# 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:** 7
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 21, 2015, 11:59am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/121 "2015-01-21T11:59:02Z")
> [@Lobohan](#): > > We can’t make policy to deal with a vanishingly rare case. Also, the increase is only for families that make 500k. That’s the proposal, but I was under the impression that posters here feel it doesn’t go far enough. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 21, 2015, 12:15pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/122 "2015-01-21T12:15:26Z")
Looks like the plan includes eliminating the main tax advantage of 529 college savings plans. [http://www.wsj.com/articles/obama-proposal-to-cut-529-plan-tax-benefits-meets-opposition-1421811117](http://www.wsj.com/articles/obama-proposal-to-cut-529-plan-tax-benefits-meets-opposition-1421811117) I am not a fan. > [@Baboonanza](#): > > If you are working for $7.50 an hour you are already the broken egg. If you’re young and it puts you on the path to 6x or 7x that pay down the road, it’s not so bad. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [January 21, 2015, 12:52pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/123 "2015-01-21T12:52:12Z")
> [@Ruken](#): > > As someone who invested in securities while making $7.50/h, I’m glad what meager returns I made weren’t further diluted by being taxed as income. Not everyone with capital gains is rich. It’s almost like the proposal should also include some form of tax relief for those who aren’t rich. I wonder if the Democrats considered such a thing? ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [January 21, 2015, 12:55pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/124 "2015-01-21T12:55:32Z")
Oh, and count me in on failing to understand the value of cutting the tax advantage of 529 plans. I’m not a fan of it either, and imagine it’s a plan frequently used by the middle class to save for their kid’s educations. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 21, 2015, 2:25pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/125 "2015-01-21T14:25:16Z")
> [@Cheesesteak](#): > > It’s almost like the proposal should also include some form of tax relief for those who aren’t rich. I wonder if the Democrats considered such a thing? My post was a response to posters who feel all capital gains should count as regular income. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 21, 2015, 2:32pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/126 "2015-01-21T14:32:06Z")
> [@Cheesesteak](#): > > Oh, and count me in on failing to understand the value of cutting the tax advantage of 529 plans. I’m not a fan of it either, and imagine it’s a plan frequently used by the middle class to save for their kid’s educations. I read, and now cannot find, that 80% of 529 users have household incomes greater than $250k. If that matters. ---
**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 21, 2015, 2:35pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/127 "2015-01-21T14:35:12Z")
> [@Ruken](#): > > As someone who invested in securities while making $7.50/h, I’m glad what meager returns I made weren’t further diluted by being taxed as income. Not everyone with capital gains is rich. Seems to me that the taxes on whatever return you got by investing what you could while making $7.50 would be trivial. ---
**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 21, 2015, 2:39pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/128 "2015-01-21T14:39:48Z")
> [@Sam\_Stone](#): > > Or in other words, you’ve got to break a few eggs to make an omelette, hmm? > > The only problem is that it really sucks to be the egg. _Any_ policy is going to favor some and harm others. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 21, 2015, 3:06pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/129 "2015-01-21T15:06:04Z")
> [@BobLibDem](#): > > Seems to me that the taxes on whatever return you got by investing what you could while making $7.50 would be trivial. It wasn’t trivial to me. ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [January 21, 2015, 3:20pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/130 "2015-01-21T15:20:00Z")
> [@Cheesesteak](#): > > Oh, and count me in on failing to understand the value of cutting the tax advantage of 529 plans. I’m not a fan of it either, and imagine it’s a plan frequently used by the middle class to save for their kid’s educations. Depends on what you mean by middle class, I think. If you make less than $220,000 in modified gross income, you can put $2,000 per year in a Coverdell account with the same tax benefits (and more flexibility in how to use the money). With a median U.S. household income of $51,900, I doubt that very many middle class people are saving more than that for college. ---
**Author:** ![Hentor\_the\_Barbarian](https://avatars.discourse-cdn.com/v4/letter/h/8edcca/32.png) [@Hentor\_the\_Barbarian](https://boards.straightdope.com/u/Hentor_the_Barbarian)\ **Post date:** [January 21, 2015, 4:42pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/131 "2015-01-21T16:42:18Z")
> [@Ruken](#): > > It wasn’t trivial to me. Do you believe the benefit to you outweighed the cost associated with low capital gains tax rates, as someone making $7.50 an hour? ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 21, 2015, 4:54pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/132 "2015-01-21T16:54:43Z")
> [@Sam\_Stone](#): > > Since you don’t have any other capital investments, if you lose everything there’s nothing to deduct it against, and the government sure as hell isn’t going to compensate you. . This is not true. If this occurs your loss is limited to a claim of $3000 per year, and this can be used to offset ordinary income. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 21, 2015, 4:56pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/133 "2015-01-21T16:56:22Z")
> [@D\_Anconia](#): > > No, you can’t always deduct your losses. And how would a doubling of the tax rate be “trivial”? Yes, you can. True, if you have no gains to offset against, your claim is limited to $3000 a year, but you can carry that forward. > **[Topic no. 409, Capital gains and losses | Internal Revenue Service](https://www.irs.gov/taxtopics/tc409)** > > IRS Tax Topic on capital gains tax rates, and additional information on capital gains and losses. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [January 21, 2015, 4:58pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/134 "2015-01-21T16:58:57Z")
