Wall Street's Lucrative Tax Break Is Under Fire »
Posted By Beau7890 1 year, 11 months ago in Business & FinanceThe most controversial tax break on Wall Street, known simply as the Carry, is not authorized by any law and was never approved by Congress. Unchallenged by lawmakers, it swelled into a benefit that, by one estimate, spares a small band of the country's richest and most powerful financiers $6 billion a year in personal income taxes.
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Beau7890
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tiredofwhiners1 year, 11 months ago
I can only think of an example as follows: A carpenter I know Ted, has a brother, Robert, with investment money. He buys a fixer upper house for $90,000 and offers to Ted half the profit if he fixes it up. So Ted renovates it and Bob puts in another $10,000 for materials. Bob sells it for $150,000 2 years later and gives Ted half the profit after 15% long term capital gains taxes ($7500). So Ted gets $21,250 for his work which took him about 3 months. No tax for Ted because Bob already paid the tax and it is a "gift" per their agreement. Note: Ted didn't do it because he didn't want to deal with his brother's personality.
It seems to me that if you contribute time and expertise, instead of money, in a long term capital gains endeavor, you should realize the benefit of long term capital gains tax rates on the results. However any money paid during the project (2% management fee), before the sale, should be taxed as ordinary income.
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Beau78901 year, 11 months ago
I'm not against a lower tax rate for capital gains in all cases, particularly those that help to stimulate investment.
To my mind, the issue here is that the fund managers are not risking their own money (or even money for which they themselves have taken on the risk of borrowing) in order to realize what they're calling capital gains rather than income, and the government loses a much larger amount of revenue from this practice of allowing them to determine how to classify their compensation under tax laws.
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inthemiddleof1 year, 11 months ago
Please explain why Ted shouldn't pay taxes. It's a business venture for which Ted provide a service, correct? Ted should pay the 35% tax on his earnings as well. It's not a double tax on the income by the gov't.
I'm tired of the rich bi tching about paying taxes and finding every loophole so they don't have to pay. It's their arrogance that is widening the class gap.
You'd think history would have taught us that the rich are no better than the poor. Throughout history the rich have fallen to their arrogance. It's only a matter of time here in America.
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willottica1 year, 11 months ago
By that logic: regular employers should be able to pay their employees in the same way.
You take a bunch of metal (capital) put work into it and pay for a few more parts, and voila! You have a car which you can sell for much more than the value of the metal. Total profit goes to the employer (who pays capital gains), then he gives a 'gift' to his employees for their work.
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browntiger1 year, 11 months ago
I oppose this tax cut. Everyone should pay same rate. It doesn't matter what source of it is.
Today what we see too many people cheating. All one have to do instead of paying real salaries - pay little salaries and offer dividends. So instead of me paying myself 200,000 - I would pay myself 30,000 and offer 170k in dividends. Realizing saving of 15% ?(SS) ? 15% fed tax stPlus state
Total "savings" 50k.
This is pure cheating.
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RoadRacer1 year, 11 months ago
Is it really cheating? The federal government has no legal right to tax any American's income. The amendment to the constitution to create the income tax was never ratified by the states and the Supreme Court has ruled a number of times that the federal government has no right to collect income tax.
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willottica1 year, 11 months ago
Just the very definition of the word: 'Capital' gains tax, means you should have to invest 'capital' not 'labor' in order to qualify. If they want to be taxed on the capital they invest, then they should pay income tax on the portion of capital that is allotted to them at the beginning.
I.e., if they get a twenty percent share in exchange for the work they do, they should be taxed for receiving 20% of the capital...
...NO, I can't figure out any logical way to call that capital gains. It's payment for a service rendered, thus it is income.
The whole tax break for risking their money seems ridiculous to me anyway:
For having money, they should be taxed less than Joe down the street working hard? Congratulations, you're rich, we'll give you a break. It strikes me that it should be the other way around! The person working hard to earn his money shouldn't have to pay as much tax as the guy who earns money without doing any work.
