Are you selfish?

[jefa_IHB]

I think the Dow has pretty effectively moved wealth from the savers to the gamblers. Hooray!



Personally, having a diverse range of family who are either self-reliant or huge moochers, I have no problem paying more taxes so that those who make under 30k a year pay none. But, I don't like my increased taxes to be re-routed to those who don't work at all (the moochers). A lot of ballyhoo I see in the blogsphere is aimed at taking money from workers and giving it to moochers. And I'm with everyone on that.



The fact of the matter is that I know tons of people who can't afford health insurance, a working car, etc etc. They work hard, they do the right thing, and they barely get by. Probably half of the people I know fall in that category. A big fat 20% of people I know are money pits, who whine that they need more and they blow it on their addictions.



Hence, my political views tend to be more moderate. I don't want the government being an enabler, but I do believe in attempting to create rules and rewards and systems to make an unfair world a little more fair.

 

[EvaLSeraphim_IHB]

[quote author="acpme" date=1225768891]eva, maybe loophole isn't the right term. loophole seems to conjure up in everyone's mind some sort of special treatment or incentive put in place by a special interest, for a special interest. i'm talking about just very basic tax strategies.



take something very simple, like capital gains. the 15% capital gains tax is an easy target for those who say the wealthy don't pay their fair share. so fine, let's raise it to 25%. problem solved right?



not really. anyone with significant amount of money in taxable investments accounts will just sell at the end of the yr and buy back similar positions. for example, John Q Richguy has millions invested in the mkt this yr, let's say he lost 30% at the end of the year. he'll just sell all his positions and buy back the same portfolio but in diff funds. for almost every possible tradable investment out there, there's another investable version of it. you can swap a mutual fund with the etf form of the same, the vanguard XYZ fund with the fidelity XYZ fund, etc. the same could be done with baskets of individual stocks or bonds through options or other investments with similar characteristics. the end result is basically the exact same portfolio in terms of allocation and risk, except now Mr. Richguy has a huge war chest in losses to carry forward. and none of this triggers a wash sale event either.



this strategy is exactly what Fidelity is telling their clients to do.

<a href="http://screener.fidelity.com/ftgw/etf/news/story?storyid=200810261203MRKTWTCHNEWS_SVC_31722A28-2B7A-414C-AE6B-5DB3B1F41595">Fidelity Investments: Market meltdown opens door to tax swaps, rebalancing</a>



although the tax increase was designed to ensure Richguy and his golf buddies him pay their fair share, no matter how much they raise the capital gains tax, they'll have off-setting losses that ensure they'll pay little to nothing for the next several years. the tax collectors might just end up scratching their heads trying to figure out how an increase in the capital gains tax resulted in... less capital gains tax actually being collected?</blockquote>


So, any suggestions for a fix? Would you prefer to, say, have everyone tally their net worth at the end of the year (rather than their income), and base any tax on that?

 

[WINEX_IHB]

[quote author="EvaLSeraphim" date=1225796023][quote author="acpme" date=1225768891]eva, maybe loophole isn't the right term. loophole seems to conjure up in everyone's mind some sort of special treatment or incentive put in place by a special interest, for a special interest. i'm talking about just very basic tax strategies.



take something very simple, like capital gains. the 15% capital gains tax is an easy target for those who say the wealthy don't pay their fair share. so fine, let's raise it to 25%. problem solved right?



not really. anyone with significant amount of money in taxable investments accounts will just sell at the end of the yr and buy back similar positions. for example, John Q Richguy has millions invested in the mkt this yr, let's say he lost 30% at the end of the year. he'll just sell all his positions and buy back the same portfolio but in diff funds. for almost every possible tradable investment out there, there's another investable version of it. you can swap a mutual fund with the etf form of the same, the vanguard XYZ fund with the fidelity XYZ fund, etc. the same could be done with baskets of individual stocks or bonds through options or other investments with similar characteristics. the end result is basically the exact same portfolio in terms of allocation and risk, except now Mr. Richguy has a huge war chest in losses to carry forward. and none of this triggers a wash sale event either.



this strategy is exactly what Fidelity is telling their clients to do.

<a href="http://screener.fidelity.com/ftgw/etf/news/story?storyid=200810261203MRKTWTCHNEWS_SVC_31722A28-2B7A-414C-AE6B-5DB3B1F41595">Fidelity Investments: Market meltdown opens door to tax swaps, rebalancing</a>



although the tax increase was designed to ensure Richguy and his golf buddies him pay their fair share, no matter how much they raise the capital gains tax, they'll have off-setting losses that ensure they'll pay little to nothing for the next several years. the tax collectors might just end up scratching their heads trying to figure out how an increase in the capital gains tax resulted in... less capital gains tax actually being collected?</blockquote>


So, any suggestions for a fix? Would you prefer to, say, have everyone tally their net worth at the end of the year (rather than their income), and base any tax on that?</blockquote>


I have two suggestions for a "fix".



One would be a consumption tax to replace the income tax. Not only would this tax the underground economy of those who don't report or under report their income, but it would also be a positive incentive for people to save money. (Econ 101 - if you want to discourage an activity, tax it. If you want to encourage an activity, subsidize it. By not taxing savings, we would give economic incentives to save money)



The other would be a flat income tax with no deductions and all income being treated equally. Sure, it would put a lot of lobbyists and tax accountants out of work, but it would change things so people acted on what made sense instead of on how to avoid taxes.



Of the two, I favor the consumption tax over a flat tax.



But while I am on a roll, I'd like to see the Federal government spend money only on things that it has a constitutional right to spend money on. That way the tax rate could be kept low and the national debt could be paid off.

 

[Nude_IHB]

[quote author="EvaLSeraphim" date=1225796023]So, any suggestions for a fix? Would you prefer to, say, have everyone tally their net worth at the end of the year (rather than their income), and base any tax on that?</blockquote>


Redefine "income" and/or remove alternative compensation options like carried interest, stock options, etc. The problems with tallying net worth is that you may force sales of some of that net worth to meet the amount of taxes due (similar to what happens when an 'inheritance' is mostly unsold assets), appraisals would play a large part in the overall taxable amount, and you would immediately cause a majority of assets to be placed into trusts that then lease them back to the original owner for a penny a year. The more effective approach would be to tax any compensation, above a set amount, at the same rate as the traditional "income" tax rates. Of course, this would cripple the economy for a few years due to a credit market seize (again) after companies suddenly find they have no domestic investors, but eventually some companies would be able to fund growth from saving their own profits.