Author Topic: In what ways do you disagree with MMM's approach?  (Read 47273 times)

nereo

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Re: In what ways do you disagree with MMM's approach?
« Reply #350 on: July 15, 2020, 02:37:24 PM »
How exactly would you tax unrealized capital gains?

How does the government tax the unrealized appreciation on your house? They estimate it.

Actually taxing unrealized gains on many things would be far easier. House prices are hugely individually variable. One share of a particular stock has a market-set value at any given point of time. A stock wealth tax would be as easy as saying "take the value of your shares at market close on Dec 31."

You could either base the tax on total investment value or just on Gains, but either way it's just as easy to calculate.

So would you tax the gains again upon sale, or would you simply shift capital gains to an annual reporting? 
If the former, how will you address the ‘double-taxation’ issue?
If the latter, what problem is this meant to solve, and how does it solve it?

sherr

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Re: In what ways do you disagree with MMM's approach?
« Reply #351 on: July 15, 2020, 03:13:28 PM »
How exactly would you tax unrealized capital gains?

How does the government tax the unrealized appreciation on your house? They estimate it.

Actually taxing unrealized gains on many things would be far easier. House prices are hugely individually variable. One share of a particular stock has a market-set value at any given point of time. A stock wealth tax would be as easy as saying "take the value of your shares at market close on Dec 31."

You could either base the tax on total investment value or just on Gains, but either way it's just as easy to calculate.

So would you tax the gains again upon sale, or would you simply shift capital gains to an annual reporting? 
If the former, how will you address the ‘double-taxation’ issue?
If the latter, what problem is this meant to solve, and how does it solve it?

Are you asking me to propose a full tax reform plan? I don't have one ready for you.

My point was simply that the idea of a wealth tax is neither impractical nor really that onerous. If they can tax you on the value of your house every year then why not stocks?

iris lily

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Re: In what ways do you disagree with MMM's approach?
« Reply #352 on: July 15, 2020, 06:00:38 PM »
How exactly would you tax unrealized capital gains?

How does the government tax the unrealized appreciation on your house? They estimate it.

Actually taxing unrealized gains on many things would be far easier. House prices are hugely individually variable. One share of a particular stock has a market-set value at any given point of time. A stock wealth tax would be as easy as saying "take the value of your shares at market close on Dec 31."

You could either base the tax on total investment value or just on Gains, but either way it's just as easy to calculate.

So would you tax the gains again upon sale, or would you simply shift capital gains to an annual reporting? 
If the former, how will you address the ‘double-taxation’ issue?
If the latter, what problem is this meant to solve, and how does it solve it?

Are you asking me to propose a full tax reform plan? I don't have one ready for you.

My point was simply that the idea of a wealth tax is neither impractical nor really that onerous. If they can tax you on the value of your house every year then why not stocks?

Well, The quick rejoinder to that question is: the taxing authority for my real estate makes and keeps records about my real estate. They don’t count on me to report what I own and the value of it, , they know that I own it, approximate size, how many bathrooms and etc.and They have their own system of assigning value to all of those things.

That would not be the case for other assets I own.

« Last Edit: July 16, 2020, 05:55:52 AM by iris lily »

nereo

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Re: In what ways do you disagree with MMM's approach?
« Reply #353 on: July 15, 2020, 07:25:50 PM »
How exactly would you tax unrealized capital gains?

How does the government tax the unrealized appreciation on your house? They estimate it.

Actually taxing unrealized gains on many things would be far easier. House prices are hugely individually variable. One share of a particular stock has a market-set value at any given point of time. A stock wealth tax would be as easy as saying "take the value of your shares at market close on Dec 31."

You could either base the tax on total investment value or just on Gains, but either way it's just as easy to calculate.

So would you tax the gains again upon sale, or would you simply shift capital gains to an annual reporting? 
If the former, how will you address the ‘double-taxation’ issue?
If the latter, what problem is this meant to solve, and how does it solve it?

Are you asking me to propose a full tax reform plan? I don't have one ready for you.

My point was simply that the idea of a wealth tax is neither impractical nor really that onerous. If they can tax you on the value of your house every year then why not stocks?

No, I’m not asking for a full tax reform plan, but since you suggested taxing unrealized gains I was curious how you believe that should work.  There are two divergent ways of taxing unrealized gains, and both have their own inherent problems.
Ultimately if your goal is to tax wealth instead of (or in addition to) taxing income, levying taxes on unrealized gains is not going to probably not an effective way of accomplishing this aim.

mjdh1957

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Re: In what ways do you disagree with MMM's approach?
« Reply #354 on: July 16, 2020, 01:35:21 AM »
Ireland in effect has taxes on unrealised investment gains. Investment funds have an 'exit tax' which is currently 41% on gains made when you sell, but it is also levied every eight years whether you sell or not.

https://www.irishlife.ie/sites/retail/files/bline-content/exit_tax.pdf

talltexan

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Re: In what ways do you disagree with MMM's approach?
« Reply #355 on: July 16, 2020, 05:59:33 AM »
I suppose the estate tax counts as a tax on unrealized gains.

Imma

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Re: In what ways do you disagree with MMM's approach?
« Reply #356 on: July 16, 2020, 07:26:04 AM »
In my country (the Netherlands) we don't tax capital gains, we tax wealth on Jan 1st. They've chosen to do that exactly because taxing unrealized/realized gains is a hassle. So you just pay taxes on whatever you own at that date. It doesn't matter if you own a property or stocks or hold money in cash.

DadJokes

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Re: In what ways do you disagree with MMM's approach?
« Reply #357 on: July 16, 2020, 07:48:49 AM »
In my country (the Netherlands) we don't tax capital gains, we tax wealth on Jan 1st. They've chosen to do that exactly because taxing unrealized/realized gains is a hassle. So you just pay taxes on whatever you own at that date. It doesn't matter if you own a property or stocks or hold money in cash.

How do they determine the value of what you own?

As it relates to stocks, I'm guessing that it would have to either be at cost or at current value. If it's current value, then that is unrealized gains.

Imma

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Re: In what ways do you disagree with MMM's approach?
« Reply #358 on: July 16, 2020, 08:16:59 AM »
In my country (the Netherlands) we don't tax capital gains, we tax wealth on Jan 1st. They've chosen to do that exactly because taxing unrealized/realized gains is a hassle. So you just pay taxes on whatever you own at that date. It doesn't matter if you own a property or stocks or hold money in cash.

