# Democrats' latest tax proposal **URL:** \ **Category:** Great Debates\ **Created:** [January 17, 2015, 4:53pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075 "2015-01-17T16:53:53Z")\ **Posts on this page:** 20\ **Page:** 15
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 23, 2015, 1:28am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/281 "2015-01-23T01:28:47Z")
We’ve gotten far afield from the OP, and I’ve participated in the distraction. My understanding of the Plan is that the proposed increase in the capital gains rate (and the removal of tax advantage from college savings plans mentioned above) is to offset expenses or revenue decrease elsewhere. I at least approve of the Dems trying to keep the changes a net zero on the balance sheet. I don’t feel good about a rate increase just for giggles, but I haven’t compared it to the other proposed changes. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [January 23, 2015, 1:30am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/282 "2015-01-23T01:30:35Z")
> [@D\_Anconia](#): > > That’s not what you said in posts 212, 228, or 233. > > You said risk-free. No such investment exists. If we’re talking about principal risk, then then the rate of the 3 month treasury is often billed as the **risk free** rate of return. You’re talking past each other. The 3 month US treasury is as close to zero principal risk as you’re going to get. It’s so close to zero that there is no practical difference between that and a theoretical risk free investment. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [January 23, 2015, 1:33am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/283 "2015-01-23T01:33:09Z")
> [@Bone](#): > > If we’re talking about principal risk, then then the rate of the 3 month treasury is often billed as the **risk free** rate of return. You’re talking past each other. > > The 3 month US treasury is as close to zero principal risk as you’re going to get. It’s so close to zero that there is no practical difference between that and a theoretical risk free investment. And its yield is as close to zero as its risk. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [January 23, 2015, 1:42am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/284 "2015-01-23T01:42:32Z")
> [@Terr](#): > > And its yield is as close to zero as its risk. What? 0.03% is nothing to scoff at! Invest about $15,000 and after a year you can probably get a cup of coffee! ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 23, 2015, 1:47am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/285 "2015-01-23T01:47:39Z")
> [@iiandyiiii](#): > > But that’s not what I was saying – the question was about the money already earned through investments once someone is ready to retire… if you invested in index funds from, say, 1977 to 2007, with a contribution each month, your overall return was very, very good. And then when you retire in 2007 (or even 2009), even if you lost a chunk of those very large returns, you can invest with no risk in bonds, CDs, and the like until you die. > > Overall, that’s a worst case scenario – and the gains would still be substantial. So the risk is/was negligible, as long as one didn’t invest in risky stocks and funds. In other words you are timing the market. If you did it in 2009 the wrong way. If you put everything in bonds in 2009 you locked in your losses. If you kept it in the market, or at least part of it, today you’ll have done very well. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 23, 2015, 1:58am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/286 "2015-01-23T01:58:40Z")
> [@iiandyiiii](#): > > If I earn or inherit, say, $10 million or $100 million, it would be trivially easy (and risk-free) to live comfortably off the investment returns. Bonds and CDs alone would yield a very, very comfortable income. > > This is what I mean by risk-free investing. Becoming rich is hard (unless you inherit it). Staying rich is very, very easy… at least as long as you’re not a complete idiot. Yeah, if you start with enough you can be sure not to lose it all, or lose it only very slowly. But if you have $10 million you should be able to live more than comfortably. Mrs. Heinz Kerry invests in Pittsburgh munies out of loyalty to Pittsburgh - she knows she is leaving money on the table. The market more or less equalizes returns. Higher yield, higher risk, lower risk, lower yield. People who bought mortgage securities during the housing bubble thought they had beat this rule - look what happened to them. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [January 23, 2015, 2:05am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/287 "2015-01-23T02:05:25Z")
> [@Bone](#): > > What? 0.03% is nothing to scoff at! Invest about $15,000 and after a year you can probably get a cup of coffee! Right. Which is why iandy’s assertion that little old ladies can live off the interest on their bonds is laughable. The difference between 4% and .03 percent is enormous. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 23, 2015, 2:20am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/288 "2015-01-23T02:20:03Z")
