quote]

capital goods

30

Another senario . I buy $100,000 in cars and fix them all sell them for a $1,000,000

I buy a piece of land for $100,000 and fix it sell it for a $1,000,000

everythinhg is the same finacialy . I am curious would I pay the same taxes on both business deals and why ?

31

[quote]pittbulll wrote:
Another senario . I buy $100,000 in cars and fix them all sell them for a $1,000,000

I buy a piece of land for $100,000 and fix it sell it for a $1,000,000

everythinhg is the same finacialy . I am curious would I pay the same taxes on both business deals and why ?[/quote]

Depends on what you do for a living. If these activities are how you make a living they are ordinary income. If you are otherwise a carpenter, you may pay capital gain rates.

I believe the car is going to be ordinary more often than not, and the land capital more often than not. But I’m making an educated guess, as each individual situation will effect the sales treatment.

32

[quote]pittbulll wrote:

[quote]usmccds423 wrote:

[quote]pittbulll wrote:
You all deserve a better response than I have time to post. But I will throw this out .I see no difference in me investing my time into manufacturing making a bunch capital products and making profit on selling them . I am sorry I see NO DIFFERENCE[/quote]

What do you mean by “capital products?”[/quote]

capital goods [/quote]

I guess I’m not understanding your scenario. If you invest your time into making goods, I assume you mean as a employee of a manufacturer, than you’d pay tax on your wages. If you use your time to make goods, but never sell them than you’re just spending money on what will be classified as a hobby loss. If you own the company and it’s a flow through entity, than you’d still pay ordinary income rates. If it’s a C Corps, than again you’d pay ordinary on your wages and the Corp would pay whatever their rate is on AGI (AGI might not be the correct number, I don’t work in tax, and I don’t remember).

Is that what you’re talking about?

33

[quote]countingbeans wrote:

[quote]pittbulll wrote:
Another senario . I buy $100,000 in cars and fix them all sell them for a $1,000,000

I buy a piece of land for $100,000 and fix it sell it for a $1,000,000

everythinhg is the same finacialy . I am curious would I pay the same taxes on both business deals and why ?[/quote]

Depends on what you do for a living. If these activities are how you make a living they are ordinary income. If you are otherwise a carpenter, you may pay capital gain rates.

I believe the car is going to be ordinary more often than not, and the land capital more often than not. But I’m making an educated guess, as each individual situation will effect the sales treatment.[/quote]

Hey Beans,

Why would a carpenter potentially pay capital gains? I guess I’m asking how you would differentiate between what would be ordinary income vs. a capital gain when the gain occurs on an investment other than on securities?

34

[quote]usmccds423 wrote:

[quote]countingbeans wrote:

[quote]pittbulll wrote:
Another senario . I buy $100,000 in cars and fix them all sell them for a $1,000,000

I buy a piece of land for $100,000 and fix it sell it for a $1,000,000

everythinhg is the same finacialy . I am curious would I pay the same taxes on both business deals and why ?[/quote]

Depends on what you do for a living. If these activities are how you make a living they are ordinary income. If you are otherwise a carpenter, you may pay capital gain rates.

I believe the car is going to be ordinary more often than not, and the land capital more often than not. But I’m making an educated guess, as each individual situation will effect the sales treatment.[/quote]

Hey Beans,

Why would a carpenter potentially pay capital gains? I guess I’m asking how you would differentiate between what would be ordinary income vs. a capital gain when the gain occurs on an investment other than on securities?[/quote]

In his examples, what you do to make a living outside those sales will determine how the gains are treated. If you developed land for a living, those gains would be ordinary. But if you and 3 buddies got together and made the investment in land and sold it 3 years later, but all worked for Ford full time, the gains would be capital (investment) gains.

35

Depending on the time frame I think you could set the car thing up as a capital gain. If you created a company and resold it for the gain. You’d have to have the strategy planned going in though. And whether it would be worthwhile would depend on your time frame I think.

I think you are worried too much in the tax rates of labor. You could tax income differently or not at all. Broadly the breakdown is more traditional and its going to be something like labor is human exertion, capital is the product of human exertion, and land is all the stuff that humans can’t create through exertion.

Realistically speaking in my opinion the other end would likely be the better focus in living wage laws. Ignoring people like Mitt who are in the top tenth of a percent and never really have or need regular income. There are jobs that put people in the top 1 percent or ten percent or what have you. These people need or at least want certain things in society. Policemen, firemen, teachers, garbage collectors, restaurants, retail shops etc. If our economy is going to have a large group of workers in service positions it somewhat behooves us to ensure they at least can make a living wage. These jobs are not treated as transitional jobs in practice. Also not everyone has the ability, or the drive to work hard, or has had chance on their side each of which can effect the result.

36

[quote]groo wrote:
Depending on the time frame I think you could set the car thing up as a capital gain. If you created a company and resold it for the gain. You’d have to have the strategy planned going in though. And whether it would be worthwhile would depend on your time frame I think.