How do they determine the value of what you own?

As it relates to stocks, I'm guessing that it would have to either be at cost or at current value. If it's current value, then that is unrealized gains.

- the money in your checking/savings/investment accounts
- minus loans and mortgages (cross checked with information provided by banks/brokers)
- cash, precious metals for investing (gold bars, not gold jewelry)
self-report but if you hide stuff it's fraud
- value of any properties you own except your main residence, value is estimated by the local government or property tax purposes (cross checked with local government and land registry)

talltexan

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Re: In what ways do you disagree with MMM's approach?
« Reply #359 on: July 16, 2020, 09:14:06 AM »
How are business entities valued for this? What about quasi-investable assets like wines or art?

Suppose you're accumulating a balance in a whole life insurance product?

Linea_Norway

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Re: In what ways do you disagree with MMM's approach?
« Reply #360 on: July 16, 2020, 12:33:04 PM »
In my country (the Netherlands) we don't tax capital gains, we tax wealth on Jan 1st. They've chosen to do that exactly because taxing unrealized/realized gains is a hassle. So you just pay taxes on whatever you own at that date. It doesn't matter if you own a property or stocks or hold money in cash.

In Norway we do both, capital gains on selling stocks, about 30%! And wealth on Jan 1rst, about 1%. With 25% reduction when you have invested in stock, rather than cash.

All Norwegian banks and stock brokers report in automatically. You need to self report on anything you buy abroad.
« Last Edit: July 16, 2020, 12:34:37 PM by Linea_Norway »

Imma

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Re: In what ways do you disagree with MMM's approach?
« Reply #361 on: July 16, 2020, 02:01:37 PM »
How are business entities valued for this? What about quasi-investable assets like wines or art?

Suppose you're accumulating a balance in a whole life insurance product?

Whole life insurance doesn't exist where we live. Quasi-investable assets are a matter for tax lawyers. The tax authorities need to prove they are bought as investments and not for personal use. That's nearly impossible for them to do so it's certainly a popular way to hide assets (as are cars, watches, vintage instruments). If you sell them and make a lot of profit there will be more money in your bank account that can easily be taxed. The wealth tax isn't very high so a lot of people don't even bother.

If you own more than 5% of company stock there's a special way to tax that (I could totally explain that, I'm a tax law specialist by trade :)  but it would take a lot of paragraphs - we sort of tax gains there) if you own less than 5% your stock in a company this is just seen as a regular investment. If the company is not publicly traded, valuation can be an issue - in that case the value of the stock is based on the company's balance sheet and sometimes the tax authorities have heated debates about this with the company's accountants and lawyers. But I'm sure that happens in all countries.   

EscapeVelocity2020

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Re: In what ways do you disagree with MMM's approach?
« Reply #362 on: July 16, 2020, 02:23:23 PM »
I realize that this is off topic, but I'm encouraged to see Mustachians thinking so much about US taxes.  It is inevitable that US tax reforms are headed our way and the most simple and effective way to increase taxes would be a wealth tax.  With all the unemployment now and for the foreseeable future, income tax reform will not close the gap with what was already a $1T deficit in 2019.

Also, social security cuts will be coming sooner than expected.

Quote
Because Americans are facing unemployment in record numbers, there are a lot of people not paying payroll taxes right now. That means the SSA is collecting a lot less than expected in taxes and will likely need to take even more from its trust funds to continue paying out current benefits. While nobody knows exactly what this will mean for the future of Social Security, a report from the Bipartisan Policy Center estimates that because of COVID-19, the trust funds could be depleted as soon as 2028.

Buffaloski Boris

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Re: In what ways do you disagree with MMM's approach?
« Reply #363 on: July 16, 2020, 09:32:42 PM »
I realize that this is off topic, but I'm encouraged to see Mustachians thinking so much about US taxes.  It is inevitable that US tax reforms are headed our way and the most simple and effective way to increase taxes would be a wealth tax.  With all the unemployment now and for the foreseeable future, income tax reform will not close the gap with what was already a $1T deficit in 2019.

Also, social security cuts will be coming sooner than expected.

Quote
Because Americans are facing unemployment in record numbers, there are a lot of people not paying payroll taxes right now. That means the SSA is collecting a lot less than expected in taxes and will likely need to take even more from its trust funds to continue paying out current benefits. While nobody knows exactly what this will mean for the future of Social Security, a report from the Bipartisan Policy Center estimates that because of COVID-19, the trust funds could be depleted as soon as 2028.

Glad you bring up taxes. A pet peeve of mine is that to the extent FI commentators talk about taxes, they almost always ignore state and local taxes.  Those are a big deal for me; the state and local bite overall is a good third to half of what the Federal part is. We get all excited that we get a break on capital gains at the Federal level, but don’t consider that a lot of states give zero preferential treatment to capital gains in paying state income taxes. And it’s going to get dramatically more intense soon. Most states can’t spend at a deficit. Whereas the Federal government can and does.

Imma

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Re: In what ways do you disagree with MMM's approach?
« Reply #364 on: July 17, 2020, 01:06:21 AM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.

I'm a homeowner, our property is maybe worth €200k and we pay like €750-1000/year for all local taxes combined. Some taxes are hidden, for example in the water bill, so this is an estimate.

LWYRUP

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Re: In what ways do you disagree with MMM's approach?
« Reply #365 on: July 17, 2020, 04:26:06 AM »
I realize that this is off topic, but I'm encouraged to see Mustachians thinking so much about US taxes.  It is inevitable that US tax reforms are headed our way and the most simple and effective way to increase taxes would be a wealth tax.  With all the unemployment now and for the foreseeable future, income tax reform will not close the gap with what was already a $1T deficit in 2019.

Also, social security cuts will be coming sooner than expected.

Quote
Because Americans are facing unemployment in record numbers, there are a lot of people not paying payroll taxes right now. That means the SSA is collecting a lot less than expected in taxes and will likely need to take even more from its trust funds to continue paying out current benefits. While nobody knows exactly what this will mean for the future of Social Security, a report from the Bipartisan Policy Center estimates that because of COVID-19, the trust funds could be depleted as soon as 2028.

