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walkitoutDuring T-weekend, I had a long discussion with my husband and his brother-in-law, J. We love J. J.'s a great guy. But we really disagreed with him about his opinion on raising taxes on people who make more than [a certain amount of money]. We think that we can afford to pay more taxes because we have more, and we have a moral obligation to share, to take care of those with less, and to make sure we're not the First Against the Wall When the Revolution Comes (ideally, make sure the revolution doesn't come).
Anyway. As a result of this discussion, I dug into the tax rate changes that would have gone into effect if the Bush tax cuts had expired without modification in some detail, which reminded me of the Capital Gains Rate Unicorn. Back in the first round of Bush tax cuts (I know, ancient history, right?), there was some discussion about how we needed to encourage people to buy and hold, so we should create a rate that benefitted people who held ... stuff ... for longer than 5 years. This wasn't supposed to create a windfall, so there was a date after which you must have bought the ... stuff. In the (brief) interim between the first tax cuts and the second tax cuts (hey, you were focused on things other than tax cuts back then, I recognize this), a bunch of Very Clever People did some tax planning and did "irrevocable elections" to take advantage of that 18% rate -- and then the second tax cut happened, producing a _lower rate_ on ... stuff ... whether you held if for 1 year or longer. And then there was scrambling to undo the "irrevocable election".
There are a variety of lessons here, but I'm going to ignore them all.
The 18% tax rate was due to return (really!), which by my calculations would not have helped me when selling the ... stuff ... I've owned the longest, because I bought it before the start date. It would, however, have helped me when selling other ... stuff ... which I bought after the start date and that was over 5 years ago. Cool. Not a big deal, but cool.
But then I thought, Self, that tax rate has _never_ done shit for anyone, except cost them additional CPA time to try to take advantage of it, get screwed by the attempt and then more CPA time to fix the problem. Self, that tax rate is Never Gonna Happen.
HR 8 passed, and as near as I can tell, the Unicorn 18% is gone forever. Which makes sense, because IT WAS A UNICORN.
http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States
Anyway. As a result of this discussion, I dug into the tax rate changes that would have gone into effect if the Bush tax cuts had expired without modification in some detail, which reminded me of the Capital Gains Rate Unicorn. Back in the first round of Bush tax cuts (I know, ancient history, right?), there was some discussion about how we needed to encourage people to buy and hold, so we should create a rate that benefitted people who held ... stuff ... for longer than 5 years. This wasn't supposed to create a windfall, so there was a date after which you must have bought the ... stuff. In the (brief) interim between the first tax cuts and the second tax cuts (hey, you were focused on things other than tax cuts back then, I recognize this), a bunch of Very Clever People did some tax planning and did "irrevocable elections" to take advantage of that 18% rate -- and then the second tax cut happened, producing a _lower rate_ on ... stuff ... whether you held if for 1 year or longer. And then there was scrambling to undo the "irrevocable election".
There are a variety of lessons here, but I'm going to ignore them all.
The 18% tax rate was due to return (really!), which by my calculations would not have helped me when selling the ... stuff ... I've owned the longest, because I bought it before the start date. It would, however, have helped me when selling other ... stuff ... which I bought after the start date and that was over 5 years ago. Cool. Not a big deal, but cool.
But then I thought, Self, that tax rate has _never_ done shit for anyone, except cost them additional CPA time to try to take advantage of it, get screwed by the attempt and then more CPA time to fix the problem. Self, that tax rate is Never Gonna Happen.
HR 8 passed, and as near as I can tell, the Unicorn 18% is gone forever. Which makes sense, because IT WAS A UNICORN.
http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States