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?
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?
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?
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.
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?
for historical reference -
(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.
I believe all tax increases cause great difficulty to the taxpayers and tax laws are a lot of trouble.
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.
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.
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.
Dividends certainly get taxed as capital gains.
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
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).
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.
Exactly. $3K is a pittance.
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.