Glad you bring up taxes. A pet peeve of mine is that to the extent FI commentators talk about taxes, they almost always ignore state and local taxes.  Those are a big deal for me; the state and local bite overall is a good third to half of what the Federal part is. We get all excited that we get a break on capital gains at the Federal level, but don’t consider that a lot of states give zero preferential treatment to capital gains in paying state income taxes. And it’s going to get dramatically more intense soon. Most states can’t spend at a deficit. Whereas the Federal government can and does.

If you stack together income + property + sales, I pay may state more than I pay the federal government. 

mjdh1957

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Re: In what ways do you disagree with MMM's approach?
« Reply #366 on: July 17, 2020, 04:40:10 AM »
I'm always surprised at how high local taxes are in the US

Me too. In Ireland I pay €260 per year local property tax

Adam Zapple

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Re: In what ways do you disagree with MMM's approach?
« Reply #367 on: July 17, 2020, 05:26:05 AM »
I didn't read all of the replies and I am nitpicking here.  I don't know that MMM necessarily considers himself an environmentalist, but several followers of this blog do.  I just don't think that you can call yourself an environmentalist while simultaneously investing in global corporations who push consumerism, create tons of unnecessary waste, carbon emissions and pollution.  I have heard the argument that we are not actually investing in, say, Exxon Mobil, but are purchasing a share from another person and the corporation doesn't recieve this money so it's fine.  This is nonsense.  Our participation in creating a demand for the shares we purchase raises capital and enriches the corporation, its investors, its CEO's etc.  Without the demand for shares, corporations would not exist. 

I recognize this is a highly complex subject.  In some situations, large corporations can actually be beneficial in comparison to several smaller, less efficient companies in terms of waste and pollution etc.  I am also not an all-or-nothing person.  I just don't think we can consider ourselves more virtous than your average consumer who drives an SUV and spends all of their money on lattes instead of investing since we are participants in a market that benefits corporations who destroy the planet.
« Last Edit: July 17, 2020, 05:27:41 AM by Adam Zapple »

Buffaloski Boris

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Re: In what ways do you disagree with MMM's approach?
« Reply #368 on: July 17, 2020, 05:52:33 AM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.

I'm a homeowner, our property is maybe worth €200k and we pay like €750-1000/year for all local taxes combined. Some taxes are hidden, for example in the water bill, so this is an estimate.

Wow.  To pay only $1000 in state and local taxes in a year! Once I enter into retirement, what I pay to state and local governments will be more than I pay the Federal government as I'll no longer be paying into our Federal pension scheme (social security), and will presumably be in a lower or at least not any higher (Federal) marginal income tax bracket.

As for property taxes, renters do not pay those directly in the US, but they pay them indirectly as part of their rent.  My property taxes, which are probably on the lower end, are roughly $4000 a year.  Plus I pay a state income tax (about 5-6% marginal rate), plus I pay state and local sales tax (VAT) of 6%, plus any hidden taxes on gasoline, alcohol, vehicle registration, licenses, property transfer taxes, etc.  And my state is probably on the middle end when it comes to taxes.  States such as NJ/NY/CA typically have much higher taxes.

There is this theme that Europeans pay significantly more in taxes than Americans.  When you add it all together, it's not quite as big of a difference.   

Yet for some reason we in the FI community seem to be more concerned about the economic impact of 0.5% to 1% in investment fees on our portfolio while ignoring the long term impact of upwards of 7-10% marginal state income tax rates that some folks are paying.
« Last Edit: July 17, 2020, 05:56:19 AM by Buffaloski Boris »

talltexan

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Re: In what ways do you disagree with MMM's approach?
« Reply #369 on: July 17, 2020, 06:00:01 AM »
I didn't read all of the replies and I am nitpicking here.  I don't know that MMM necessarily considers himself an environmentalist, but several followers of this blog do.  I just don't think that you can call yourself an environmentalist while simultaneously investing in global corporations who push consumerism, create tons of unnecessary waste, carbon emissions and pollution.  I have heard the argument that we are not actually investing in, say, Exxon Mobil, but are purchasing a share from another person and the corporation doesn't recieve this money so it's fine.  This is nonsense.  Our participation in creating a demand for the shares we purchase raises capital and enriches the corporation, its investors, its CEO's etc.  Without the demand for shares, corporations would not exist. 

I recognize this is a highly complex subject.  In some situations, large corporations can actually be beneficial in comparison to several smaller, less efficient companies in terms of waste and pollution etc.  I am also not an all-or-nothing person.  I just don't think we can consider ourselves more virtous than your average consumer who drives an SUV and spends all of their money on lattes instead of investing since we are participants in a market that benefits corporations who destroy the planet.

If you switch from index funds to active investments, I imagine there's a whole menu of environmentally responsible investment options.

Buffaloski Boris

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Re: In what ways do you disagree with MMM's approach?
« Reply #370 on: July 17, 2020, 06:03:37 AM »
I realize that this is off topic, but I'm encouraged to see Mustachians thinking so much about US taxes.  It is inevitable that US tax reforms are headed our way and the most simple and effective way to increase taxes would be a wealth tax.  With all the unemployment now and for the foreseeable future, income tax reform will not close the gap with what was already a $1T deficit in 2019.

Also, social security cuts will be coming sooner than expected.

Quote
Because Americans are facing unemployment in record numbers, there are a lot of people not paying payroll taxes right now. That means the SSA is collecting a lot less than expected in taxes and will likely need to take even more from its trust funds to continue paying out current benefits. While nobody knows exactly what this will mean for the future of Social Security, a report from the Bipartisan Policy Center estimates that because of COVID-19, the trust funds could be depleted as soon as 2028.

Glad you bring up taxes. A pet peeve of mine is that to the extent FI commentators talk about taxes, they almost always ignore state and local taxes.  Those are a big deal for me; the state and local bite overall is a good third to half of what the Federal part is. We get all excited that we get a break on capital gains at the Federal level, but don’t consider that a lot of states give zero preferential treatment to capital gains in paying state income taxes. And it’s going to get dramatically more intense soon. Most states can’t spend at a deficit. Whereas the Federal government can and does.

