Wealth Inequality in America

"The ratio of government handouts to wages and salaries in the United States is now at an all-time high. According to TrimTabs Investment Research, government handouts have reached a level that is equivalent to 35 percent of all wages and salaries in the United States. Considering the fact that this figure was only 21 percent back in the year 2000 and only 10 percent back in 1960 that is very frightening. The sad truth is that today the American people are more dependent on direct government payments than they ever have been before." Mar. 2011

Enough to pull their own weight and be out of poverty.

So... what's the amount? Can you work flipping burgers and go to school part time on it? Is it close to free if you are poor?

 

Define government handouts and where is the link.

 

I also took some accounting courses in college...enough to get my accounting degree.

I do understand that future gains are not guaranteed. I also understand that if you invest over a long period of time and do not make any gains, you should probably stop.

You keep talking about how hard it is to be an investor. I say bollocks. It is far more difficult to build a business from the ground up and be successful at it. However, building a business has the profits taxed at the same rate as working for somebody else (self employment tax not considered). Meanwhile, passively investing in the work of others carries a greatly reduced tax rate. How is that equitable under your apparent degree of difficulty tax system?

 

This is the kind of misinformed generalizations that cause class warfare.

Of course there are hardworking rich people and lazy poor people but there are also some very lazy rich people and the majority poor people are very hard working.

It's sad that so many people have bought into this kind of Randian / Social Darwinian thinking.

 

Out of curiosity, what were your annual investment returns (by percentage) from 2007 till 2012?

Like I said before, I don't care if long-term capital gains rates increase, but if they do, the capital loss limit should also increase.

Regarding your example, correct me if I'm wrong (its been years since I've studied this), but if your sole proprietorship generates a net operating loss, can't you use that loss to offset any income you might receive? For instance, if you have a NOL of -$50k, but you have an ebay business on the side that generates $50k in net income, your taxable income is $0.

Conversely, if you have -$50k in capital losses and $50k in net income from your ebay business, isn't your taxable income $47k?

 

Not at all - investing requires significant capital (and knowledge) to be lucrative; that's something most people don't have. Labor can be done primarily with time and effort.

If you doubled that in one year, you'd make $1000. Chances are you can 30-40 times that much doing an actual job.

That's true, but only on income above $400k, I believe.

It shouldn't be that hard. Take the simplest investment in the S&P 500. Worst case, you'd have lost about 50% if you invested at the absolute peak and sold at the absolute bottom. Markets historically return an average of 10% per year, so if you pick average years, you'd make your money back in about 7 years with no taxes.

This is true - but it's also true for capital gains. If one of your investments makes $50k and another loses $50k, you'll have $0 in capital gains.

 

That's my point. You were likening labor with investing. Investing is significantly more challenging than labor.

If investing is as easy as you guys make it seem, there shouldn't be any problem doubling it 5 or 6 times. And honestly, if you were that confident in your investing skill, it would be very easy to raise capital as long as you were willing to incur debt.

Apparently not.

In the past, taxpayers weren’t required to pay Medicare tax on income generated from investments such as capital gains, dividends, and taxable interest. In 2013, however, you could owe a 3.8% Medicare tax on some or all of your net investment income.

The amount you owe is based on the lesser of your total net investment income or the amount of your MAGI that exceeds $200,000 for individuals, $250,000 for couples filing jointly, or $125,000 for spouses filing separately.


https://www.fidelity.com/viewpoints/personal-finance/new-medicare-taxes

You think if people lost 50% of their investments, they'd be willing to stay in the stock market for 7 additional years? If anything, people have been conditioned to buy at the top and sell at the bottom.

That doesn't address my point. Correct me if I'm wrong, but net operating losses can offset total income without limitation. Capital losses can only offset total income to the extent of $3,000.

In my example, if you had a $50k NOL and $50k net income from ebay, you pay no taxes. However, if you had a $50k capital loss and $50k net income from ebay, you'd be paying taxes on $47k.

 

I have not been investing. I have been paying off student debt from when I went to law school and debt incurred in operating a business.

As for the capital gain scenario, I believe you are mistaken. I believe that you can deduct your capital losses to the extent of your gains. If you have capital losses that exceed your gains, you'll have a loss carry forward.

 

If you haven't been investing, don't you think its disingenuous to say that investing isn't hard?

I thought you could only deduct capital losses to the extent of capital gains plus an additional $3,000? That's why my example made the distinction of having a $50k capital loss and $50k net income from ebay....to show that you'd still have to pay tax on $47k.

 

Requiring money does not mean investing is harder or requires more effort. It just means it requires money. I don't see any reason why that would be incentive to tax it at a lower rate.

Why? First off, no one argued investing is "easy". They argued against your ridiculous claim that it requires more effort than labor. Second, being easy or hard has nothing to do with rate of return. Why not just be more ridiculous in your claim and say investing being easy means I should be able to generate a ten million percent return?

My bad - $200k, not $400k. Doesn't change the substance of the point.

Yes - the vast majority of investors aren't traders who are constantly selling and buying.

Not necessarily true. I don't believe net operating losses can counteract interest income or dividend income. Not 100% sure about long-term capital gains, but I don't think it would work there either. Different categories of income are generally taxed separately.

 

Of course it does. If you think investing is easy, you should consistently have returns that are much better than your benchmark. And if that's the case, use leverage and invest.

The vast majority of investors aren't well-educated in the dynamics of the market. If a novice investor's investment loses half its value, the investor is not likely to stay the course and remain invested. Instead, he's more likely to cash out to preserve his capital. That's human nature. You're essentially trying to argue that the vast majority of people will act against human nature.

If you have a net operating loss from your sole proprietorship, you'll normally be able to deduct the loss from your total income from other business ventures or from any salary, wages, or other earnings.

http://www.bizfilings.com/toolkit/s...ness-losses-can-generate-loss-deductions.aspx

Not sure if it's accurate, but it's the first thing that popped up on a google search.

 

I never said that investing is not hard. I questioned whether it was significantly harder than starting a business such that such disparate tax treatment was warranted. Instead you choose to equate that to saying that investing is easy.

You are right about the $47k. As I said before, you can use capital losses to offset any capital gains. Any unused capital losses are carried forward to future years. Incidentally, none of this justifies such a starkly lower tax rate. It only creates a discussion regarding deductability.

 

My point was that sole proprietorships and investing aren't as comparable as you originally made them seem. And like I've said before, I have no problem raising long-term capital gains rates as long as the capital loss limits are also increased.

 

I think Pandas are overrated. Tug Speedman is my hero.

 

I'm not OK with it. What refman and Major proposed to even the field between the rich and the middle class hurts the middle class while not touch the rich.

Let's say I'm a typical millionaire,

I make $75K a year, tax rate @ 15% and invested wisely for 20 years and have a couple of millions in the market.

Under their tax the rich plan,

 

To be continued after meeting. Dang phone.

 

Back to scheduled post.

Let's say I have an emergency and I need to cash out on a chunk of my stock.

I'm now tax at 39.5% for being in the top 1%.

However, if I had a capital gains loss, I only benefit at a 15% tax rate.