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No. of Recommendations: 4
That's what they say now. Or will they do it so that it's only for a married couple. Singles are $500,000. And wait...we need to tweak it a bit more so it's $250,000. And we won't adjust for inflation (like they did when they started taxing "high income" Social Security recipients), so today's $250,000 will be the equivalent of $125,000 after a few years of 1970's type inflation.

This is the camel's nose under the upper middle class tent.
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No. of Recommendations: 5
Yes, qualified dividends are lumped with capital gains. But is your AGI greater than $1 million? If not, nothing to worry about.
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No. of Recommendations: 4
That's what they say now. Or will they do it so that it's only for a married couple. Singles are $500,000. And wait...we need to tweak it a bit more so it's $250,000. And we won't adjust for inflation (like they did when they started taxing "high income" Social Security recipients), so today's $250,000 will be the equivalent of $125,000 after a few years of 1970's type inflation.

This is the camel's nose under the upper middle class tent.
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No. of Recommendations: 6
Net long term capital gains are taxed exactly as are qualified dividends since TIPRA effective 2008 and made permanent by ATRA effective 2013 but it also added the 3.8% surtax for higher AGIs. But their rationale's are different.

The 0%/15%/23.8% rate on capital gains incentivizes holding investments for at least a year while the rationale for qualified dividends is to avoid double taxation on corporate earnings used to pay the dividend. If capital gains are taxed as ordinary income at some higher AGI (currently $1MM is being discussed but that could change), this would remove the incentive to hold shares of stock or derivatives, which would likely lead to increased trading for the high income group.

I personally can see no reason to raise the rate for the high AGI filers on Q.Dividends due to the double taxation rationale. But this Congress majority are not the sharpest knives in the drawer and I doubt many of them understand or care about the concept of double taxation. If the household as an AGI >$1MM, "stick-it-to-em" seems to be the mentality today.

BruceM
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No. of Recommendations: 7
"I personally can see no reason to raise the rate for the high AGI filers on Q.Dividends due to the double taxation rationale"

I see this double taxation boogeyman all the time.
But it's not really double taxation. One is a tax on the company profits, one is a tax on the individual.
The individual is not the company and while people often believe that owning stocks means they invested in the company, the reality is that their 'investment' dollars went to some third party and not the company.
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No. of Recommendations: 31
Daryl44 writes,

That's what they say now. Or will they do it so that it's only for a married couple. Singles are $500,000. And wait...we need to tweak it a bit more so it's $250,000. And we won't adjust for inflation (like they did when they started taxing "high income" Social Security recipients), so today's $250,000 will be the equivalent of $125,000 after a few years of 1970's type inflation.

This is the camel's nose under the upper middle class tent.

</snip>


It's about time. Why should an "upper middle-class" twit be paying less than a working man with the same income? That's the kind of thing that eventually gets the pitch forks sharpened.

And it's not just people with a $500,000 or $250,000 income. A married couple with a $100,000 income from qualified dividends and capital gains pays $0 in Federal Income Tax. A neighbor with $100,000 in wage and salary income pays about $9,000 in Federal taxes. How does that make sense?

And yes, over 95% of my income is qualified dividends and capital gains.

intercst
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No. of Recommendations: 2
What about the portion of capital gains that's due to inflation? It's not really a gain at all.
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BruceCM, is there a way to private message you?
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Reply directly to his post. Uncheck the "Post this Reply to the Boards" box and check the "E-Mail this Reply to the Author" before clicking on Submit Message.

PSU
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No. of Recommendations: 2
Daryll44 asks,

What about the portion of capital gains that's due to inflation? It's not really a gain at all.

It gets same the treatment as the $8,000/yr "poll tax" working families pay on their health insurance due to rampant price gouging. They just need to "eat it".

Every American family basically pays an $8,000 ‘poll tax’ under the U.S. health system, top economists say
https://www.washingtonpost.com/business/2020/01/07/every-ame...

</snip>


Of course, if you're wealthy, and you have complete control over the timing, and type of taxable income you realize each year (which most do), you can avoid the "poll tax" with "free Obamacare". I'd budgeted $20,000/yr for health insurance in my 60's (I turned age 65 in February of this year.) My last few years of Obamacare featured a monthly premium of $1.43/month -- lest than $20/year.

Obamacare Repeal? My amazing story of drastically lower premiums.
https://www.retireearlyhomepage.com/obamacare_2017.html

</snip>


intercst
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No. of Recommendations: 0
How does that make sense?

It doesn't. And it isn't really "fair", either. I've said before, much more verbosely, that unearned income should be taxed at a MUCH higher rate than earned income. Maybe 2x the rate.