If you stack together income + property + sales, I pay may state more than I pay the federal government.

No doubt.  But that seems to be an almost hands-off topic.  Yeah, I get the taxes are what we pay for services like roads and a fire department, which I happen to be a big fan of.  There is also a whole lot of variance in efficiency and what people pay for those services. Compare the significantly different tax burdens of a state like SD with no state income tax and relatively light property and sales taxes with another state like NJ where the overall tax burden is confiscatory.  If people are dying on the streets of SD cities because of the lack of services, it's missed my notice.  They have schools, fire departments, paved roads, and they even have schools.   

slappy

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Re: In what ways do you disagree with MMM's approach?
« Reply #371 on: July 17, 2020, 06:33:20 AM »
I didn't read all of the replies and I am nitpicking here.  I don't know that MMM necessarily considers himself an environmentalist, but several followers of this blog do.  I just don't think that you can call yourself an environmentalist while simultaneously investing in global corporations who push consumerism, create tons of unnecessary waste, carbon emissions and pollution.  I have heard the argument that we are not actually investing in, say, Exxon Mobil, but are purchasing a share from another person and the corporation doesn't recieve this money so it's fine.  This is nonsense.  Our participation in creating a demand for the shares we purchase raises capital and enriches the corporation, its investors, its CEO's etc.  Without the demand for shares, corporations would not exist. 

I recognize this is a highly complex subject.  In some situations, large corporations can actually be beneficial in comparison to several smaller, less efficient companies in terms of waste and pollution etc.  I am also not an all-or-nothing person.  I just don't think we can consider ourselves more virtous than your average consumer who drives an SUV and spends all of their money on lattes instead of investing since we are participants in a market that benefits corporations who destroy the planet.

If you switch from index funds to active investments, I imagine there's a whole menu of environmentally responsible investment options.

Do they revoke your forum credentials if you switch from index funds, though? /s

slappy

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Re: In what ways do you disagree with MMM's approach?
« Reply #372 on: July 17, 2020, 06:34:04 AM »
I realize that this is off topic, but I'm encouraged to see Mustachians thinking so much about US taxes.  It is inevitable that US tax reforms are headed our way and the most simple and effective way to increase taxes would be a wealth tax.  With all the unemployment now and for the foreseeable future, income tax reform will not close the gap with what was already a $1T deficit in 2019.

Also, social security cuts will be coming sooner than expected.

Quote
Because Americans are facing unemployment in record numbers, there are a lot of people not paying payroll taxes right now. That means the SSA is collecting a lot less than expected in taxes and will likely need to take even more from its trust funds to continue paying out current benefits. While nobody knows exactly what this will mean for the future of Social Security, a report from the Bipartisan Policy Center estimates that because of COVID-19, the trust funds could be depleted as soon as 2028.

Glad you bring up taxes. A pet peeve of mine is that to the extent FI commentators talk about taxes, they almost always ignore state and local taxes.  Those are a big deal for me; the state and local bite overall is a good third to half of what the Federal part is. We get all excited that we get a break on capital gains at the Federal level, but don’t consider that a lot of states give zero preferential treatment to capital gains in paying state income taxes. And it’s going to get dramatically more intense soon. Most states can’t spend at a deficit. Whereas the Federal government can and does.

Aren't they included in overall expenses?

DadJokes

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Re: In what ways do you disagree with MMM's approach?
« Reply #373 on: July 17, 2020, 06:40:28 AM »
I realize that this is off topic, but I'm encouraged to see Mustachians thinking so much about US taxes.  It is inevitable that US tax reforms are headed our way and the most simple and effective way to increase taxes would be a wealth tax.  With all the unemployment now and for the foreseeable future, income tax reform will not close the gap with what was already a $1T deficit in 2019.

Also, social security cuts will be coming sooner than expected.

Quote
Because Americans are facing unemployment in record numbers, there are a lot of people not paying payroll taxes right now. That means the SSA is collecting a lot less than expected in taxes and will likely need to take even more from its trust funds to continue paying out current benefits. While nobody knows exactly what this will mean for the future of Social Security, a report from the Bipartisan Policy Center estimates that because of COVID-19, the trust funds could be depleted as soon as 2028.

Glad you bring up taxes. A pet peeve of mine is that to the extent FI commentators talk about taxes, they almost always ignore state and local taxes.  Those are a big deal for me; the state and local bite overall is a good third to half of what the Federal part is. We get all excited that we get a break on capital gains at the Federal level, but don’t consider that a lot of states give zero preferential treatment to capital gains in paying state income taxes. And it’s going to get dramatically more intense soon. Most states can’t spend at a deficit. Whereas the Federal government can and does.

It's difficult for a FI commentator to talk about local taxes when local taxes are different everywhere.

As for the current situation, we're anticipating about a 30% increase in property taxes going forward. Since we just refinanced our mortgage, our payment will probably end up close to what it was before the refinance.

Feivel2000

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Re: In what ways do you disagree with MMM's approach?
« Reply #374 on: July 17, 2020, 07:47:43 AM »
How exactly would you tax unrealized capital gains?

How does the government tax the unrealized appreciation on your house? They estimate it.

Actually taxing unrealized gains on many things would be far easier. House prices are hugely individually variable. One share of a particular stock has a market-set value at any given point of time. A stock wealth tax would be as easy as saying "take the value of your shares at market close on Dec 31."

You could either base the tax on total investment value or just on Gains, but either way it's just as easy to calculate.

So would you tax the gains again upon sale, or would you simply shift capital gains to an annual reporting? 
If the former, how will you address the ‘double-taxation’ issue?
If the latter, what problem is this meant to solve, and how does it solve it?

Are you asking me to propose a full tax reform plan? I don't have one ready for you.

My point was simply that the idea of a wealth tax is neither impractical nor really that onerous. If they can tax you on the value of your house every year then why not stocks?

Well, The quick rejoinder to that question is: the taxing authority for my real estate makes and keeps records about my real estate. They don’t count on me to report what I own and the value of it, , they know that I own it, approximate size, how many bathrooms and etc.and They have their own system of assigning value to all of those things.

That would not be the case for other assets I own.

