# Can anyone defend taxing Capital Gains at only 15%? **URL:** \ **Category:** Great Debates\ **Created:** [October 27, 2010, 5:17pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555 "2010-10-27T17:17:11Z")\ **Posts on this page:** 15\ **Page:** 4
**Author:** ![Kearsen](https://avatars.discourse-cdn.com/v4/letter/k/82dd89/32.png) [@Kearsen](https://boards.straightdope.com/u/Kearsen)\ **Post date:** [October 28, 2010, 7:31pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/61 "2010-10-28T19:31:57Z")
> [@Jas09](#): > > 😕 After-tax income is the money you take home after you’ve paid income tax on it. As opposed to pre-tax income (say, 401(k) contributions, or Traditional IRA contributions, IIRC). > > My point being that capital gains income is just income, and it is given preferential treatment primarily because policy-makers have decided that it is in the best interest of the economy to incentivize capital investment (or, more cynically, policy-makers are more beholden to the capital investors than folks whose income is entirely salary). As far as I know it has nothing to do with it being “taxed twice”. His being taxed twice has to do with the money invested, not the money gained. The money he spent investing had indeed already been taxed. Now the cap gain tax is the tax on the income you gained from that initial investment. The amount is debatable ---
**Author:** ![Chronos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chronos/32/134_2.png) [@Chronos](https://boards.straightdope.com/u/Chronos)\ **Post date:** [October 28, 2010, 8:16pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/62 "2010-10-28T20:16:23Z")
> [@](#): > > Well if your stock value climbs to $200,000 from $100,000 over say 5 years, your capital gain is $100,000 and at 15% you’ve forked over $15,000. > > Your stock tanks and you are left with nothing. No net capital gain at all, in fact a net capital loss of $100,000. If you’ve paid the capital gains tax, then your stock can’t tank, because it’s not your stock any more: You’ve already sold it. And I imagine that if you did in fact sell your stock after it’d doubled in value, and shortly before it tanked to nothing, you’d be feeling pretty pleased with yourself. ---
**Author:** ![The\_Flying\_Dutchman](https://avatars.discourse-cdn.com/v4/letter/t/9fc348/32.png) [@The\_Flying\_Dutchman](https://boards.straightdope.com/u/The_Flying_Dutchman)\ **Post date:** [October 28, 2010, 8:39pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/63 "2010-10-28T20:39:19Z")
What if you sold the 200,000 of stock, immediately bought another stock for $200,000 which subsequently tanked. Would you pay capital gains taxes for the year you sold the stock ? ---
**Author:** ![SmartAlecCat](https://avatars.discourse-cdn.com/v4/letter/s/67e7ee/32.png) [@SmartAlecCat](https://boards.straightdope.com/u/SmartAlecCat)\ **Post date:** [October 28, 2010, 8:41pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/64 "2010-10-28T20:41:40Z")
Ok, here’s one for you: What if I agree to help you with your investment, but instead of you paying me, I agree to just take a percentage of your capital gain? Should my renumeration be taxed as income or as a capital gain? ---
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [October 28, 2010, 8:53pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/65 "2010-10-28T20:53:55Z")
> [@The\_Flying\_Dutchman](#): > > What if you sold the 200,000 of stock, immediately bought another stock for $200,000 which subsequently tanked. > > Would you pay capital gains taxes for the year you sold the stock ? Yes, but you could sell the second stock and offset the gains with the losses. ---
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [October 28, 2010, 8:55pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/66 "2010-10-28T20:55:48Z")
> [@SmartAlecCat](#): > > Ok, here’s one for you: > > What if I agree to help you with your investment, but instead of you paying me, I agree to just take a percentage of your capital gain? > > Should my renumeration be taxed as income or as a capital gain? What do you mean by helped with your investment? If you were a partner and added some capital to the investment then you would pay capital gains. If the help is inthe form of investment advice, then it would be income. ---
**Author:** ![The\_Flying\_Dutchman](https://avatars.discourse-cdn.com/v4/letter/t/9fc348/32.png) [@The\_Flying\_Dutchman](https://boards.straightdope.com/u/The_Flying_Dutchman)\ **Post date:** [October 28, 2010, 9:22pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/67 "2010-10-28T21:22:41Z")
> [@Gangster\_Octopus](#): > > Yes, but you could sell the second stock and offset the gains with the losses. What if the second stock goes to peanuts. Like GM. The you’ve got nothing to sell. If I’m getting how capital gains taxes work, only payable on liquidation, there appears to be an undue influence to stick with a falling stock in the hope of recovery rather than switching over to another risky stock,( they are all risky) which might very well be a benefit to society. Further more, if you liquidate $200,000 of stock, $100,000 capital gain, you have only $185,000 to reinvest into the private sector after capital gains. Doesn’t that limit investment in progress in futuristic ventures. Doesn’t that shrink the wealth generating capacity of the private sector? ---
