# 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:** 17
**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 29, 2015, 6:33am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/321 "2015-01-29T06:33:26Z")
> [@Nothar](#): > > The Net Investment Income Tax ends up being a backdoor increase in capital gains rates that most people are still unaware of. It is a genius move politically for the democrats as they do not get as much flack for passing a tax that most Americans do not know about or how it works and do not have to get flack for raising capital gains rates further. In the future, if the Democrats are able to get back legislative power, it would not surprise me if all future adjustments to capital gains rates were run through the NIIT instead of the base rate to provide them cover politically since it has worked so well. Thanks for the information. In the time I had I couldn’t find anything newer than 2013. We’ll see if investment crashes because of this new onerous tax burden. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 29, 2015, 12:11pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/322 "2015-01-29T12:11:48Z")
> [@Voyager](#): > > Thanks for the information. In the time I had I couldn’t find anything newer than 2013. We’ll see if investment crashes because of this new onerous tax burden. Do you not allocate assets based on risk and expected return? Would you not reallocate if expected returns decreased? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [January 29, 2015, 12:21pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/323 "2015-01-29T12:21:28Z")
> [@Ruken](#): > > Do you not allocate assets based on risk and expected return? Would you not reallocate if expected returns decreased? Reallocate where? If you are changing allocation based on changes in return due to a tax rate increase, where are you going to move your capital to get better return, that also is beyond the reach of the new tax? Bonds? A savings account? The mattress? ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 29, 2015, 12:29pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/324 "2015-01-29T12:29:57Z")
> [@Fear\_Itself](#): > > Reallocate where? If you are changing allocation based on changes in return due to a tax rate increase, where are you going to move your capital to get better return, that also is beyond the reach of the new tax? Bonds? A savings account? The mattress? You don’t get to move your capital to get a better return, because there isn’t one. You move it to manage your risk based on expected return. If the level of risk is no longer justified, then this is managed by reducing exposure. So yes, bonds and cash equivalents. Or going from riskier ventures to various securities. Don’t you do this? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [January 29, 2015, 12:32pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/325 "2015-01-29T12:32:08Z")
> [@Ruken](#): > > You don’t get to move your capital to get a better return, because there isn’t one. You move it to manage your risk based on expected return. If the level of risk is no longer justified, then this is managed by reducing exposure. So yes, bonds and cash equivalents. Or going from riskier ventures to various securities. Don’t you do this? How does raising the tax rate on all capital gains change the risk? You are not going to avoid the tax increase by moving the deck chairs on the Titanic. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 29, 2015, 12:52pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/326 "2015-01-29T12:52:38Z")
> [@Fear\_Itself](#): > > How does raising the tax rate on all capital gains change the risk? You are not going to avoid the tax increase by moving the deck chairs on the Titanic. The rate doesn’t change the risk directly. It makes it less worthwhile. I ask again, because this will tell the rest of us how much you understand here: If your tax rate goes up, are you going to leave your allocation exactly the same as it is now? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [January 29, 2015, 1:14pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/327 "2015-01-29T13:14:38Z")
> [@Ruken](#): > > The rate doesn’t change the risk directly. It makes it less worthwhile. I ask again, because this will tell the rest of us how much you understand here: If your tax rate goes up, are you going to leave your allocation exactly the same as it is now? Yes, because reallocation does not change risk, and it does not avoid the tax, unless I take it out of all investments all together, and then I have no return at all. Seems like a drastic measure just to make a point about a tax increase. ---
**Author:** ![doorhinge](https://avatars.discourse-cdn.com/v4/letter/d/a5b964/32.png) [@doorhinge](https://boards.straightdope.com/u/doorhinge)\ **Post date:** [January 29, 2015, 2:55pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/328 "2015-01-29T14:55:39Z")
> [@Voyager](#): > > Thanks for the information. In the time I had I couldn’t find anything newer than 2013. We’ll see if investment crashes because of this new onerous tax burden. Only if this new onerous tax burden ever passes thru the current Congress. What are the chances of that happening? Zero? ---
**Author:** ![BobLibDem](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/boblibdem/32/3149_2.png) [@BobLibDem](https://boards.straightdope.com/u/BobLibDem)\ **Post date:** [January 29, 2015, 3:04pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/329 "2015-01-29T15:04:05Z")
> [@doorhinge](#): > > Only if this new onerous tax burden ever passes thru the current Congress. What are the chances of that happening? Zero? Is there any tax increase that you would not refer to as onerous? ---
**Author:** ![doorhinge](https://avatars.discourse-cdn.com/v4/letter/d/a5b964/32.png) [@doorhinge](https://boards.straightdope.com/u/doorhinge)\ **Post date:** [January 29, 2015, 3:40pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/330 "2015-01-29T15:40:04Z")
_for historical reference_ - > [@Voyager](#): > > Thanks for the information. In the time I had I couldn’t find anything newer than 2013. We’ll see if investment crashes because of this **new onerous tax burden**. > [@doorhinge](#): > > Only if this **new onerous tax burden** ever passes thru the current Congress. What are the chances of that happening? Zero? > [@BobLibDem](#): > > Is there any tax increase that you would not refer to as **onerous**? (Bold and underline added) I chose to use the same wording as **Voyager** to minimize the possibility of confusion. But to answer your question - No. _ONEROUS - › causing great difficulty or trouble: The tax bill was aimed at lifting the onerous tax burden from the backs of the middle class._ > **[onerous](https://dictionary.cambridge.org/dictionary/english/onerous)** > > 1. difficult to do or needing a lot of effort: 2. difficult to do or needing a… I believe all tax increases cause great difficulty to the taxpayers and tax laws are a lot of trouble. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 29, 2015, 6:02pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/331 "2015-01-29T18:02:56Z")