Government can simply force your bank to withdraw the wealth tax based on the information they have about your stocks, etc. Then you can do your taxes to prove that you paid to much.
For other values like wine, gold, art, etc, tax law can simply force you to state it by yourself. And if a tax audit shows that you didn't followed the law, they can take all your possession and throw you in jail, so that it's not that good of a deal, to not pay the wealth tax...

I don't see the problem...

Buffaloski Boris

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Re: In what ways do you disagree with MMM's approach?
« Reply #375 on: July 17, 2020, 08:38:36 AM »
I realize that this is off topic, but I'm encouraged to see Mustachians thinking so much about US taxes.  It is inevitable that US tax reforms are headed our way and the most simple and effective way to increase taxes would be a wealth tax.  With all the unemployment now and for the foreseeable future, income tax reform will not close the gap with what was already a $1T deficit in 2019.

Also, social security cuts will be coming sooner than expected.

Quote
Because Americans are facing unemployment in record numbers, there are a lot of people not paying payroll taxes right now. That means the SSA is collecting a lot less than expected in taxes and will likely need to take even more from its trust funds to continue paying out current benefits. While nobody knows exactly what this will mean for the future of Social Security, a report from the Bipartisan Policy Center estimates that because of COVID-19, the trust funds could be depleted as soon as 2028.

Glad you bring up taxes. A pet peeve of mine is that to the extent FI commentators talk about taxes, they almost always ignore state and local taxes.  Those are a big deal for me; the state and local bite overall is a good third to half of what the Federal part is. We get all excited that we get a break on capital gains at the Federal level, but don’t consider that a lot of states give zero preferential treatment to capital gains in paying state income taxes. And it’s going to get dramatically more intense soon. Most states can’t spend at a deficit. Whereas the Federal government can and does.

It's difficult for a FI commentator to talk about local taxes when local taxes are different everywhere.

As for the current situation, we're anticipating about a 30% increase in property taxes going forward. Since we just refinanced our mortgage, our payment will probably end up close to what it was before the refinance.

I disagree that FI commentators can’t talk about state taxes. There are a lot of common themes like geoarbitrage, appeals of property taxes, owning vehicles through an LLC etc to reduce the overall tax burden. It just seems like it’s “too difficult“ for them, so they don’t. And instead they comment on active versus passive investing to save 1% in fees. There’s probably some ideological issues as well. I remember one FI commentator waxing on as to how she was proud to pay her relatively high state and local taxes.

slappy

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Re: In what ways do you disagree with MMM's approach?
« Reply #376 on: July 17, 2020, 08:56:30 AM »
I realize that this is off topic, but I'm encouraged to see Mustachians thinking so much about US taxes.  It is inevitable that US tax reforms are headed our way and the most simple and effective way to increase taxes would be a wealth tax.  With all the unemployment now and for the foreseeable future, income tax reform will not close the gap with what was already a $1T deficit in 2019.

Also, social security cuts will be coming sooner than expected.

Quote
Because Americans are facing unemployment in record numbers, there are a lot of people not paying payroll taxes right now. That means the SSA is collecting a lot less than expected in taxes and will likely need to take even more from its trust funds to continue paying out current benefits. While nobody knows exactly what this will mean for the future of Social Security, a report from the Bipartisan Policy Center estimates that because of COVID-19, the trust funds could be depleted as soon as 2028.

Glad you bring up taxes. A pet peeve of mine is that to the extent FI commentators talk about taxes, they almost always ignore state and local taxes.  Those are a big deal for me; the state and local bite overall is a good third to half of what the Federal part is. We get all excited that we get a break on capital gains at the Federal level, but don’t consider that a lot of states give zero preferential treatment to capital gains in paying state income taxes. And it’s going to get dramatically more intense soon. Most states can’t spend at a deficit. Whereas the Federal government can and does.

It's difficult for a FI commentator to talk about local taxes when local taxes are different everywhere.

As for the current situation, we're anticipating about a 30% increase in property taxes going forward. Since we just refinanced our mortgage, our payment will probably end up close to what it was before the refinance.

I disagree that FI commentators can’t talk about state taxes. There are a lot of common themes like geoarbitrage, appeals of property taxes, owning vehicles through an LLC etc to reduce the overall tax burden. It just seems like it’s “too difficult“ for them, so they don’t. And instead they comment on active versus passive investing to save 1% in fees. There’s probably some ideological issues as well. I remember one FI commentator waxing on as to how she was proud to pay her relatively high state and local taxes.

I don't recall that individual, but it seems a lot of people feel that way in my community. I think it has to do with the direct effect that they can see and experience. When you pay high property taxes (as i do, $7k a year), generally you are getting something in return. For example, I live in a safe community with a great school district. I personally don't feel I fit in, but many people love the town and are proud to be here. So they see their taxes are part of that. When you pay federal taxes, you don't necessarily benefit directly, at least not in a way that most people can relate to. They see their federal taxes as going to pay for entitlement programs they may not agree with or things that benefit society as a whole, even though they don't impact my daily life directly.

Dicey

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Re: In what ways do you disagree with MMM's approach?
« Reply #377 on: July 17, 2020, 09:24:52 AM »
I realize that this is off topic, but I'm encouraged to see Mustachians thinking so much about US taxes.  It is inevitable that US tax reforms are headed our way and the most simple and effective way to increase taxes would be a wealth tax.  With all the unemployment now and for the foreseeable future, income tax reform will not close the gap with what was already a $1T deficit in 2019.

Also, social security cuts will be coming sooner than expected.

Quote
Because Americans are facing unemployment in record numbers, there are a lot of people not paying payroll taxes right now. That means the SSA is collecting a lot less than expected in taxes and will likely need to take even more from its trust funds to continue paying out current benefits. While nobody knows exactly what this will mean for the future of Social Security, a report from the Bipartisan Policy Center estimates that because of COVID-19, the trust funds could be depleted as soon as 2028.

Glad you bring up taxes. A pet peeve of mine is that to the extent FI commentators talk about taxes, they almost always ignore state and local taxes.  Those are a big deal for me; the state and local bite overall is a good third to half of what the Federal part is. We get all excited that we get a break on capital gains at the Federal level, but don’t consider that a lot of states give zero preferential treatment to capital gains in paying state income taxes. And it’s going to get dramatically more intense soon. Most states can’t spend at a deficit. Whereas the Federal government can and does.

