Quote:
Originally Posted by djplong
ijusluvit: Thanks for explaining yourself. Now, to dig a little deeper - what do you think of the following situation? I came into some money back in 1990 (death in the family). Some of that money, I invested in a friend's business that I really believed in - so much so that I worked for 'sweat equity' on my off hours for a while (developing software). When I had money, I put about $22,000 in cash into the business (private stock purchase). Combined with my 'sweat equity', on the books, I'd put in about $26,000 (valuing my labor at FAR below what my billing rates were - but, again, I believed in the future value).
Set the calendar over a year later. My 'stock' (and I put it in quotes because it wsa a private issue, not publicly traded) is worth $103,000 due to the growth in the company. Mind you, I'm not one of the paid employees. By now, I own 1% of the company with my investment of time and money.
In real life, we were bought out by a company that later turned out to be quite shady. At the time of the buyout, we all voluntarily took a reduced value to out shares - mine were valued at $86,000 - in order to be part of what was to be a publicly traded company. Well, the company sold the assets (our software) off to an offshore firm and we were left with nothing. In the end, a conversion resulted in my shares being worth $50. Yes, one copy of Ulysses S. Grant.
But let's have an exercise. Suppose the parent company prospered and wasn't so shady. Suppose a couple of years later I had $300,000 in stock and now I wanted to lock in my 'profits' and diversify so that I didn't have all my retirement eggs in one basket.
If I sold my stock at $300,000, I'm looking at around $275,000 in 'profit' - especially considering how hard it is to define how much I 'paid' with my 'sweat equity' part.
For all that risk and waiting a few years for gratification, what do you think is a fair taxation rate? You specifically mentioned 'above $250,000' for higher taxes. In this case, how much is "right", in your opinion? The IRS says that I could be looking at the lower Capital Gains tax rate as opposed to 'regular income' (depending on the asset and how long I've held on to it). What's your opinion?
Then - what if I held on to it for a few more years - until it was worth, say, $500,000?
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At the present time, regular income dollars in the 250k range are subject to federal income tax percentages over 30%. That's almost right, but I'd support small percentage increases from the current schedule up to perhaps $500k. Dollars above that point would be subject to sharp percentage increases for a period of at least 5 years. Again, Buffet and Gates could tell us the numbers which would finally convince companies to stop paying the obscene bonuses, large chunks of which would simply go straight to JQ Public.
Capital gains taxes are a straight 15%. I think they should be increased on dollar profits exceeding 100k (let's say at least 20%), with a graduated percentage scale topping out at perhaps 50%. However, I also would like to see more latitude in deferring capital gains taxes through moving profits to other investments. Purchasing treasury bonds and other government securities with capital gains would automatically defer capital gains taxes, as would some other kinds of "economically stimulating" investments. Based on the time period the owner held on to these investments before cashing out, the tax rate would be gradually reduced.