Capital Gains and Tax Rates


This post is by Jeff Carter from Points and Figures


Was reading Fred’s blog on taxes this morning.  I am not on Twitter anymore so I will comment here.  Fred argues that capital gains should go up and ordinary income rates should go down and be the same.  He suggests 20%.

My wife and I were doing our taxes this week.  It’s a pain in the butt.  Fred’s worth a lot more than me, and makes a lot more than me so I imagine his tax prep is a lot worse than mine.

There are all kinds of permutations in the tax code.  Some are put there to encourage certain behaviors that we see as “good” for society.  Some are lobbied and inserted.  I can’t begin to go through all the different permutations but I think that research shows most people pay Hauser’s Rate.  At the end of the day, no matter your income, you pay an effective tax rate of about 18%.

I generate my income these days from a management fee and capital gains.  In the old days when I traded commodities, it was a blended cap gains rate and the top ordinary income rate, 60/40.  All my December 31 positions were marked to market and I paid tax on them-even if they were still open.

I’d take Fred’s proposal further.  I’d propose getting rid of all write-offs.  No business expenses and amortization schedules, nothing.  Make it a flat-rate tax of 15% and send it in.  If you make $1,000,000, you pay $150k in taxes.

I would further (Read more...)