If you stack together income + property + sales, I pay may state more than I pay the federal government.

Due to a successful house flip in a state that doesn't give a break on capital gains, in 2019 we paid way more to the fine state of CA than we did to the feds. But I hadn't considered the question from @LYWRUP's POV.  If I include property taxes in the state portion, it's at least double. If I include the property taxes on our rentals, the disparity gets even bigger... Oh, shit! I'll have to do a little research.

RWD

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Re: In what ways do you disagree with MMM's approach?
« Reply #378 on: July 17, 2020, 10:10:30 AM »
I didn't read all of the replies [...]
Obviously. This topic was beaten to death back on page 3. Short answer is that your logic that you purchasing shares somehow benefits a company is flawed. Even if a very large group of people boycott a stock all it takes is a few wealthy investors without your anti-consumerist concerns to see the potential earnings and bring it back into line with it's actual value based on the performance of the company. Boycott the products, not the stock.

RWD

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Re: In what ways do you disagree with MMM's approach?
« Reply #379 on: July 17, 2020, 10:12:05 AM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.
Why would renters pay property tax? They don't own the property. Though through their rent they are indirectly helping pay the landlord's property tax.

DadJokes

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Re: In what ways do you disagree with MMM's approach?
« Reply #380 on: July 17, 2020, 11:16:35 AM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.

I'm a homeowner, our property is maybe worth €200k and we pay like €750-1000/year for all local taxes combined. Some taxes are hidden, for example in the water bill, so this is an estimate.

The landlords aren't eating the taxes. They pass that expense on to renters in the form of higher rent.

FIPurpose

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Re: In what ways do you disagree with MMM's approach?
« Reply #381 on: July 17, 2020, 11:34:24 AM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.

I'm a homeowner, our property is maybe worth €200k and we pay like €750-1000/year for all local taxes combined. Some taxes are hidden, for example in the water bill, so this is an estimate.

The landlords aren't eating the taxes. They pass that expense on to renters in the form of higher rent.

Landlords can only raise rent in line with market prices. Property taxes are raised 1200 per year, but you can only rent the property for an additional $50 per month, then yes the landlord would have to eat it. There would be a correlation between property taxes and rental prices, but no, there is no economic law that says that all property tax increases can be passed on to the end consumer.

slappy

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Re: In what ways do you disagree with MMM's approach?
« Reply #382 on: July 17, 2020, 11:51:08 AM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.

I'm a homeowner, our property is maybe worth €200k and we pay like €750-1000/year for all local taxes combined. Some taxes are hidden, for example in the water bill, so this is an estimate.

The landlords aren't eating the taxes. They pass that expense on to renters in the form of higher rent.

Landlords can only raise rent in line with market prices. Property taxes are raised 1200 per year, but you can only rent the property for an additional $50 per month, then yes the landlord would have to eat it. There would be a correlation between property taxes and rental prices, but no, there is no economic law that says that all property tax increases can be passed on to the end consumer.

In that situation, wouldn't we eventually end up with a shortage of rentals as landlords find that rental properties are not worth it financially?

FIPurpose

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Re: In what ways do you disagree with MMM's approach?
« Reply #383 on: July 17, 2020, 02:45:46 PM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.

I'm a homeowner, our property is maybe worth €200k and we pay like €750-1000/year for all local taxes combined. Some taxes are hidden, for example in the water bill, so this is an estimate.

The landlords aren't eating the taxes. They pass that expense on to renters in the form of higher rent.

Landlords can only raise rent in line with market prices. Property taxes are raised 1200 per year, but you can only rent the property for an additional $50 per month, then yes the landlord would have to eat it. There would be a correlation between property taxes and rental prices, but no, there is no economic law that says that all property tax increases can be passed on to the end consumer.

In that situation, wouldn't we eventually end up with a shortage of rentals as landlords find that rental properties are not worth it financially?

Could be, then housing prices would drop to the point that more people would buy rather than rent.

At least in the area of the country I'm in, housing prices already make being a landlord a poor investment. Yes, if property taxes go up, and rent stays the same or goes down, then that likely means that home prices are depreciating. (Which would be another way that landlords can "eat it") Usually when property taxes go up, there is some combination of both rent increases and home value depreciation.

FIPurpose

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Re: In what ways do you disagree with MMM's approach?
« Reply #384 on: July 17, 2020, 02:50:10 PM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.

I'm a homeowner, our property is maybe worth €200k and we pay like €750-1000/year for all local taxes combined. Some taxes are hidden, for example in the water bill, so this is an estimate.

The landlords aren't eating the taxes. They pass that expense on to renters in the form of higher rent.

Landlords can only raise rent in line with market prices. Property taxes are raised 1200 per year, but you can only rent the property for an additional $50 per month, then yes the landlord would have to eat it. There would be a correlation between property taxes and rental prices, but no, there is no economic law that says that all property tax increases can be passed on to the end consumer.

In that situation, wouldn't we eventually end up with a shortage of rentals as landlords find that rental properties are not worth it financially?

Could be, then housing prices would drop to the point that more people would buy rather than rent.

At least in the area of the country I'm in, housing prices already make being a landlord a poor investment. Yes, if property taxes go up, and rent stays the same or goes down, then that likely means that home prices are depreciating. (Which would be another way that landlords can "eat it") Usually when property taxes go up, there is some combination of both rent increases and home value depreciation.

Here's at least one paper that did a small analysis on property tax rates vs home appreciation:

https://www.aabri.com/manuscripts/182935.pdf
Quote
The initial review of the relationship between property taxes and home price appreciations suggested that states with low property taxes tend to have higher appreciations. Therefore, the researchers tested a secondary question: Do high property tax per capita states have lower home appreciation growth rates, and vice versa? Though one cannot conclude with statistical certainty that this relationship exists, summary statistics support this notion. For example, nine states that had the highest growth rates of property appreciations had low growth rates of property taxes, only three states having the highest growth rates of appreciation also had the highest property taxes.

Adam Zapple

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Re: In what ways do you disagree with MMM's approach?
« Reply #385 on: July 17, 2020, 03:02:02 PM »
I didn't read all of the replies [...]
Obviously. This topic was beaten to death back on page 3. Short answer is that your logic that you purchasing shares somehow benefits a company is flawed. Even if a very large group of people boycott a stock all it takes is a few wealthy investors without your anti-consumerist concerns to see the potential earnings and bring it back into line with it's actual value based on the performance of the company. Boycott the products, not the stock.

