Help me understand long term capital gains tax vs income tax

You pay the 15% max for the money you don't work for. You pay the bracket for the money that you have to bust your ass for.

Sounds fair.

Turd. wrote:

You pay the 15% max for the money you don't work for. You pay the bracket for the money that you have to bust your ass for.

Sounds fair.

But I was already taxed on the money I invested. Now I'm being taxed again for saving and investing instead of just spending it?

asdsdf wrote:

But I was already taxed on the money I invested. Now I'm being taxed again for saving and investing instead of just spending it?

That's true for a lot of people. The problem is that a lot of hedge fund managers making upward of $10 million can structure much of their annual salary to be capital gains. So they pay 15% on what is essentially their annual salary, rather than 35%.

mcgato wrote:

asdsdf wrote:

But I was already taxed on the money I invested. Now I'm being taxed again for saving and investing instead of just spending it?

That's true for a lot of people. The problem is that a lot of hedge fund managers making upward of $10 million can structure much of their annual salary to be capital gains. So they pay 15% on what is essentially their annual salary, rather than 35%.

Agreed. Make capital gains tax a graduated scale like income tax. Make it something something just lower than the income tax rate for each tier. That will still incentivize investment, while making things progressive across the board.

asdsdf wrote:

Turd. wrote:

You pay the 15% max for the money you don't work for. You pay the bracket for the money that you have to bust your ass for.

Sounds fair.

But I was already taxed on the money I invested. Now I'm being taxed again for saving and investing instead of just spending it?

Your mastery of the English language leaves much to be desired.

You were already taxed on the money you invested. You are NOT being taxed on this money again.

You are being taxed on any income you generate from this. It just happens that you are being taxed on this income at a lower rate than those folks who are working for their income.

Thanks for playing.

asdsdf wrote:

But I was already taxed on the money I invested. Now I'm being taxed again for saving and investing instead of just spending it?

The money you invested IS NOT being taxed again. The gains on that money are being taxed for the first time and at a lower rate than the money you earned from your job.

The "taxed twice" argument is terribly annoying as it is quite inaccurate.

asdsdf wrote:

But I was already taxed on the money I invested. Now I'm being taxed again for saving and investing instead of just spending it?

You're not being taxed again on the money you invested. You are being taxed on the profit on that investment.

For example, you buy $1000 worth of stock, hold onto it for a few years and then sell it for $1200. You are taxed on the sale price ($1200) minus the cost basis ($1000) or $200 at a 15% rate, so you owe $30 tax on that investment.

The capital gain tax is what liberals pretend doesn't exist when they talk about Warren Buffet paying more than his secretary.

Gold Investor wrote:

The capital gain tax is what liberals pretend doesn't exist when they talk about Warren Buffet paying more than his secretary.

Wrong.

The comparatively low rate of the capital gains tax is the gist of that discussion.

Hannity probably forgot to tell you that, so I can see why you are confused.

high rise wrote:

Suppose I earn $100,000 W2 Income and contribute 10% into my 401(k).

Then suppose I also sold a stock held outside my 401(k) that I held for 2 years that earned $15,000.

How do the taxes work on this?

Suppposedly these are the 2012 brackets for a single person

Tax Bracket Single

10% Bracket $0 – $8,700

15% Bracket $8,700 – $35,350

25% Bracket $35,350 – $85,650

28% Bracket $85,650 – $178,650

33% Bracket $178,650 – $388,350

35% Bracket Over $388,350 Over $388,350

Do I pay on this scale above for $90,000 and then separately 15% on the $15,000 and add those two values together?

Are the W2 earnings kept kind of in separate from long term capital gains earnings?

just to be clear, you will also get a personal exemption and a standard deduction (assuming you don't itemize) before applying the rates in the table.

and a second point of clarification, which i think most of you already understand, is that you don't apply the rate next to the total taxable income amount to all of that taxable income. for example, if your taxable income is in fact $90,000, it's not the case that all $90,000 is taxed at 28%.

mcgato wrote:

asdsdf wrote:

But I was already taxed on the money I invested. Now I'm being taxed again for saving and investing instead of just spending it?

