Think about it. If, one year ago, you had a $2mm portfolio invested in the S&P 500, you will keep virtually none of the salary you earned this year (assuming you’re near the top tax bracket).

EDIT: assumes you are realizing your gains, rather than just holding and hoping the democrats don’t sweep the tax rates higher

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42335790)

My point is that the opportunity cost of working has now gone up, since my excess income just flowed into investments whose payoffs are now diminished.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338496)

So let's say a bigshot like you earns $1M in 2021, and has $5M in the market, with a basis (meaning the original acquisition price) of $4M.

Ignoring the lower marginal rates on the first $400K, let's say you pay 50% between feds and state. So you keep $500K in your checking account at the end of the year from your long-haul trucking practice.

If you don't liquidate your market holdings, you don't pay anything. But let's say you are confident the market is going to crater once all incentive for work and investment is eliminated by Biden, so you decide to cash out your $5M. You have a $4M basis, so you keep that $4M. You have a $1M capital gain, so you pay $500K when you cash out.

Make sense? Your tax rate is 50% -- 50% of your earned income, and 50% of your capital gain. You don't add those together and say that your tax rate was 100%.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338526)

For those who have **earned income** $1m or over, then their capital gains rate will be 50%.

In other words, if you make $100k per year at your job but for some oddball reason are taking $2m in capital gains each year (extreme scenario just for illustration), you wouldn't be subject to the 50% super tax on the $2m cap gain--you'd just pay it at the usual rate, which in this case would be 15%.

Conversely, if you earned $1.01m per year, even if you took a paltry capital gain (say 5k), that 5k capital gain would be taxed at 50%.

Am I misreading the proposal?

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338546)

"The White House plan would instead tax capital gains as ordinary income, at a top proposed rate of 39.6%. It would apply to those with more than $1 million in annual income, according to Bloomberg."

https://www.cnbc.com/2021/04/22/how-the-biden-capital-gains-tax-proposal-would-hit-the-wealthy.html

Taxes are confusing, and are easily mis-explained to rile up proles who aren't close to being subject to them.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338581)

https://www.bloomberg.com/news/articles/2021-04-22/biden-to-propose-capital-gains-tax-as-high-as-43-4-for-wealthy?sref=i3mD6rA5

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42339279)

This would also make the tax easy to avoid - all you have to do is not have any earned income and you can cash out billions of dollars at the old rates.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42339248)

A company you own is bought, and part of it comes as a cash consideration. You wind up with $999k in capital gains. If capital gains were calculated marginally, like earned income taxes, you would expect to pay 0% on the first $30k, 15% on the next $60k, and 20% beyond that, up to $1mm, after which you would start paying 40%.

But Biden didn’t propose that.

Biden proposed that, if the sum of all your sources of income are greater than $1mm (short term passive, long term passive, earned income, etc), you pay 40% on long term passive and capital gains. Even if we are being generous and assuming that he is going to tranche capital gains so that you only owe 40% on each dollar over $1mm, your current income now pushes your total capital gains over $1mm, where they will be taxed at 40%. And the income you earned to get there is taxed at 50%. If you are $100k, you owe k50k in taxes, plus $40k in capital gains. To be fair, the marginal increase in capital gains is only 20%, not the full 40%, but that still comes out to a 70% marginal effective rate.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338591)

if the sum of all your sources of income are greater than $1mm (short term passive, long term passive, earned income, etc)

Are you sure about this:

{claim that if condition is met, all LTCG would be at 40%}

Those are two critical elements that need to be understood about the proposal.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338609)

"The White House plan would instead tax capital gains as ordinary income, at a top proposed rate of 39.6%. It would apply to those with more than $1 million in annual income, according to Bloomberg."

You'd pay 39.6% on your cap gain (there are some Medicare or Medicaid surtaxes of a few percent also). I highly doubt they would apply the 39.6% rate to your $100K earned income, but I could be wrong about this; not sure whether the details have been fleshed out. But even if they did, you'd pay 39.6 on your earned income, and 39.6 on your cap gain, for a total effective rate of 39.6%. What's so hard about this?

