harveyc

sbl, you need to read about AMT a bit closer. Again, you're just reading what you think you already "know". AMT and Long-Term Capital Gain Not all capital gains get hit, but they do come into play and affect the taxes paid. It's also mentioned in one of the Wikipedia link I gave above.

And then you throw stuff out there that the rich invested their tax savings overseas. You have some documentation for that? Higher tax rates here encourage overseas investing. Is that what you really want?

If it wasn't for the rich, many of the great ideas (inventions) that have come about would just be sitting on paper. It takes large investors with capital to help bring these things to market, putting people to work.

Surely you understand the way that law making works. Bush did not write the tax law but signed it. Many Democrats supported it in the legislature. They recognize a benefit to society of encouraging long term capital investments.

Another principle behind discounted long term capital gains being taxed at lower rates is due to inflation. If someone investes $1,000,000 in 2000 and gets a return of $1,200,000 10 years later, is it really fair to tax that $200,000 gain at the full rate when, in reality, he has suffered a "loss" due to the decline in the purchasing power of their money?

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sbl

From BankRate.com:

"The tax act that reduced the dividend rate treats dividends as net capital gains when computing the favorable tax rate for AMT purposes. Therefore dividends, like long-term capital gains, won't be taxed at higher than 15 percent for the alternative minimum tax."

The rich got their big tax cut in 2001 or 2002-- have you seen a big increase in manufacturing jobs here since then? How about in China? What more evidence do you need? That clearly has helped our economy!

I could accept an adjustment to capital gains based on inflation--that would be a few % per yr. Not 50%. So I guess you are happy with the bonuses of the bankers we bailed out being taxed at half the rate of the middle class--I'm sure there are others.

Abnshrek

The problem is there isn't any incentives really to do anything on our soil vs making the quik buck by ordering out..? for cheaper labor

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I'm a Nannerhead :^)

sbl

You are right! Cheap labor is the reason most of our jobs were shipped oversees. The tax cuts and breaks just helped finance it.

harveyc

The bankrate.com article is obviously overly simplified and misses the mark with AMT.

The indexing would be helpful, but the 50% figure you quote is not "per year". That would be great, some of my capital gains would give me tax credits instead of reduced tax levels.

The risk of that results when one ties their capital up for longer periods of time is considered justification by most lawmakers as worthy of a discounted tax rate, especially since the investments helps stimulate economic growth and jobs. Some jobs here simply would not exist if there wasn't the 15% break, period. I don't think that's really what you want to see.

The tax cuts had nothing to do with sending jobs overseas. Regulatory burden and competition are the factors that have increased jobs being sent overseas. Most of us all shop for the best bargains we can get instead of shopping for "Made in the USA" products. That's the price we pay. You like to blame the wealthy for it but you have no support for such a claim. It didn't take any extra money to move jobs overseas, it saved company's money.

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sbl

No, the capital gains tax break is not 50% per yr, but those billions stock options bonuses that the bankers just got will get a 50% reduction if they just hold them for a yr--what kind of investment is that?

According to a recent news segnment, when the Bush Tax cut expires it will increase federal tax collection over 360 Billion/yr. So, over the 10 yr life of the bill, it put somwhere in the range of $3.5 Trillion in the pockets of the rich. How much of that was spent creating jobs here in the US? I will bet you that more of it was spent moving jobs to China. BE HONEST--of course it cost money to move jobs oversees--the cost of moving equipment or new equipment, the cost of new buildings, the cost of training workers--but then all of that is deductable as is the travel to visit (or go play golf there). And the rich owners that moved those jobs over there still have to pay income tax on their profits or dividends (if they want to spend that money here of course).

Abnshrek

I think its time for the state to lower the Taxes on my Beer :^)

Who will drink to that? :^)

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I'm a Nannerhead :^)

sbl

I will!

