My personal opinion is that we do the following: 1. Scrap the age restriction and early withdrawal penalty on Roth IRAs. Convert Roth IRAs into a savings account with tax free capital gains. (Canada does this today). Its a big reason why people save more money over there. They use the tax free savings accounts there to create down payments and large savings pools over time. Like the Roth IRA, the account would have a maximum contribution cap and potentially an income limit (although Canada doesn't have an income limit on theirs). But its an easy and restricted way to encourage Americans to invest in the stock market. 2. Tax regular capital gains as income in order to make the system more progressive.
As someone that's lived thru the introduction of such a tax I can confirm the former. Base prices stay the same, businesses just add on the tax line item to your receipt. It's regressive - poor people spend a higher % of their income on stuff covered by vat (like food). And ive never seen vat go down, only up over the years. I would prefer higher taxes on stuff that rich people buy instead, like properties over $x, 2nd homes, but that won't happen cos they control everything
as an active stock market participant i am not receptive to this change. but should this become law of the land, I'll adapt
I think the question right now is why is investing money in someone else's company (stock market) taxed a lower rate than investing time/labor into building your own company (income + self-employment taxes) or someone's else's company (regular job). It seems like a perverse incentive structure that makes it easier to make money with money than with actual work, so it's not surprising that would be how our society operates.
The TFSA is supposed to offset the increase in capital gains taxes. Canadian TFSA accounts give every resident a vehicle to invest with zero capital gains. Canada allows each resident to contribute $6000 per year per person (so a married couple would get $12000 like a Roth IRA). Additionally, in Canada, contribution room rolls over so if you fail to contribute one year, that $6000 can be used in a subsequent year. Basically every person gets a path towards capital gains free investing while larger investors have to deal with capital gains being treated as ordinary income. To me, that's been the smartest way of handling dilemmas around capital gains. Larger investors will see their taxes go up but smaller to medium investors gain a new tax free vehicle. And since your contribution room rolls over, you aren't penalized for failing to contribute to your savings account in a given year.
I think he's talking about disconnecting it from retirement entirely. You can basically put in up to $6000 each year - and that money never gets taxed again (including earnings). So you could invest it in Gamestop, make $50,000, and take it all out next year and use it. Basically, everyone gets an opportunity at a little bit of regular stock market gains potential with no tax. But the rest has a higher rate.
You can pull your contributions without penalty but not the gains. The gains are taxed as income with an additional 10% penalty if you pull them before you turn 59 and a half (in some exceptions you can get out of the penalty but not the taxes). I'm suggesting removing all restrictions so you can withdraw gains at any time without being taxed on them. And in exchange for this new tax free savings account, any capital gains earned outside of this account (or any other tax deferred account), gets taxed as regular income (subject to the standard income tax brackets).
Groceries usually are not covered by VAT. If the point of the VAT will be to tax corporate revenue, prices are now artificially low and consumers are getting their goods subsidized indirectly by the Government. If the Government changed tax laws so corporations paid their fair share, prices will have to rise for corporations to maintain their margins. This might not protect commodity prices for groceries, like a consumption oriented tax would. If the VAT does hurt low income families, existing government assistance program can be modified to offset the difference.
Not to pick on you, but this is an example of what we don't want to do. Everything people hate about government and taxes is because of stuff like this. We create a tax that doesn't do what we want quite right, so let's now add more rules to another government program to get us back to where we want. 10 years from now, the tax code will have changed 5 more times, so whatever modification you made to some program in 2021 to fix the new VAT won't necessarily work the same or help the people it was originally intended to help. This is how we end up assistance programs that are so complicated that the people who need them don't use them and how accountants make a fortune because we have an absurdly complex tax code. Creating yet another tax system (VAT) is also just another massive layer of unproductive expenses put on businesses to manage it - all spent on accountants, product management systems, etc. I can't imagine how much hassle, for example, Texas' tax-free weekend is for local businesses. We should try to identify the very specific problem we're trying to fix, and come up with the simplest, most direct route to get there and go with that. The whole tax code AND government assistance needs to be dumbed down and simplified dramatically. It's one thing I love about the UBI concept - it scraps a ton of other government programs and just makes it all into one big sum (it has plenty of other issues, though).
Here come the "job killing tax hiking Dems" with their job killing and tax hiking ideas. These seem like fairly reasonable proposals to actually pay for stuff rather than borrowing money or creating it out of thin air.