[/quote]

Time frame isn’t relevant. It is intent and common practice or the organization. If the purpose of the company is to fix and sell cars, the sale of the car is ordinary earnings. Doesn’t matter if you sell one every 20 years or not.

If the purpose of the company was to wash windows, and it flipped a car randomly, you might have a case for capital gain rates. But if you start flipping cars on the regular, the courts will rule it ordinary.

There is a fair amount of case law on this, and it really is a case-by-case situation.

37

[quote]groo wrote:
If our economy is going to have a large group of workers in service positions it somewhat behooves us to ensure they at least can make a living wage. [/quote]

Which of these jobs that aren’t transitional are not paying a living wage?

I also don’t think that we should sit back and start calling jobs that were never intended to provide people with a means to fully support themselves or family (Wal-Mart greeter) as non-transitional because some people are trying to use them as something they are not.

[quote]Also not everyone has the ability, or the drive to work hard, or has had chance on their side each of which can effect the result.

[/quote]

I’m a firm beliver that luck is over rated by many, and it is in fact opportunity coupled with preparation. But outside of that: why should we artifically reward less drive? Everyone, outside of mental handicaps) has the ability to add value to themselves, particularly in 2012. Sure it is harder for some, but anyone can.

38

[quote]countingbeans wrote:

[quote]groo wrote:
Depending on the time frame I think you could set the car thing up as a capital gain. If you created a company and resold it for the gain. You’d have to have the strategy planned going in though. And whether it would be worthwhile would depend on your time frame I think.

[/quote]

Time frame isn’t relevant. It is intent and common practice or the organization. If the purpose of the company is to fix and sell cars, the sale of the car is ordinary earnings. Doesn’t matter if you sell one every 20 years or not.

If the purpose of the company was to wash windows, and it flipped a car randomly, you might have a case for capital gain rates. But if you start flipping cars on the regular, the courts will rule it ordinary.

There is a fair amount of case law on this, and it really is a case-by-case situation. [/quote]

I was assuming the company would be sold with the cars as assets of it, but I more meant that some things hit a bit more scrutiny like if I created a company today with 100k in assets and you bought it from me tomorrow for 1 billion and I hadn’t done something amazing I think people would be looking at it a little harder.

If you are making a profit of 1 million its different than selling the cars for 1 million as well I think the argument is much to general.

What I would do is sell all the cars for cash and treat the 100k as a loss. If you are trying to save money go big I say.

39

[quote]countingbeans wrote:

[quote]groo wrote:
If our economy is going to have a large group of workers in service positions it somewhat behooves us to ensure they at least can make a living wage. [/quote]

Which of these jobs that aren’t transitional are not paying a living wage?

I also don’t think that we should sit back and start calling jobs that were never intended to provide people with a means to fully support themselves or family (Wal-Mart greeter) as non-transitional because some people are trying to use them as something they are not.

[quote]Also not everyone has the ability, or the drive to work hard, or has had chance on their side each of which can effect the result.

[/quote]

I’m a firm beliver that luck is over rated by many, and it is in fact opportunity coupled with preparation. But outside of that: why should we artifically reward less drive? Everyone, outside of mental handicaps) has the ability to add value to themselves, particularly in 2012. Sure it is harder for some, but anyone can.[/quote]

Everyone can add value to themselves.
I agree with this. However our economy has moved to having a huge service sector. If those jobs are considered to be needed for whatever reason they should pay a living wage. I don’t think minimum wage currently is a living wage.

Hard work is not always rewarded.(I’d say this is the primary cornerstone of some economic thought that causes a lot of issues as some conservative thought operates as if it always is.)

Luck is a factor good and bad to some extent. This is where I think social programs should be directed to not in everlasting support of people, but people that clearly had bad luck. Obviously not always easy to discern but sometimes it certainly is. If you inherit a fortune obviously thats good luck. If you’ve sat on welfare for 10 years never going to school or working thats obviously not bad luck.

Why should we? This is a bigger question. I think it benefits society to be able to work a regular job and have a family and not have to work paycheck to paycheck.

40

[quote]groo wrote:

Everyone can add value to themselves.
I agree with this. However our economy has moved to having a huge service sector. If those jobs are considered to be needed for whatever reason they should pay a living wage. I don’t think minimum wage currently is a living wage. [/quote]

But I don’t want to encourage people to stay at positions that they shouldn’t.

We can’t just have some base line national income thresehold that no worker can make less than.

The world needs ditch diggers too, and in some ways just as much (if not more in some cases) than it needs CEO’s. Doesn’t mean the ditch digger should get paid as much as the CEO.

No it isn’t. That is why you shoudl look to move to an area where your hard work is rewarded.

Nothing wrong with a true safety net, or old & disabled people getting assitance.

i think we agree on this point. Help is good, fostering poverty isn’t.

[quote]Why should we? This is a bigger question. I think it benefits society to be able to work a regular job and have a family and not have to work paycheck to paycheck.

[/quote]

I don’t disagree. I just don’t think the government can or should “policy” our way there. They can pave the road, but you can’t force people to take it.