In fact I know a great way to do that! Make your own--no tax at all (except sales tax). There are some pretty good kits out there too.

harveyc

The primary financial benefit is getting the right to purchase a stock at a pre-determined price which is usually at a very good discount when/if exercised (some options are not exercised when the company's stock price drops below the option price). The discount between the option price and the market price is reported as wages and has been treated as such for maybe close to 10 years (my wife get some small stock options so I remember it changed a while back, but it wasn't a big deal for us). So the capital gains break has nothing to do with stock options. He someone chooses to hold on to the shares they will need to come up with the money to pay their taxes on the discount elsewhere. If they hold onto those shares for over a year and the stock goes up in price above the market price when they exercised their option, they will report that as a long term capital gain and pay the discounted capital gains rate (though the capital gains may push them into being hit with AMT).

I am being honest. Capital gains are not funding the transfer of jobs overseas. Most moves involving outsourcing and hiring a company in China to manufacture a part for someone, not the U.S. company actually building a plant there. But even when a U.S. company needs to raise capital to fund construction of a plant overseas, it's done from the sale of additional shares of a company. One shareholder selling at a gain simply transfers ownership of those shares from one party to another with no impact on the capital level of the company.

You're wanting to single out companies based on what you perceive to be bad things they've done. That opens up a dilemma which is impossible to solve. Different people will have different opinions of what is bad. Some of those bankers receiving huge bonuses had nothing to do with any losses suffered by their parent company and actually earned huge profits for their company. But you want to tax them more because of the company they're working for? What about a public employee's pension fund that owns shares in Exxon, should they be taxed higher because they profit from shares in a supposedly evil company? What about Apple Computer, which sold $15 billion of products last quarter but has closed down plants here in the U.S.? Maybe we should tax people more if they buy too many products made outside of the USA. We should also consider extra taxes for people who don't eat five servings a day of fruits and vegetables (one serving of bananas should be required, IMO).

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sbl

If the billions bankers and corporate executives of companies are now getting taxed as salary on the part of options below market value that is great--it didn't used to be that way. They are still getting taxed at half the rate as I am for no real investment at all in the company on the gains. Middle class stockholders of these companies are getting shafted as the value of the stock is diluted.

Of course companies are moving equipment to other countries, I know people whose last yr on the job was just to move and set-up equipment. They did it for cheap labor and they didn't fund it by selling stock. It was a privately owned company and they funded it out of their rich pockets.

Again, the earnings of my pension plan and IRA are taxed as salary--not as capital gains--even if capital gains were part of the increase.

I am not saying we should tax bad behavior differently--though if it were possible it would be a good idea--but we should quit rewarding it.

I am just saying if 28% is the highest tax rate and it applies to the middle class--the same rate should apply to all income above that level. I do not think the rich should pay a lower tax rate than I do.

Abnshrek

Well maybe(?) when you retire, but not if they are in a tax-free bond fund... but what's the fun in that.. Tax-free being semi-stabile earnings.
The only problem I have with what your 28%, that's now; not when you retire and are on SS if its still around.? So your tax bracket may not be @ 28% (unless your a really good packrat) like you state, which should ease your burden and your mind... :^)

<- thinkin' it's time for a beer :^)

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I'm a Nannerhead :^)

harveyc

sbl, you continue to want to single out the rich as getting the capital gains tax advantage. I'm middle class and get the break and so do you and so do the lower class. Whoever makes long term investments gets the same break. Also, you keep saying that the rich pay a lower rate than you but that is only if they have long term capital gains and you have none. Most everyone that has long term capital gains also has other forms of income and the rich are in higher brackets than the middle class. Again, the top 10% of taxpayers are paying over half of the income taxes in this country but you still don't think that's enough.

I didn't say anything about taxation of your pension benefit. I asked if pension companies shouldn't also pay income taxes on capital gains.

Your example of one company that moved their equipment overseas makes no connection with that being funded by long term capital gains. I know of many companies that have moved operations to overseas but most do not move plant and equipment; it's easier and cheaper to set up new facilities overseas. Certainly there are cases where there is some specialized high-value equipment that is worth moving. Such moves are usually funded from existing capital of a company and has nothing to do with long term capital gains.