> [@Stringbean](#): > > The risk inherent in any investment is reflected in the yield. > > Tax policy should have other concerns. . . . How does the second sentence follow from the first? ---
**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 21, 2015, 5:17pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/135 "2015-01-21T17:17:43Z")
> [@DrDeth](#): > > Yes, you can. True, if you have no gains to offset against, your claim is limited to $3000 a year, but you can carry that forward. > > [http://www.irs.gov/taxtopics/tc409.html](http://www.irs.gov/taxtopics/tc409.html) If a taxpayer has a loss of $100,000, a $3,000 credit isn’t worth very much. Also, I thought that there were time limits on certain types of loss carryfowards, but I can’t find it right now. Maybe I was mistaken about that. ---
**Author:** ![Happy\_Fun\_Ball](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/happy_fun_ball/32/17664_2.png) [@Happy\_Fun\_Ball](https://boards.straightdope.com/u/Happy_Fun_Ball)\ **Post date:** [January 21, 2015, 10:34pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/136 "2015-01-21T22:34:21Z")
> [@D\_Anconia](#): > > If a taxpayer has a loss of $100,000, a $3,000 credit isn’t worth very much. > > Also, I thought that there were time limits on certain types of loss carryfowards, but I can’t find it right now. Maybe I was mistaken about that. Don’t worry about the loss, these days the government socializes the losses of investors while making sure the profits remain privatized. :rolleyes: If we treated capital gains as income for tax purposes, low income earners like **Ruken** would probably pay no tax because they would probably not make enough to get into a higher tax bracket. When I was in college I cashed out $10,000 in mutual funds that including several thousand in capital gains to supplement my $8/hour job as a grader. That year I did not pay anything in tax as I did not make enough. I just don’t understand why I have to pay \>25% of my families income to the federal government in taxes while Warren Buffett only pays 16 percent or so on his capital gains income. If I had that extra $50,000 per year, I would probably invest most of it and help create some jobs, but I can’t because I am penalized for being a laborer :(. It’s not like we even tax all of a person’s capital gains. Again, using Warren Buffett as an example, in 2010 he paid 6.9 million in taxes on 62.9 million in adjusted gross income and 39.8 million in taxable income. That same year, his reported net worth went up by over 10 billion dollars due to the surging price of Berkshire Hathaway stocks. Those capital gains, however, were not taxed. Those gains allowed Berkshire Hathaway to acquire Burlington Northern Sante Fe railroad, invest 3 billion dollars in General Electric, and invest 5 billion dollars in Goldman Sachs enabling further capital gains that again will not be taxed unless he decides to pay himself with the gains in which case he will pay around 15%. While I am a capitalist to my core, I just don’t believe that this tax policy makes sense nor is it fair to middle class taxpayers like me that probably pay about 50% of my total household earning in taxes of one form or another. ---
**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 21, 2015, 10:56pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/137 "2015-01-21T22:56:51Z")
> [@Happy\_Fun\_Ball](#): > > That same year, his reported net worth went up by over 10 billion dollars due to the surging price of Berkshire Hathaway stocks. Those capital gains, however, were not taxed. Those gains allowed Berkshire Hathaway to acquire Burlington Northern Sante Fe railroad, invest 3 billion dollars in General Electric, and invest 5 billion dollars in Goldman Sachs enabling further capital gains that again will not be taxed unless he decides to pay himself with the gains in which case he will pay around 15%. While I am a capitalist to my core, I just don’t believe that this tax policy makes sense nor is it fair to middle class taxpayers like me that probably pay about 50% of my total household earning in taxes of one form or another. Wait, what? You think that capital gains should taxed even when they’re only on paper? Sure, Mr. Buffett might be able to, but 98% of investors couldn’t afford to pay taxes on “income” that they haven’t received, and very well may not ever receive. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [January 22, 2015, 12:01am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/138 "2015-01-22T00:01:57Z")
My marginal rate back then was 15%, so yes, I would have paid taxes. I see some countries allow inflation to increase the basis of an investment. I might be able to get behind that in exchange for slightly higher rates. ---
**Author:** ![Happy\_Fun\_Ball](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/happy_fun_ball/32/17664_2.png) [@Happy\_Fun\_Ball](https://boards.straightdope.com/u/Happy_Fun_Ball)\ **Post date:** [January 22, 2015, 12:40am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/139 "2015-01-22T00:40:32Z")
> [@D\_Anconia](#): > > Wait, what? You think that capital gains should taxed even when they’re only on paper? Sure, Mr. Buffett might be able to, but 98% of investors couldn’t afford to pay taxes on “income” that they haven’t received, and very well may not ever receive. No, I am just making the point that we don’t tax capital gains unless we sell the capital; I don’t think many people actually realize this. ---
**Author:** ![Happy\_Fun\_Ball](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/happy_fun_ball/32/17664_2.png) [@Happy\_Fun\_Ball](https://boards.straightdope.com/u/Happy_Fun_Ball)\ **Post date:** [January 22, 2015, 12:43am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/140 "2015-01-22T00:43:07Z")
> [@Ruken](#): > > My marginal rate back then was 15%, so yes, I would have paid taxes. > > I see some countries allow inflation to increase the basis of an investment. I might be able to get behind that in exchange for slightly higher rates. I still have not heard a convincing reason that income from capital gains, interest income, or dividends should be taxed at a lower rate that income earned by working. Sam claimed that it had to do with risk, but he seems to be unable to quantify in numbers how that works. Does anybody have a convincing reason why we should not tax all forms of income at the same rate? [Previous page](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075.md?page=6) [Next page](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075.md?page=8)