A simple but unpopular idea
by OrangeJubilee (2024-02-19 11:52:24)

In reply to: PBR Poll on Possible Federal Revenue Enhancements....  posted by Raoul

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I have long felt taxing 100K earned as a plumber and 100K in investment returns from a trust fund baby differently are stupid.

All income, wages, dividends, cap gains, carried interest, EVERYTHING pays:

2.9% for Medicare, no cap (current law for wages)
12.4% for social security with no cap (rate is current for wages but capped)
The current marginal rates with no deductions (standard or itemized) deduction.
Everyone gets a 7K credit to start, fully refundable (amount could be tweaked.)

For businesses, they are all taxed on US-source income at the top marginal rate, plus 2.9% plus 12.4%. However shareholders are credited with their share of taxes paid by the corporate, effectively ending corporate taxation for domestic shareholders.

Seems to me this would generate way more money than we do now and be very simple. If people want to complain about LT gains being partially inflation, they would have the option to pay to increase basis annually if they wished.

I'm not sure if it would increase or decrease revenue, but
by Tex Francisco  (2024-02-19 12:38:32)     cannot delete  |  Edit  |  Return to Board  |  Ignore Poster   |   Highlight Poster  |   Cannot reply

I've always thought taxing capital gains at income tax rates, but with an inflation adjusted basis, seemed like the most fair and obvious way.
Pretty sure ths already happens for the upper middle class
by catripledomer  (2024-02-19 19:45:04)     cannot delete  |  Edit  |  Return to Board  |  Ignore Poster   |   Highlight Poster  |   Cannot reply

People who hit AMT pay tax on investments at their marginal tax rate. Only those who fall below or above the AMT threshold pay the ST and LT capital gains rates.
No it doesn't
by OrangeJubilee  (2024-02-20 09:30:39)     cannot delete  |  Edit  |  Return to Board  |  Ignore Poster   |   Highlight Poster  |   Cannot reply

I think you mean they pay at the AMT rate, which is 26% or 28%, well below their "regular income" marginal rate of 35% or 37%, and does not include SS and Medicare taxes that would add ~15% on. So it is still really advantaged vs. earned income.

Also, we are talking pretty far up the chain, not sure you can call anyone paying AMT "upper middle class". They are just upper class.

From the tax policy center:

"In 2019, the AMT impacted just 0.1 percent of households overall. This includes 0.2 percent of households with income between $200,000 and $500,000, 1.8 percent of those with incomes between $500,000 and $1 million, and 12.5 percent of households with incomes greater than $1 million (table 1)."
It seems incorrect to include SS and Medicare in this
by catripledomer  (2024-02-20 10:29:00)     cannot delete  |  Edit  |  Return to Board  |  Ignore Poster   |   Highlight Poster  |   Cannot reply

Even if you tax capital gains as regular income, it would still not be subject to payroll taxes. Are you suggesting we change that as well?
Yes, treat same as wages and uncap SS *
by OrangeJubilee  (2024-02-20 14:04:45)     cannot delete  |  Edit  |  Return to Board  |  Ignore Poster   |   Highlight Poster  |   Cannot reply