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Richard

The higher the income, the easier it is to lower your Adjusted Gross Income. Other than bad planning, I don't see why an upper-middle class (or higher) gross income would ever encounter AMT.

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Back in business at plantsthatproduce.com

sbl

Yes, I get a capital gains tax break--sometimes a few thousand $$$, and I get a tax break on dividends--usually less than a few hundred $$, but like I said, I don't see why I should pay less for income I got for doing nothing than money I worked hard for.

Yes the top 10% pay half of the income tax--but they make 90% of the income. They pay less for no reason other than they own more congressmen--Republican and Democtrats. For the most part, the tax breaks they get do not go into creating new job--most new jobs are created by small business--by middle class tax payers who scrape together everything they can and borrow whatever they can to start a new business. Now they are out of money and can't get loans and even if they could they can't sell things because nobody but the rich can afford to buy.

If Congress really wanted to increase manufacturing jobs in this country, they could pass more laws like the Jones Act that requires ships delivering good between US ports to be built in the US--protecting our shipbuilding industry and preventing it from being exported. We need to do the something similar for steel, textiles, and other key manufacturing industries.

Your rich guy is going to be drinking by himself and the bar will probably have to close because the middle class can't afford a beer!

Abnshrek

That's called protectionism I due believe. You think our economy sucks now. Govt Contracts are protectionism enough, anything else is just feeding a fat cat's pocket. I look for amercian products and pay the premium price for them so other folks dont loose their jobs. If 300 million people did that I guess disney, hasbro games, the lot wouldn't be selling a whole lotta nothing. I have the view of what has china ever done for me. You know the answer to that.

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I'm a Nannerhead :^)

momoese

harveyc

Richard, it's not easy to avoid the AMT unless you're so intent on it that you intentionally lose money and that's not good planning.

sbl, most new jobs are created by new products being made and that requires capital investment. Most of our lawmakers use what little wisdom they have to help encourage capital investments by providing accelerated depreciation, reduced capital gains taxes, etc. Both small businesses and large businesses benefit from this.

I've made a point to my son about the problem about so much of what we buy coming from China. He will scan items now to see where they come from. Some guy on the citrus form has a signature line that says something like "Ty Ty is a place to get robbed, WalMart is a place to buy a bunch of plastic crap from China."

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sbl

Small businesses are the biggest employers in this country, but most small businesses are not creating a new products, they are selling products and services and they need customers. I was listening to NPR this morning and they interviewed a small business owner (custom trucks and vans). He said even the $5000 tax credit for new employees would not help him--he doesn't have customers.

The middle class --the 70 to 80% in the middle that pay the other 50% of the tax --has been squeezed by the cost of necessities--higher energy cost, higher medical cost, higher education cost, and higher food cost. They don't have money to spend on discretionary spending. It doesn't matter how much you invest in a business--if you do not have customers, it will fail.

I am not against depreciation and investment credits for businesses that create jobs in this country, but after that vehicle or equipment that was depreciated to $0 is sold for $10,000, what is wrong with the govt getting 28% of that depreciation back instead of 14 or 15%?

harveyc

Selling a depreciated asset requires recapture of depreciation tax at the taxpayers full marginal rate (28% or whatever). I think it's Form 4797.

Selling products wears out manufacturing equipment which requires new capital outlays to replace it. In addition, people don't usually just keep selling the same product, they re-tool and build newer/better versions.

The biggest problem with the economy isn't because the middle class has been squeezed by higher costs but because a large number of people were irresponsible and spent more money than they earned for ten years or more of borrowing against inflated home prices. Adjusting to spending what a person is actually earning is painful to those directly affected as well as the entire economy.

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sbl

There are surely some that overspent and mortgaged their homes to do it, but the vast majority are still in their homes, still working, but finding it hard to make ends meet and still go out to eat (small business), take vacations (small business), buy services (small business), pay for home improvements (small business). All of those small businesses are supported by discretionary spending from the middle class, that can't export their manufacturing, they need customers--money from investments and tax cuts for the rich didn't help them and won't.