That’s the proposal, but I was under the impression that posters here feel it doesn’t go far enough.
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
I am not a fan.
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.
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?
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.
My post was a response to posters who feel all capital gains should count as regular income.
I read, and now cannot find, that 80% of 529 users have household incomes greater than $250k. If that matters.
Seems to me that the taxes on whatever return you got by investing what you could while making $7.50 would be trivial.
Any policy is going to favor some and harm others.
It wasn’t trivial to me.
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.
Do you believe the benefit to you outweighed the cost associated with low capital gains tax rates, as someone making $7.50 an hour?
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.
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.
. . . How does the second sentence follow from the first?
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.
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.
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.
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.
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?