Then I won't beat it anymore other than to say I disagree.

swashbucklinstache

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Re: In what ways do you disagree with MMM's approach?
« Reply #386 on: July 17, 2020, 04:41:01 PM »
I agree with an above poster about an increase in capital gains taxes hitting MMM types, perhaps up to 10 million or so in worth, the most. A commonly used approach among say the 15+ crowd is to not ever actually sell the stock anyway. If I have 25 million dollars in stock it's not difficult to, say, get a 2 million dollar loan secured by your portfolio at quite low rates and use that money to both service the loan and pay your living expenses until you die. A process you could repeat if you wanted to spend more money.

I imagine the 100+ crowd & business owners would dodge in even more effective ways.

I suppose there's probably data about who pays CG taxes we could look at, or ask economists to look at.

Here's a place to start if one were so inclined, at least for the < 10 crowd.

https://fred.stlouisfed.org/tags/series?t=capital%3Bgains%2Flosses

https://www.data.gov/

Bloop Bloop

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Re: In what ways do you disagree with MMM's approach?
« Reply #387 on: July 17, 2020, 09:10:32 PM »
I dislike the idea of a wealth tax because it's double-taxation (it's already been taxed on the way in as income) but I'm all for a punitive estate tax.

My view is that you shouldn't be able to pass more than a modest amount (like say, $1m?) to your heirs, and anything over that can be taxed at 90% for all I care.

The kids didn't earn shit, so why give them the world? It's not good for anyone involved.

FIPurpose

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Re: In what ways do you disagree with MMM's approach?
« Reply #388 on: July 17, 2020, 10:09:33 PM »
I dislike the idea of a wealth tax because it's double-taxation (it's already been taxed on the way in as income) but I'm all for a punitive estate tax.

My view is that you shouldn't be able to pass more than a modest amount (like say, $1m?) to your heirs, and anything over that can be taxed at 90% for all I care.

The kids didn't earn shit, so why give them the world? It's not good for anyone involved.

By that logic sales tax and property tax are double taxation.

Bloop Bloop

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Re: In what ways do you disagree with MMM's approach?
« Reply #389 on: July 17, 2020, 10:12:10 PM »
I dislike the idea of a wealth tax because it's double-taxation (it's already been taxed on the way in as income) but I'm all for a punitive estate tax.

My view is that you shouldn't be able to pass more than a modest amount (like say, $1m?) to your heirs, and anything over that can be taxed at 90% for all I care.

The kids didn't earn shit, so why give them the world? It's not good for anyone involved.

By that logic sales tax and property tax are double taxation.

Recurring property tax is, yes. I'm not a fan of it.

Stamp duty and sales tax I'm fine with as long as it's in line with the cost of the good.

Technically stamp duty and sales tax are double taxation and property tax is triple.

mspym

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Re: In what ways do you disagree with MMM's approach?
« Reply #390 on: July 17, 2020, 11:39:53 PM »
I am a fan of a solid estate tax because it prevents the accumulation of society - distorting wealth*

*mostly, caveat for tech billionaires etc

Kyle Schuant

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Re: In what ways do you disagree with MMM's approach?
« Reply #391 on: July 18, 2020, 02:07:31 AM »
I am a fan of a solid estate tax because it prevents the accumulation of society - distorting wealth*
We could simply treat all income as... income. If you get $100,000, whether it be from a salary, from share dividends, from selling a piece of land, or from a $100,000 stamp collection from your uncle Benny's estate, you get taxed on $100,000.

Imma

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Re: In what ways do you disagree with MMM's approach?
« Reply #392 on: July 18, 2020, 02:16:59 AM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.
Why would renters pay property tax? They don't own the property. Though through their rent they are indirectly helping pay the landlord's property tax.

They don't own the property, but they live there. So they are the users of the services that the local authorities are providing. It wouldn't be fair if all the local services were paid for by the half of the people who own their homes and the renters wouldn't have to pay for thrash pick-up, sewage, dump, water etc.

In my country users and owners are taxed seperately, so if you are living in a property you also own, you have to pay two tax bills: user taxes and owner taxes.

Monkey Uncle

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Re: In what ways do you disagree with MMM's approach?
« Reply #393 on: July 18, 2020, 05:13:35 AM »
I am a fan of a solid estate tax because it prevents the accumulation of society - distorting wealth*
We could simply treat all income as... income. If you get $100,000, whether it be from a salary, from share dividends, from selling a piece of land, or from a $100,000 stamp collection from your uncle Benny's estate, you get taxed on $100,000.

Yes.

In a perfect world, there would only be one kind of tax.  Either a tax on ALL forms of income, as you state.  All money coming in from whatever source gets taxed as ordinary income.  Tax brackets would be progressive, as they are now, though rates obviously would have to be much higher to make up for the loss of revenue from all the other taxes that would be eliminated.

Alternatively, we could tax ALL forms of consumption (with no other kinds of taxes).  Basically a great big sales tax.  Everyone pays the same rate on everything they buy.  This would be more regressive than a progressive income tax, but would still be progressive to an extent, because wealthier people generally spend more than poor people.  Another positive feature is that the tax burden falls heaviest on those who consume the most, which loosely correlates to those who are putting the most burden on society.

RWD

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Re: In what ways do you disagree with MMM's approach?
« Reply #394 on: July 18, 2020, 07:30:37 AM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.
Why would renters pay property tax? They don't own the property. Though through their rent they are indirectly helping pay the landlord's property tax.

They don't own the property, but they live there. So they are the users of the services that the local authorities are providing. It wouldn't be fair if all the local services were paid for by the half of the people who own their homes and the renters wouldn't have to pay for thrash pick-up, sewage, dump, water etc.

In my country users and owners are taxed seperately, so if you are living in a property you also own, you have to pay two tax bills: user taxes and owner taxes.

Over here [in the US] property taxes don't typically cover trash pick-up, water/sewer, etc. Those are covered by the renter as utilities. Sometimes they are included as part of the cost of rent but that is up to the landlord. For services not paid as utilities, again, they are indirectly covered through rent. Money is fungible, after all.