**Author:** ![D\_Odds](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/d_odds/32/2882_2.png) [@D\_Odds](https://boards.straightdope.com/u/D_Odds)\ **Post date:** [October 28, 2010, 9:36pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/68 "2010-10-28T21:36:48Z")
> [@The\_Flying\_Dutchman](#): > > What if the second stock goes to peanuts. Like GM. The you’ve got nothing to sell. > > If I’m getting how capital gains taxes work, only payable on liquidation, there appears to be an undue influence to stick with a falling stock in the hope of recovery rather than switching over to another risky stock,( they are all risky) which might very well be a benefit to society. That depends. If you are only dealing with one stock (or a portfolio in total), then there are carryforward (and I can’t remember about carryback) provisions to income tax law that will allow you offset future income (carryforward), or refile past income to lower taxes from previous years (carryback). If you are talking about a single stock inside of a portfolio of stocks, then you net all _realized_ capital losses and gains for the tax year. If your two transactions occur during the same tax year, they will offset. It is not uncommon for investors with large capital losses in some issues to realize gains in other issues to lessen the tax burden of closing those positions. Were you sitting on a big gain that you didn’t want to sell because of the taxes when GM tanked? Perfect opportunity to cash out. > [@](#): > > Further more, if you liquidate $200,000 of stock, $100,000 capital gain, you have only $185,000 to reinvest into the private sector after capital gains. > > Doesn’t that limit investment in progress in futuristic ventures. Doesn’t that shrink the wealth generating capacity of the private sector? That’s the opposite of the OPs argument, which argued for a greater tax on all capital gains. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [October 28, 2010, 9:42pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/69 "2010-10-28T21:42:24Z")
> [@SmartAlecCat](#): > > Ok, here’s one for you: > > What if I agree to help you with your investment, but instead of you paying me, I agree to just take a percentage of your capital gain? > > Should my renumeration be taxed as income or as a capital gain? This is the situation that hedge fund managers are currently in. They are paid a fee, typically 2% of the funds being managed, plus 20% of any gains. They currently pay capital gains tax on this, not income tax. For more information, Google “carried interest”. ---
**Author:** ![SmartAlecCat](https://avatars.discourse-cdn.com/v4/letter/s/67e7ee/32.png) [@SmartAlecCat](https://boards.straightdope.com/u/SmartAlecCat)\ **Post date:** [October 28, 2010, 9:52pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/70 "2010-10-28T21:52:25Z")
> [@amarone](#): > > This is the situation that hedge fund managers are currently in. They are paid a fee, typically 2% of the funds being managed, plus 20% of any gains. They currently pay capital gains tax on this, not income tax. For more information, Google “carried interest”. Doesn’t that seem a little absurd that they only pay 15% of the millions of $$ they got for doing their job (I’d call that ‘income’)? ---
**Author:** ![flickster](https://avatars.discourse-cdn.com/v4/letter/f/7bcc69/32.png) [@flickster](https://boards.straightdope.com/u/flickster)\ **Post date:** [October 28, 2010, 10:40pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/71 "2010-10-28T22:40:23Z")
> [@Gangster\_Octopus](#): > > Yes, but you could sell the second stock and offset the gains with the losses. I think you would have to retain the tanked stock for a period of 1 year prior to being able to write off the loss. As for the OP: I fail to understand the drive to punish those who achieve with punitive taxation. We should be providing every incentive for financial investment instead of punishing those that do. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [October 28, 2010, 10:54pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/72 "2010-10-28T22:54:10Z")
> [@SmartAlecCat](#): > > Doesn’t that seem a little absurd that they only pay 15% of the millions of $$ they got for doing their job (I’d call that ‘income’)? Yup. There have been proposals to change this loophole and I do not know where they stand. ---
**Author:** ![Kearsen](https://avatars.discourse-cdn.com/v4/letter/k/82dd89/32.png) [@Kearsen](https://boards.straightdope.com/u/Kearsen)\ **Post date:** [October 29, 2010, 3:19pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/73 "2010-10-29T15:19:00Z")
> [@SmartAlecCat](#): > > Doesn’t that seem a little absurd that they only pay 15% of the millions of $$ they got for doing their job (I’d call that ‘income’)? Isn’t 15% the amount of tax that is paid by 'employer and employee" It is normally split between the 2 at 7.5% each so I can see why they would pay the entire 15%. The question is why you expect them to pay more? ---
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [October 29, 2010, 3:45pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/74 "2010-10-29T15:45:23Z")
> [@Kearsen](#): > > Isn’t 15% the amount of tax that is paid by 'employer and employee" > It is normally split between the 2 at 7.5% each so I can see why they would pay the entire 15%. > The question is why you expect them to pay more? That’s the payroll tax for Social Security and I believe it is 6.25% for employee and employer. ---
**Author:** ![Kearsen](https://avatars.discourse-cdn.com/v4/letter/k/82dd89/32.png) [@Kearsen](https://boards.straightdope.com/u/Kearsen)\ **Post date:** [October 29, 2010, 3:47pm UTC](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555/75 "2010-10-29T15:47:49Z")
> [@Gangster\_Octopus](#): > > That’s the payroll tax for Social Security and I believe it is 6.25% for employee and employer. Gotcha. [Previous page](https://boards.straightdope.com/t/can-anyone-defend-taxing-capital-gains-at-only-15/558555.md?page=3)