But until we do, it does make sense to take advantage (as you have been doing these many years). Hopefully I'll be able to next year (e.g. cheap Obamacare medical coverage) as my earned income drops to zero and I start living off of my investments.

1poorguy
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1poorguy

You stated "that unearned income should be taxed at a MUCH higher rate than earned income. Maybe 2x the rate."

Doesn't unearned income include unemployment? If so would you consider an exemption for unemployment under this proposed increased tax?

Goo
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No. of Recommendations: 2
"The individual is not the company and while people often believe that owning stocks means they invested in the company, the reality is that their 'investment' dollars went to some third party and not the company."

True, but you DO own shares in the company. If the company goes bankrupt tomorrow and shares are worth zero, your entire purchase price of those shares is down the drain.

If the company has a bad year and the stock drops in half, your holdings drop in half.

Yes, they are 'invested' in the company - owning those shares, taking the risk of their money , hoping to make more money in the future by selling their 'ownership' - stock - and higher price because the company is doing more business and making more money.

It's not like a federally guaranteed CD - where you will get your money back, plus interest.

If they start taxing cap gains are 'regular income rates' - 80% of mutual funds will disappear, most investments will flow to index funds for the entire market - or tax managed funds - to avoid yearly taxes while increasing wealth.

t
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No. of Recommendations: 1
mrgoo asks,

You stated "that unearned income should be taxed at a MUCH higher rate than earned income. Maybe 2x the rate."

Doesn't unearned income include unemployment? If so would you consider an exemption for unemployment under this proposed increased tax?

</snip>


Unemployment benefits are typically taxed like wage & salary income, though the 2021 COVID stimulus bill gave unemployment a one-time exemption to make it "tax-free".

intercst
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No. of Recommendations: 4
"Yes, they are 'invested' in the company - owning those shares, taking the risk of their money , hoping to make more money in the future by selling their 'ownership' - stock - and higher price because the company is doing more business and making more money."

So if I put money on Red at the roulette wheel, am I 'invested' in Red?

Stocks are just casino chips. You can use whatever system you like to 'value' them, but in the end it's all gambling because you don't actually manage the company (or decide policy etc.).
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No. of Recommendations: 1
I see this double taxation boogeyman all the time.

Really? Where?

BruceM
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No. of Recommendations: 3
What about the portion of capital gains that's due to inflation? It's not really a gain at all.

Our income tax rates are progressive. So of course your income may keep up with inflation, but as it does, the tax man gets more than his fair share of your income increase.

Inflation is a politicians friend. He collects more tax dollars without taking political risk by raising taxes.

Why should dividends be the exception?
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No. of Recommendations: 3
If the household as an AGI >$1MM, "stick-it-to-em" seems to be the mentality today.

If by that you mean stick it to the little guy, I agree. :-)

https://www.marketwatch.com/story/ceos-are-paid-278-times-mo...

Overall, there’s a 278-to-1 pay ratio between workers and CEOs. In 1989, the compensation ratio was 58-to-1 and in 1965, it was 20-to-1.
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No. of Recommendations: 8
I personally can see no reason to raise the rate for the high AGI filers on Q.Dividends due to the double taxation rationale. But this Congress majority are not the sharpest knives in the drawer and I doubt many of them understand or care about the concept of double taxation.

And what would you call the people who tax your taxes? The goombahs who limited SALT deduction to $10,000 to stick it to the blue staters? Do you think they understand the concept of double taxation very well but just don't care for their fellow Americans who live in the wrong state?
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No. of Recommendations: 3
"Stocks are just casino chips. You can use whatever system you like to 'value' them, but in the end it's all gambling because you don't actually manage the company (or decide policy etc.)."

True - but you do get to have input by voting your shares - including the various proposals by stockholders - and stockholder 'pressure' can decide policy issues.......

It's not 'gambling' - unless, of course, your idea of 'investing' is GameStop or similar...or pets.com during the dot.com craze with no revenue, no assets, no income.......

Spinning the roulette wheel will bankrupt you (99.99%) if you stay there long enough.....the house always wins.

On the other hand, not playing a stacked game where your odds of winning are about 1 in a million, long term.... is ....not investing but merely passing time till your fortunate drains away while you watch the flashing lights of the slot machines...



t.
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No. of Recommendations: 1
That's what they say now. Or will they do it so that it's only for a married couple. Singles are $500,000. And wait...we need to tweak it a bit more so it's $250,000. And we won't adjust for inflation (like they did when they started taxing "high income" Social Security recipients), so today's $250,000 will be the equivalent of $125,000 after a few years of 1970's type inflation.

This is the camel's nose under the upper middle class tent.


I find this to be implausible. Cutting taxes is way more popular than raising them.
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