Biden wants to increase taxes on all you rich working peeps.

This site may earn a commission from merchant affiliate links, including eBay, Amazon, and others.

tRidiot

Perpetually dissatisfied
Special Hen
Joined
Oct 23, 2009
Messages
19,523
Reaction score
12,712
Location
Bartlesville
That’s going on right now. A lot of the money from the stimulus checks are going into the market. Driving the market up while the value of the dollar is dropping. In real terms, I suspect the market is remaining flat. And if someone is saving money in a bank account, they are losing real purchasing power!

Exactly... so I am wondering if my increasing ETH dollar value is really just remaining flat.
 

Rez Exelon

Sharpshooter
Special Hen
Joined
Jan 10, 2009
Messages
3,484
Reaction score
3,347
Location
Tulsa
The 20% vs 40% tax rate equates into a investment return of 20% vs 15%. And unfortunately, we cannot count on those kind of returns year after year.

Here's an example of investing $5,000 in the stock market and growing exponentially at 10%, 15% and 20%. Check out the difference in earning a compounded 15% vs. 20% over 35 years.

So it's my understanding that capital gains is not due until the sale of an asset right? So your worksheet showing compound interest is somewhat flawed. Because all the GAINS would all be the same rate of return if invested equally, then the capital gains would be at the end assuming that you sold off all at the same time and other conditions were equal.

So lets say you made 2,000,000 in your example, according to https://smartasset.com/investing/capital-gains-tax-calculator#t95lhznBndit appears that with an annual income of "0" you'd owe $535,229.

If you made, let's say, I dunno, the 10,000,000 per year max the calculator allows (https://smartasset.com/investing/capital-gains-tax-calculator#58g6MTkpoY) then it looks like $574,560.

So effectively it's 40k difference between top and bottom.
 

SlugSlinger

Sharpshooter
Supporting Member
Special Hen Supporter
Joined
Apr 14, 2009
Messages
7,825
Reaction score
7,621
Location
Owasso
Stop using the crazy numbers. lol

This example looks like the current long term capital gains tax rate or around 20%, double that and if you made $2,000,000 you'll be taxed at around $1,000,000. Short term is different, I believe treated as ordinary income.

The issue is taxes will be paid on the gains when they are recognized. If you trade stocks, you will be taxed with every trade, even if reinvesting your earnings. Value and purchasing power will be lost with every trade by the amount of the tax. It is uncommon to see higher investment return rates with one stock investment, although companies like Amazon have been a good ride. Most people will trade stocks not just sit in one. Unless they invest in a mutual fund and just ride it out, which is probably the best way to invest for most people.

Something like an S&P index fund.

upload_2021-4-28_13-31-28.png


Capital gains on real estate is different. I am not sure what the limits are, but if you trade houses you live in and make money each time, you can roll your earnings into the next house and not owe taxes immediately. That makes real estate more tax advantageous that the stock market.

So it's my understanding that capital gains is not due until the sale of an asset right? So your worksheet showing compound interest is somewhat flawed. Because all the GAINS would all be the same rate of return if invested equally, then the capital gains would be at the end assuming that you sold off all at the same time and other conditions were equal.

So lets say you made 2,000,000 in your example, according to https://smartasset.com/investing/capital-gains-tax-calculator#t95lhznBndit appears that with an annual income of "0" you'd owe $535,229.

If you made, let's say, I dunno, the 10,000,000 per year max the calculator allows (https://smartasset.com/investing/capital-gains-tax-calculator#58g6MTkpoY) then it looks like $574,560.

So effectively it's 40k difference between top and bottom.
 

tRidiot

Perpetually dissatisfied
Special Hen
Joined
Oct 23, 2009
Messages
19,523
Reaction score
12,712
Location
Bartlesville
Capital gains on real estate is different. I am not sure what the limits are, but if you trade houses you live in and make money each time, you can roll your earnings into the next house and not owe taxes immediately. That makes real estate more tax advantageous that the stock market.

As long as you live in that house for 2 years, is my understanding. This changes sometimes every few years, depending on administrations and Congressional windblowing/bloviation, etc.
 

Rez Exelon

Sharpshooter
Special Hen
Joined
Jan 10, 2009
Messages
3,484
Reaction score
3,347
Location
Tulsa
Stop using the crazy numbers. lol

This example looks like the current long term capital gains tax rate or around 20%, double that and if you made $2,000,000 you'll be taxed at around $1,000,000. Short term is different, I believe treated as ordinary income.
The issue is taxes will be paid on the gains when they are recognized. If you trade stocks, you will be taxed with every trade, even if reinvesting your earnings. Value and purchasing power will be lost with every trade by the amount of the tax. It is uncommon to see higher investment return rates with one stock investment, although companies like Amazon have been a good ride. Most people will trade stocks not just sit in one. Unless they invest in a mutual fund and just ride it out, which is probably the best way to invest for most people.

Something like an S&P index fund.

View attachment 203405
Stop using crazy numbers? I literally went based on your numbers. If anything I scaled back. Look at your sheet, where the top end after 35 years is 2.9 million.

Your sheet show compound interest. You park money somewhere, walk away, have a consistent return. In your example, you never accounted for trades and rebalancing. So quit changing the rules of your own example to suit yourself when corrected.

Again, assuming that from your sheet cell G23 that your realized 2 million in value over 33 years at 20% interest, then the question is "How much tax" is owed. Using the calculator as linked about the amount of tax owed depends on income, and my point is that the spread between the top and the bottom of the brackets is still only 40k if one trusts that calculator.
 

El Pablo

Sharpshooter
Supporting Member
Special Hen Supporter
Joined
Apr 5, 2007
Messages
7,958
Reaction score
8,778
Location
Yukon
This really only affects the Elon Musks and Warren Buffets of the world, that have far more money than I do, and are taxed at a lower rate. Since most of their gains are via stock, and if you just hold on long enough you pay the capitol gains rate. Seems to me that capitol gains rate should be progressive too like the income taxes. Not just a set rate for everyone.
 

okcBob

Sharpshooter
Supporting Member
Special Hen Supporter
Joined
May 17, 2020
Messages
5,295
Reaction score
8,369
Location
okc
Not buying the progressive tax model. Flat tax makes the most sense to me. Everybody should have skin in the game. Half the country doesn’t pay federal income tax, so why wouldn’t they want someone else to fund the govt?
 

TedKennedy

Sharpshooter
Supporting Member
Special Hen Supporter
Joined
Oct 9, 2012
Messages
11,214
Reaction score
12,367
Location
Tulsa
This really only affects the Elon Musks and Warren Buffets of the world, that have far more money than I do, and are taxed at a lower rate. Since most of their gains are via stock, and if you just hold on long enough you pay the capitol gains rate. Seems to me that capitol gains rate should be progressive too like the income taxes. Not just a set rate for everyone.

Why?
 

Latest posts

Top Bottom