> [@iiandyiiii](#): > > I said ‘for all intents and purposes’ it was risk-free, or negligible-risk. You think I’m underestimating the risk, I think you’re overestimating the risk. We got it. > > I meant fixed income. The coupon income is part of the fixed income, and that income won’t change – so unless the retiree drastically changes his/her lifestyle, there’s (virtually) no risk for a T-bond/T-bill to his/her future. > > The larger point is that while it’s very difficult to get rich, it’s very easy to stay rich, if one’s chief goal is to maintain their wealth (rather than grow it). For some reason I think you didn’t live through the '80s with \> 10% inflation. If you had I think you’d understand the risk of inflation a lot better. People today are complaining that they can’t get a decent return on bonds, and for good reason. you can’t. If inflation suddenly hit 12%, your 4% return would look pretty feeble. In the other direction, my college loans from the '70s looked pretty small when I paid them off after the inflation of the '80s. I know of a very safe money market fund paying basically 0% interest. (In the particular circumstances, this is a feature.) Try living off that safe investment. The market balances off return and risk. If you don’t understand that, you don’t understand anything about investing. BTW, rich people don’t stay rich by investing in T-bills. They stay rich by having a portfolio diversified over various investments and various risk levels. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 23, 2015, 2:21am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/289 "2015-01-23T02:21:58Z")
> [@D\_Anconia](#): > > Right. Which is why iandy’s assertion that little old ladies can live off the interest on their bonds is laughable. The difference between 4% and .03 percent is enormous. You don’t see a lot of articles about retirees raking it in from their T-bills, do you? Current standard advice is to stay invested in the market even after you retire. Move some of your money to safer investments, but not all of it. ---
**Author:** ![HMS\_Irruncible](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hms_irruncible/32/7394_2.png) [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)\ **Post date:** [January 23, 2015, 2:30am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/290 "2015-01-23T02:30:21Z")
I can never understand why we don’t just implement a hefty wealth/inheritance tax, and get rid of all income/capital gains taxes. Especially corporate income tax… why tax earnings that don’t accrue to a person? I say, earn all you want, and pay tax only if you sit on those gains rather than spending or investing them. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 23, 2015, 5:47am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/291 "2015-01-23T05:47:26Z")
> [@HMS\_Irruncible](#): > > I can never understand why we don’t just implement a hefty wealth/inheritance tax, and get rid of all income/capital gains taxes. Especially corporate income tax… why tax earnings that don’t accrue to a person? I say, earn all you want, and pay tax only if you sit on those gains rather than spending or investing them. When would you do it? When the market is high? And get nothing when the market goes down and you need the money? Of course capital gains tax collection is reduced in a downturn, which is one explanation for deficits then, but you don’t want to intensify the effect. California reduced the amount we get from stable tax sources like property taxes in favor of less stable sources like income tax and sales tax - and it has been a disaster. Anyhow an inheritance tax is not going to replace the capital gains tax unless you make it very high, make the start point really low, and start killing rich people. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [January 23, 2015, 3:32pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/292 "2015-01-23T15:32:14Z")
> [@HMS\_Irruncible](#): > > … why tax earnings that don’t accrue to a person? Shareholders are people, you know. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 23, 2015, 3:55pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/293 "2015-01-23T15:55:53Z")
Have we had a link here yet to a good summary of the tax plan? Everything I’m finding is just news articles talking about pieces of it. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [January 23, 2015, 3:59pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/294 "2015-01-23T15:59:55Z")
You can read the Dems’ own (well, the Democrats on the House Budget Committee, anyway) summary of the plan [here](http://democrats.budget.house.gov/sites/democrats.budget.house.gov/files/fy15-dem-budget-report.pdf). ---
**Author:** ![HMS\_Irruncible](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hms_irruncible/32/7394_2.png) [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)\ **Post date:** [January 23, 2015, 4:50pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/295 "2015-01-23T16:50:33Z")
> [@Voyager](#): > > When would you do it? When the market is high? And get nothing when the market goes down and you need the money? Of course capital gains tax collection is reduced in a downturn, which is one explanation for deficits then, but you don’t want to intensify the effect. > California reduced the amount we get from stable tax sources like property taxes in favor of less stable sources like income tax and sales tax - and it has been a disaster. > > Anyhow an inheritance tax is not going to replace the capital gains tax unless you make it very high, make the start point really low, and start killing rich people. The way I phrased it was unclear… I meant an actual wealth tax, not simply an inheritance tax. I think your post makes my point when you mention property taxes, which of course are a type of wealth tax. ---
