By and large, it is not possible to invest rather than playing the market. IPOs and other share issues are rare events, and most investors have no chance at all of investing in those companies. When you buy shares on the market, whether directly or through a mutual fund, you aren’t buying those shares from the company they represent, but rather from another person like yourself, and none of the money you pay goes to the company or benefits it in any substantial way. It’s just a bet, where the previous owner is betting that it is better to sell those shares and you are betting that it is better to buy those shares.
If that’s the case, what is the economic benefit point of favorable tax treatment for gains associated with those wagers? Why should we care whether you hold those shares for ten minutes or ten years? Why should we encourage you to make more bets?
I would say that the Betsy DeVos yacht story really did not play well with my rural extended family. I believe the claim of “teachers pay out of pocket for school supplies, and she has 10 yachts?”
It is getting harder and harder for them to hide the inequality happening right now.
Secondary markets in stocks are not supposed to benefit the company. They already got their benefit when they sold the shares. Now all that’s left is their obligations to the shareholder.
It’s not necessarily a zero sum game as you imply. Someone who is 65 may prefer cash now to future growth, and someone who is 35 may prefer future growth to cash now. It’s possible for both of them to come out ahead even if they both know exactly how the stock will perform in the future.
Sure, that’s possible, but irrelevant to the point that those stock purchases are not investments in the company, and arguments for favorable tax treatment on the grounds of encouraging investment are just deception. Rich people want favorable tax treatment for the way they accumulate money, e.g. buying and selling things and inheriting money from their parents. That’s it.
I think the point was that it will encourage individuals to invest, i.e. set aside money long-term, rather than use the money on consumption or short term trading.
You can argue that people don’t need any more encouragement to invest, but that’s different from arguing that it wouldn’t affect investment.
Most people can’t make long-term investments with cash. If they’re lucky, they can buy a home with a mortgage, and/or set aside money from each paycheck into their 401k, both of which already have advantageous tax treatment. The people who can make long-term investments with cash, cash they don’t need now, are rich people, and rich people invest anyway. Why should rich people get advantageous tax treatment to do what they would do anyway?
Because even if someone is already planning to invest unused cash, this makes it more likely that they will make longer-term investments as opposed to short term trading. Which was the original point above. Whether that’s a worthwhile goal is a separate issue.
I really think this is some of the best ammo that Democrats have going into midterms and the next Presidential election with the people swayed last time by Trump’s rhetoric. Showing specifically how rich many of these people are should help change some minds.
There are excellent arguments for indexing capital gains to inflation. For example somebody who bought a house for 250K say 20 years ago and is now retired and sells it for $500K, the real after inflation gain is only $115K. So taxing them on inflation is unfair. There also decent argument for encouraging home ownership, by providing tax incentives like exempting the first $250K in capital gains on the sale of your primary resident. There are also good argument for encouraging saving and riskier investments by taxing long term investment at lower rates. However as you point we don’t need multiple systems to do they same thing.
Having all three is basically giving wealthy people a winning trifecta ticket to becoming richer.
No ordinary person pays taxes on the sale of a house. The sale of a home you actually lived in is tax free for up to $250k in profit for individuals and up to $500k in profit for couples. The only people who pay capital gains taxes on the sale of houses are rich people who make commercial home investments. Why do they need incentives to do what they would do anyway?
That entirely depends on the market you bought into. It’s quite possible for a middle class family that purchased a home in Seattle 20 years ago to have made more than $250K unadjusted.
You can only claim that exemption once though, so if you sell a house and don’t buy another you have to either use the exemption or pay the tax on it.
Also, that exemption may not mean much in some markets. We recently sold my aunt’s house in the SF Bay Area. She had owned it since the early 60’s, probably paid $30k back then. It sold for $1.65 million, in a contested auction. Now in this case the money is going to her heirs but had she sold it before her death that exemption wouldn’t have meant much.
You don’t have to use the exemption at all when you sell a house and buy a new one in the same tax year. Most people never pay any tax on the profit of a home sale, because they only sell a home to buy a new one, or when they retire when they use the exemption. Tax on the proceeds from selling a house is almost exclusively a rich person’s problem.
Agreed. If you buy another home you don’t have to worry about it. It is only when you sell and don’t buy another residence.
Again, it depends on the market and how long you have owned the home. My current home has doubled in value but I am still fine because of the exemption. That is because of the market I am in. But in any major market that may not be true.
Isn’t that almost exactly what I said in the quote you reference? You reply without reading sometimes don’t you?
I didn’t think so? It used to be once lifetime but when the limit was raised in the '90s I thought it was also changed to allow this for primary residence every 5 yrs or something similar.
Yes, it was, sorry. But what’s your objection again? I said almost exlusively a rich person’s problem. You seem to agree that most people don’t have to pay the tax, and that when they do, it’s because of the big gain. Are we really disagreeing?