That's true for a lot of people. The problem is that a lot of hedge fund managers making upward of $10 million can structure much of their annual salary to be capital gains. So they pay 15% on what is essentially their annual salary, rather than 35%.

There is the small matter that they have to produce a profit and they put their own capital at risk, which is not quite the same as putting nothing at risk and getting a guaranteed paycheck several times a month.

J. H. Whitney wrote:

mcgato wrote:

That's true for a lot of people. The problem is that a lot of hedge fund managers making upward of $10 million can structure much of their annual salary to be capital gains. So they pay 15% on what is essentially their annual salary, rather than 35%.

There is the small matter that they have to produce a profit and they put their own capital at risk, which is not quite the same as putting nothing at risk and getting a guaranteed paycheck several times a month.

Have you been around the country for the last 5 years? What paycheck is guaranteed?

J. H. Whitney wrote:

a guaranteed paycheck several times a month.

Guaranteed paycheck?

Does your cluelessness know no bounds? Seriously, are you that out of touch?

Fishing Instructor wrote:

asdsdf wrote:

But I was already taxed on the money I invested. Now I'm being taxed again for saving and investing instead of just spending it?

You're not being taxed again on the money you invested. You are being taxed on the profit on that investment.

For example, you buy $1000 worth of stock, hold onto it for a few years and then sell it for $1200. You are taxed on the sale price ($1200) minus the cost basis ($1000) or $200 at a 15% rate, so you owe $30 tax on that investment.

Usually when you hear people talk about being taxed twice they are talking about dividend payouts from a corporation. The corporation pays corporate income tax, then shareholders pay personal income tax on dividend.

Turd. wrote:

Have you been around the country for the last 5 years? What paycheck is guaranteed?

every single one you earn

Turd. wrote:

J. H. Whitney wrote:

[quote]mcgato wrote:

There is the small matter that they have to produce a profit and they put their own capital at risk, which is not quite the same as putting nothing at risk and getting a guaranteed paycheck several times a month.

Have you been around the country for the last 5 years? What paycheck is guaranteed?

reading if FUNdamental, reading comprehension (evidently) is not.

If you work for a paycheck, you are guaranteed that paycheck.

If you work for a percentage of profit, you are not guaranteed anything unless you produce that profit.

Here's one big problem with taxing Capital Gains. Since our government (among others) has decided that it is OK for the first time in recorded history to allow inflation to be the norm, you get taxed even if your investment fails to be worth as much now as when you initiated it. That really sucks!

Holding an $10,000 investment for 10-years at 2% ROR and 2% inflation means you get to pay $329 in taxes even though you are getting back the same amount of purchasing power that you put in. You would have to make 0.4% above inflation just to break even.

Now if you subscribe to the notion that TRUE inflation is somewhere above 10% then good luck trying to match that ROR even though you have to pay a boatload of tax. And at 10% inflation, your ROR would have to be 3.2% points above just to break even.

The government screws us with inflation and then taxes us on top of it too.

Good points and I understood that.

Now my other question:

I saw a chart that said that people in the 10% and 15% brackets pay no capital gains tax in 2012.

So say I made $25,000 a year in W2 income but earned $100,000 in long term capital gains after selling a stock.

Would I pay $0 in capital gains for 2012? And 15% on the last dollar earned from my W2?

Or would I pay 15% on my last dollar earned since that is my W2 income and then get about $10,000 capital gains with no capital gains taxes due and then pay 15% on the $90,000 earnings?

First of all, who says that you already paid taxes on it? There are all sorts of ways you could have come into some money other than after tax savings. Secondly, in so much as you already did pay taxes on it. Why don't you argue for why you had to pay taxes on your earned income in the first place? The bottom line is that others in this thread are right. Exploiting communist labor and leveraging economies are not taxed. But jobs are taxed like its a pack of cigarettes.

asdsdf wrote:

Turd. wrote:

You pay the 15% max for the money you don't work for. You pay the bracket for the money that you have to bust your ass for.

Sounds fair.

But I was already taxed on the money I invested. Now I'm being taxed again for saving and investing instead of just spending it?