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338635)

I’m basing my assumptions on the original BBG report and the NYT follow up. Neither indicate that capital gains will be treated exactly like regular income, just that the top marginal rate will be the same. You clearly just googled around until you had a second-hand source that said what you wanted to hear. The original source for your citation doesn’t back you up.

https://news.bloombergtax.com/daily-tax-report-state/biden-to-propose-capital-gains-tax-as-high-as-43-4-for-wealthy

https://www.nytimes.com/2021/04/22/business/economy/biden-taxes.html

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338844)

https://en.wikipedia.org/wiki/Not_even_wrong

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338678)

But wealthy people evaluating a new investment are absolutely going to be disincentivized because of this.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42335810)

I’ll take my money, horde it, and Tommy T it up and enjoy my life in some third-world country rather than risk it in a business and kill myself getting it off the ground and have 50+% go to people who didn’t do anything to create it and who actively hate me.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42335831)

Remember how on Mad Men the characters start buying real estate as they get rich? That's because there was a rule that you could basically deduct 100% of the amount spent on acquiring real estate in the tax year in which you did it. No 27 year depreciation crap. You make a million bucks, you spend $950,000 of it on buying investment properties, your taxable income is 50k. That would have been so 180.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42337092)

no, i don't remember this at all, except that they move out of their landlord-owned apartment when thy can afford to live in a house, just like happens now

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42337198)

In the 1950s, your business could pay your country club fees, pay for your car, pay for other perks like your kids education, soirées with other business people, etc. and all of it was completely tax deductible for the business, with no need to be reported by the beneficiary. Once you account for all the random business perks, the marginal tax rates were significantly lower than 91%.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42337529)

Something like 65% of kids are in households that get public assistance today. But also government workers and government contractors. There's been a massive migration out of the productive labor force.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42340131)

this informs his thesis that it incentivizes not working, as if suddenly by quitting his job he won't pay that cap gains rate

also i don't understand how his one-year cap gains on 2M invested will dwarf his apparently >1M annual salary that it will increase his marginal tax rate to 90%

nothing about his OP makes sense

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42337180)

Assume you have $675k in realized capital gains and long term passive income coming in FY2022. You're trying to decide whether you should quit your current consulting gig, where you earn $330k/year.

If you were to keep working, your total pre-tax income is $1.005mm. Since the Biden rule stipulates that if your TOTAL take home (not just capital gains / long term passive income) is over $1mm, you get bumped up to a 40% tax bracket on capital gains / long term passive. You will owe 50% of you $305k salary, plus 40% of your $675k capital gains, coming to a total of $435k in taxes.

If you were to quit your job, you would not cross the $1mm threshold, and you would only owe 20% on your long term capital gains, for a total of $135k.

By working, you would earn another $305k of earned income, but pay an additional $300k in taxes, coming out to a net effective marginal tax rate on your income of 90%.

Yes, i get it. Taxes are marginal. Maybe you wouldn't owe 40% on the first $1mm, just every dollar after that, etc. The point is that the tax rate has gone up enough that the difference in rates between tranches, and the combining of income and capital gains to produce income thresholds, make it more appealing to simply not work and allocate more cash each year out of capital gains than it is to continue slaving away and have the marginal advantage of such work be minuscule.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338417)

I re-ran the math, and my example is correct.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338848)

one day they'll show their true colors and I will respond by organizing a gender reveal party at the nearest federal building

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42337546)

Might keep them away for a while, at least until the Palestinian wing of the DNC takes a sweep

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42337547)

In reality, we have no idea how this is going to work.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42337568)

OMG THIS IS TERRIBLE CAN ANY1 CONFIRM

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42338462)

"just pay 70% marginal tax rate, whats the big deal!@"

fuck you faggot.

(http://www.autoadmit.com/thread.php?thread_id=4818024&forum_id=2#42339276)