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willottica1 year, 11 months ago
(I realize that I seem to contradict myself, to summarize my points)
1. Since there is a break on capital gains tax break, the break should only go to those who actually invest capital.
2. There really shouldn't be a capital gains tax break. Working hard for your money should get you a better tax rate than earning money with no effort involved. (Of course, this probably wouldn't sit well with the people lining politicians pockets-I mean 'campaign coffers', so it isn't likely to change anytime soon.)
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agentX1 year, 11 months ago
We can't afford these tax breaks anymore. We need to close the Cayman Islands loopholes and the Carry. We need the money to pay for all the medical care our vets are going to need.
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willottica1 year, 11 months ago
Do away with income taxes all together and just tack on global, no exceptions sales tax. That way, all money is taxed equally when it's used.
No tax on what you make, 30% tax on everything you buy.
(Again, it would probably not fly with congress, because it would require far less bureaucracy, thus people invested in tax law would lobby against it.)
(And for this to work, you would need to get back the tax on items you sell at a profit - the same thing shouldn't be taxed multiple times. Ex: You buy your house at 100,000, pay 30%=30,000 extra... then you sell at 200,000. The new buyer pays 60,000 in tax, but you get your 30,000 back. Total taxes now paid, 60,000 for an item valued at 200,000.)
It might also be wise to tax all money taken out of the country at a similar rate (to avoid people just going elsewhere to spend their money).
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inthemiddleof1 year, 11 months ago
good luck taxing money leaving the country.
I can take $10g out of my bank and go to mexico and spend it all without exchanging it. Who are you going to tax? Can't be me, cause you can't prove I spent the money there. The Mexican banker exchanging the money? He had no part in the sale. It potentially Americanizes the entire world monetary system. I think a lot of countries would take issue to that.
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Commodore11 year, 11 months ago
It certainly pays to be rich doesn't it? I wonder if Congress will be able to do anything about this. I doubt it. They will either be bribed by these rich guys or propose another non-binding resolution. But Warren Buffett pays less taxes than his $60K a year secretary? Sure he says he doesn't agree but he still doesn't mind paying does he? He is pathetic.
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endtyranny1 year, 11 months ago
The Republicans speak at length about tax cuts. In reality, they are only talking about cuts for the filthy rich and they are using their big government to shake down the middle and lower classes to pay for it. How ironic that the GOP has become the big government, tax and spend party.
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simonsez1 year, 11 months ago
Schumer and Hillary are under pressure on this one to stop any change. This is primarily a New York problem.
I would bet there will be no change in this one.
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BananaSlug1 year, 11 months ago
The more you make, the more you can afford to pay in taxes. I'm not talking about people who make $70-$100k; I'm talking about people who make more in a year than most people dream of winning in the lottery. Taxes are what pay for roads, police, firemen, schools, and they are what should pay for health care, education through college, and housing assistance for social service people so that they can live in the communities they serve. When you pay taxes, you are paying the government for services you can't provide yourself. The rich balk at paying because they don't need the government's services; they can pay for everything the government would provide, at a higher quality too. Regulation and taxation, which are painted as evils because the rich want you to think they are, are what protect the poor and the middle-class from abuse, when done properly. The business elite have changed the government to suit their interests. We need to take it back so that it serves ours.
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willottica1 year, 11 months ago
Back before cash, the barter system ensured that no-one was paid obscene amounts for anything. Food and labour were valuable commodities, and why shouldn't they be? They are what ensure survival and enable progress. Nowadays, food and labour are the cheapest things around, and people pay obscene amounts of money for televisions.
$5000 for a plasma TV, that could easily feed 2 people for a year. Now, if cash did not exist, do you really think that people would trade a years worth of food for a television (a television which has to be fed with electricity-$, supplemented with cable or satellite subscriptions-$, Blu-Ray DVD technology-$, surround-sound systems-$ and who knows what else)?
The ultimate indignity is that some people can barely afford food! North America needs some significant economic rebalancing, because her priorities are WAY out of whack!
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