**Author:** ![HMS\_Irruncible](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hms_irruncible/32/7394_2.png) [@HMS\_Irruncible](https://boards.straightdope.com/u/HMS_Irruncible)\ **Post date:** [January 23, 2015, 4:54pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/296 "2015-01-23T16:54:12Z")
> [@Really\_Not\_All\_That\_Bright](#): > > Shareholders are people, you know. My fault for not making clear that I was talking primarily about a wealth tax (though I did mention an inheritance tax, it’s the wealth tax I find most interesting). You are, I assume, correctly pointing out that shareholders would dodge income and capital gains taxes, but they’d owe a wealth tax on the shares they own. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 23, 2015, 6:08pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/297 "2015-01-23T18:08:37Z")
> [@HMS\_Irruncible](#): > > My fault for not making clear that I was talking primarily about a wealth tax (though I did mention an inheritance tax, it’s the wealth tax I find most interesting). You are, I assume, correctly pointing out that shareholders would dodge income and capital gains taxes, but they’d owe a wealth tax on the shares they own. Most of my comments refer to the wealth tax part of it. I agree that property taxes are a form of wealth tax, but most times property values are much more stable than investment values. And reassessments happen relatively infrequently. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 28, 2015, 1:19am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/298 "2015-01-28T01:19:37Z")
> [@D\_Anconia](#): > > It’s not feasible. An investment of $10 million in CDs would require 40 different banks (not branches) to get FDIC insurance. It’s totally feasible. I just searched for $200,000 FDIC-insured CDs and pulled up options at some thirty different banks. Other banks pop up when I search for smaller amounts. I can buy CDs without opening separate accounts with each bank. And even if I can’t, I can probably afford to pay a personal assistant to do it for me if I’ve got $10M. Hell, you can just use [CDARS](http://en.wikipedia.org/wiki/Certificate_of_Deposit_Account_Registry_Service). You’re going to be doing something like this anyway unless the money is literally under your pillow. Rates are ~2.8% for 10-year CDs. It’s not something I’m interested in for my own investments, but you could do it. > [@Really\_Not\_All\_That\_Bright](#): > > You can read the Dems’ own (well, the Democrats on the House Budget Committee, anyway) summary of the plan [here](http://democrats.budget.house.gov/sites/democrats.budget.house.gov/files/fy15-dem-budget-report.pdf). Thanks. I’m still on the hunt, though; this doesn’t list all the changes from the previous fiscal year, and doesn’t even mention many of the proposed changes (e.g. taxing college savings plans.) ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [January 28, 2015, 1:28am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/299 "2015-01-28T01:28:36Z")
> [@Ruken](#): > > Rates are ~2.8% for 10-year CDs. It’s not something I’m interested in for my own investments, but you could do it. So let’s see. You lock your money in for 10 years at 2.8%. Inflation rate for the last 10 years is [right round 2%](http://www.usinflationcalculator.com/inflation/current-inflation-rates/), so for ease of calculation let’s say, optimistically, that it will stay low for the next 10 years at around 1.8%. So your real rate of return is 1%. On $10M that would be 100K/year. That’s before taxes, of course. And with the optimistic future inflation rate. Do you really think 100K/year annual spending income, before taxes, is something that would be attractive to someone worth $10M? ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 28, 2015, 2:20am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/300 "2015-01-28T02:20:02Z")
> [@Terr](#): > > So let’s see. You lock your money in for 10 years at 2.8%. Inflation rate for the last 10 years is [right round 2%](http://www.usinflationcalculator.com/inflation/current-inflation-rates/), so for ease of calculation let’s say, optimistically, that it will stay low for the next 10 years at around 1.8%. So your real rate of return is 1%. On $10M that would be 100K/year. That’s before taxes, of course. And with the optimistic future inflation rate. > > Do you really think 100K/year annual spending income, before taxes, is something that would be attractive to someone worth $10M? Did I claim otherwise? The poster said it’s not feasible to cover everything by FDIC, when people do it all the time. [Previous page](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075.md?page=14) [Next page](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075.md?page=16)