> [@Sam\_Stone](#): > > Any plan to tax capital and distribute it for consumption diminishes the capacity of a capitalist country to innovate and engage in risky investment with potentially great returns. > > Where exactly was I going to get any funds to invest in anything that could give me capital gains that I could offset with those losses? When small businesses fail and their capital loss is realized, the owner is usually broke and will not be making any more capital gains. . Any plan where capital gains are taxed differently than other income bring in tax evasion schemes, and is unfair to the wage-earners. Again, now for the fourth time-\*\* you do NOT need capital gains to claim capital losses. \*\*You get to offset ordinary income with your losses- with limitations. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [January 29, 2015, 6:34pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/332 "2015-01-29T18:34:12Z")
> [@DrDeth](#): > > Again, now for the fourth time-\*\* you do NOT need capital gains to claim capital losses. \*\*You get to offset ordinary income with your losses- with limitations. The $3K limitation is a crippling one. It makes the offset meaningless. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 29, 2015, 6:38pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/333 "2015-01-29T18:38:40Z")
> [@Terr](#): > > The $3K limitation is a crippling one. It makes the offset meaningless. No, it’s not. And many folks have some sort of CG from other sources. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [January 29, 2015, 6:42pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/334 "2015-01-29T18:42:11Z")
> [@DrDeth](#): > > No, it’s not. And many folks have some sort of CG from other sources. Yes, like dividends, right? Except you can’t offset dividend capital gains by capital losses. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 29, 2015, 6:47pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/335 "2015-01-29T18:47:19Z")
> [@Terr](#): > > Yes, like dividends, right? Except you can’t offset dividend capital gains by capital losses. Yeah, and that’s because dividends arent Capital Gains. :rolleyes: But stock sales are. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [January 29, 2015, 6:53pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/336 "2015-01-29T18:53:57Z")
> [@DrDeth](#): > > Yeah, and that’s because dividends arent Capital Gains. :rolleyes: But stock sales are. Dividends certainly get taxed as capital gains. ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [January 29, 2015, 7:05pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/337 "2015-01-29T19:05:00Z")
> [@doorhinge](#): > > Only if this new onerous tax burden ever passes thru the current Congress. What are the chances of that happening? Zero? The tax burden being discussed (the NIIT) has already passed as part of the ACA. It went in to effect Jan 1 2013. More info here: [Questions and Answers on the Net Investment Income Tax | Internal Revenue Service](http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs) If it has caused a massive change in investor behavior over the last two years, I certainly haven’t heard about it (or seen it in the stock market). ---
**Author:** ![Jas09](https://avatars.discourse-cdn.com/v4/letter/j/d07c76/32.png) [@Jas09](https://boards.straightdope.com/u/Jas09)\ **Post date:** [January 29, 2015, 7:11pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/338 "2015-01-29T19:11:53Z")
> [@Terr](#): > > Dividends certainly get taxed as capital gains. As you no doubt know, some do and some don’t. Qualified dividends are taxed at the same rate as capital gains. Non-qualified dividends are taxed at your marginal income tax rate. Qualified dividends can not be offset with capital losses, but if you still have a capital loss after cancelling any gains (or a carryover loss with no gains) you can offset up to $3K of non-qualified dividends (or other ordinary income, which amounts to the same thing). As to the 529 plan, I think the key point to remember is that absent a state tax break a 529 plan is likely a bad financial decision for any individual or family that isn’t already maximizing all of the other tax-advantaged space available (401(k) plans, IRAs, HSAs). And a family is already maximizing those spaces then an additional investment tax break isn’t really something they need. Expanding the AOTC would have been a much bigger benefit to the “middle class”. Removing the tax-free compounding benefit may have actually encouraged families saving for college to make sounder financial decisions. But alas, the political imagery was too powerful. The much bigger deal, and a loophole that really could stand closing, is the step-up basis for inherited capital assets. IANATL, YMMV, etc. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [January 29, 2015, 8:22pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/339 "2015-01-29T20:22:06Z")
> [@Jas09](#): > > Qualified dividends can not be offset with capital losses, but if you still have a capital loss after cancelling any gains (or a carryover loss with no gains) you can offset up to $3K of non-qualified dividends (or other ordinary income, which amounts to the same thing). Exactly. $3K is a pittance. ---
**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 29, 2015, 8:25pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/340 "2015-01-29T20:25:29Z")
> [@doorhinge](#): > > _ONEROUS - > › causing great difficulty or trouble: > The tax bill was aimed at lifting the onerous tax burden from the backs of the middle class._ > > [ONEROUS | English meaning - Cambridge Dictionary](http://dictionary.cambridge.org/dictionary/american-english/onerous) > > I believe all tax increases cause great difficulty to the taxpayers and tax laws are a lot of trouble. We’ll see if the new taxes actually cause great difficulty which can be measured by a reduction of economic activity due to the tax. There are examples where they clearly have not. Now tax laws being onerous I’ll grant you, but it seems that tax law doesn’t get any less complicated when the rate goes down. So that discussion is orthogonal to a tax rate discussion. [Previous page](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075.md?page=16) [Next page](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075.md?page=18)