Kyle Schuant

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Re: In what ways do you disagree with MMM's approach?
« Reply #395 on: July 18, 2020, 09:17:00 AM »
In a perfect world, there would only be one kind of tax.  Either a tax on ALL forms of income, as you state.  All money coming in from whatever source gets taxed as ordinary income.  Tax brackets would be progressive, as they are now, though rates obviously would have to be much higher to make up for the loss of revenue from all the other taxes that would be eliminated.
Or just eliminate all deductions, and you wouldn't have to change tax brackets at all - this would deal with the millionaires who pay no tax, and would grab a fair chunk of cash from the rest of us.

If you think the spending will benefit you, then you spend it. But you don't get to charge it to the public purse, even partially.


Of course, this will never happen. The reason Australia (for example) has 6,000 pages of income tax legislation is that at some point someone had their hand out, and someone else thought maybe if they filled that hand with cash, that person would vote for them; repeat this process a lot of times and it's trivial to get to thousands of pages. Ten or twenty years on both the voter and the MP have forgotten all about the exchange, but the budgetary hole remains there below the waterline, letting water into the ship of state. With enough holes you look around to find you're always in deficit and the ship is sinking.


The system is supposed to be complex and allow rorts. If it wasn't then this sort of thing couldn't happen.


https://www.reuters.com/article/us-health-coronavirus-bankruptcy-bonuses/on-eve-of-bankruptcy-u-s-firms-shower-execs-with-bonuses-idUSKCN24I1EE

FIPurpose

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Re: In what ways do you disagree with MMM's approach?
« Reply #396 on: July 18, 2020, 09:21:59 AM »
In a perfect world, there would only be one kind of tax.  Either a tax on ALL forms of income, as you state.  All money coming in from whatever source gets taxed as ordinary income.  Tax brackets would be progressive, as they are now, though rates obviously would have to be much higher to make up for the loss of revenue from all the other taxes that would be eliminated.
Or just eliminate all deductions, and you wouldn't have to change tax brackets at all - this would deal with the millionaires who pay no tax, and would grab a fair chunk of cash from the rest of us.

If you think the spending will benefit you, then you spend it. But you don't get to charge it to the public purse, even partially.


Of course, this will never happen. The reason Australia (for example) has 6,000 pages of income tax legislation is that at some point someone had their hand out, and someone else thought maybe if they filled that hand with cash, that person would vote for them; repeat this process a lot of times and it's trivial to get to thousands of pages. Ten or twenty years on both the voter and the MP have forgotten all about the exchange, but the budgetary hole remains there below the waterline, letting water into the ship of state. With enough holes you look around to find you're always in deficit and the ship is sinking.


The system is supposed to be complex and allow rorts. If it wasn't then this sort of thing couldn't happen.


https://www.reuters.com/article/us-health-coronavirus-bankruptcy-bonuses/on-eve-of-bankruptcy-u-s-firms-shower-execs-with-bonuses-idUSKCN24I1EE

'rort': huh, that's a new word to me :p

Cranky

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Re: In what ways do you disagree with MMM's approach?
« Reply #397 on: July 18, 2020, 04:08:26 PM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.
Why would renters pay property tax? They don't own the property. Though through their rent they are indirectly helping pay the landlord's property tax.

It depends on where you are. In some states landlords are required to pay the water bill, and trash pickup is a city service, not something you pay separately.

When we lived in Michigan, in what was surely the world’s worst apartment, we got a state tax rebate every year on the amount of property tax we “paid” in our rent because we were low income.

They don't own the property, but they live there. So they are the users of the services that the local authorities are providing. It wouldn't be fair if all the local services were paid for by the half of the people who own their homes and the renters wouldn't have to pay for thrash pick-up, sewage, dump, water etc.

In my country users and owners are taxed seperately, so if you are living in a property you also own, you have to pay two tax bills: user taxes and owner taxes.

Over here [in the US] property taxes don't typically cover trash pick-up, water/sewer, etc. Those are covered by the renter as utilities. Sometimes they are included as part of the cost of rent but that is up to the landlord. For services not paid as utilities, again, they are indirectly covered through rent. Money is fungible, after all.

RWD

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Re: In what ways do you disagree with MMM's approach?
« Reply #398 on: July 18, 2020, 06:17:19 PM »
I'm always surprised at how high local taxes are in the US and that they only seem to be paid by homeowners as far as I can see and not by renters. To me that sounds quite odd.
Why would renters pay property tax? They don't own the property. Though through their rent they are indirectly helping pay the landlord's property tax.

They don't own the property, but they live there. So they are the users of the services that the local authorities are providing. It wouldn't be fair if all the local services were paid for by the half of the people who own their homes and the renters wouldn't have to pay for thrash pick-up, sewage, dump, water etc.

In my country users and owners are taxed seperately, so if you are living in a property you also own, you have to pay two tax bills: user taxes and owner taxes.

Over here [in the US] property taxes don't typically cover trash pick-up, water/sewer, etc. Those are covered by the renter as utilities. Sometimes they are included as part of the cost of rent but that is up to the landlord. For services not paid as utilities, again, they are indirectly covered through rent. Money is fungible, after all.

It depends on where you are. In some states landlords are required to pay the water bill, and trash pickup is a city service, not something you pay separately.

When we lived in Michigan, in what was surely the world’s worst apartment, we got a state tax rebate every year on the amount of property tax we “paid” in our rent because we were low income.

*quote fixed*

Interesting, I was not aware of that (and I've rented in three different states).

sherr

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Re: In what ways do you disagree with MMM's approach?
« Reply #399 on: July 19, 2020, 07:38:09 PM »
Alternatively, we could tax ALL forms of consumption (with no other kinds of taxes).  Basically a great big sales tax.  Everyone pays the same rate on everything they buy.  This would be more regressive than a progressive income tax, but would still be progressive to an extent, because wealthier people generally spend more than poor people.  Another positive feature is that the tax burden falls heaviest on those who consume the most, which loosely correlates to those who are putting the most burden on society.

It doesn't have to be regressive. You can for example tax yachts at 1000% and bread at 0%. And we do that already to some extent in the US, but yes it's not as easy as just declaring brackets for income tax and calling it a day.