Long term capital gains vs. income averaging.


#1

Long term capital gains vs. income averaging.

Profits due to the sale of anything owned by the seller for at least the full year prior to the sales transaction are granted extraordinary and unjustified tax reductions for their long term capital gain incomes.

I do not argue that incomes of those who continuously reinvest into and strive to nurture their enterprises are MORE worthy but they are CERTAINLY NOT LESS economically worthy than those who choose to “take the money and run”.

Income is income; reduced rates for long term capital gains are unjustified.
////////////////////////////////////////////////////////////////////////////////////

There was an “income averaging” provision within our income tax regulations that mitigated progressive tax rate’s excesses when applied to the filing’s year’s taxable income but only IF the filing year’s taxable income was significantly greater than that of the prior year.

This tax reduction rewarded but was not limited to wealthy investors or those that sold their homes. It benefitted lottery or quiz program winners, sport or entertainment figures, inventors or anyone else that hit ANY KIND of financial jackpot within the taxable year for which they were filing an income tax return. It compensated those who were lucky or daring or devoted years for study or practice of their chosen professions.
It was of no particular benefit to those with comparatively level annual incomes; (such as a Buffett, Romney or your mailman).
I advocate elimination of the long term capital gain, tax loophole. If it’s the U.S. Congress’s opinion we need a tax reduction to compensate for progressive tax rates’ effects, I suggest re-enacting what was the superior tax provision, (i.e. the income averaging provision) within our tax regulations.

Respectfully, Supposn


#2

This is ridiculous, the ability to average out extreme expenses and windfalls for 5 years is neither “extraordinary” or “unjustified”, it is a vital part of running a business.

If I have to replace a truck (an enormous expense), this business expense will serve my company for the next 5 years. If I am forced to take the entire deduction in one year then 3/4s of this expense save me nothing because the first 1/4 of the cost already drops me to the lowest bracket. In this scenario I would be paying enormous truck payments for the next 4 years with no deduction to offset them, meaning all the payments would be taxed as income.

Likewise, if I sell a piece of equipment that I have depreciated out to zero more than one year after I have taken the last portion then I would owe the ENTIRE sales price in profit for one year (placing me in a much higher bracket) even though that windfall was 6 years in the making and does NOT reflect my annual income.

The averaging is what makes it possible to survive as a small business, only regular traders are taxed at a higher rate because they actually initiate an investment and conclude the same investment in the same year. That means their “profits” ARE an accurate reflection of their income that year, those of us who spend years setting the table for various Capital Gains use averaging to accurately reflect the overall time and investment that is represented as each effort is brought to fruition.

What you are proposing would basically mean that in up years, a business will be raped but in down years they are just on their own. This in no way would accurately reflect the annual profit of any business and since business cannot bring every investment to fruition in one calender year you would have raised the tax burden beyond the actual average profit.

Putting the business out of business.

This is not a “loophole”, it is common sense if you had ever earned your living as a business person instead of just regular paychecks. I have had two of the last 4 years produce ZERO profit but I have done better than most in my business because I also have not lost money. I have survived because of decisions that enable Capital to exist that was made in better years.

Those “better” years would not reflect my income accurately and those zero profit years would not reflect my income accurately either, averaging is the only way to get an accurate assessment of what tax bracket I belong in.

You have absolutely no idea what you are talking about as evidenced by this post, you just use cliches to spout Class Warfare without ever having risked anything yourself.

“Income is income” is not what you are advocating, you are advocating that all income is annual income

That is ridiculous and juvenile.


#3

RET423, you’re defending the accounting and tax methods for depreciating capital goods. There’s NOTHING within this discussion thread regarding that issue.

Incomes averaging were previous provisions within our federal of income tax regulations dealing exclusively with the final annual taxable incomes. Depreciation methods are inconsequential to this issue.

I’m not familiar with the tax regulations limited to ranching or agriculture. I’ve read that the income averaging tax provisions still are in effect for farmers. I do not know if that’s actually the fact. I was aware and personally used the income averaging method when it was to my own advantage.

I suspect that those provisions were eliminated because many tax preparers were less aware of it and at the time it was being used, I suppose it was more difficult to use and to administer. In those years most tax preparers did not have computers and data processing was much more exotic and expensive.

Long term capital gains are narrowly described source of incomes. I’m opposed to “special strokes for special folks”. The income averaging tax provisions were applicable to anyone who had a particularly good income year. It wasn’t limited to investors. If you hit the lottery or sold your house, or finally received your degree and no longer were impoverished, those tax provisions mitigated progressive income tax rates’ effects upon your total taxes.

Respectfully, Supposn


#4

I am defending the long term capital gains tax rate and the ability to amortize income and expenses over 5 or 7 years instead of treating all income and expenses as current year conditions.

You are condemning the lower rate for long term capital gains than short term capital gains AND the ability to amortize income over a predetermined span of time.

And Long Term Capital Gains is not “Narrowly Defined”, any Capital Gain that is realized on an investment that you have held for longer than 1 year can be entered on your tax return as a “Long Term” Capital Gain. I do this every year, don’t tell me I don’t know what I have to pay for long and short term capital gains.

And of course there are tax laws that are “only limited to investors”, there are also tax laws that are “only limited to trucking companies” and laws “only limited to restaurant” and every other damn thing that exists on the planet. Our tax code is an immoral monstrosity of corruption that those like you use to convince the ignorant that the people who are paying** ALL THE TAXES** right now are not yet giving you enough money to be “fair”.

You are not entitled to one single penny of anyone’s earnings but your own, what you get now you steal and what you advocate for here is more stealing.

ALL Capital Gains whether long or short term are earned on dollars that have ALREADY BEEN TAXED , taxing them again at any rate is like paying sales tax to buy seeds and then being taxed again every time you eat something out of your garden.


#5

RET423, the current tax treatment of long term capital gains do not and the prior tax provisions for income averaging did not affect or were affected b tax provisions for depreciation OR amortization.

Both tax provisions, (i.e. long term capital gain and income averaging) are concerned with income only AFTER the taxable amount of annual incomes have been determined.

Respectfully, Supposn


#6

RET423, contending capital gains incomes were previously taxed is absolute nonsense.

To use your analogy, if you sold vegetables from your garden, that’s revenue. Your seeds were a portion of your expenses. Your net income, (i.e. annual regular taxable income) is the difference between the two amounts.

Later if you sell part or your entire garden, that sales revenue is capital gains and you have never before paid taxes upon that capital gains income.

Respectfully, Supposn


#7

You are not entitled to one penny of anyone’s earnings or savings but your own, you can try to justify your merciless pursuit of every penny that is earned by people who already shoulder ALL the tax burden for everyone any way you like but you will still be advocating theft at gunpoint from the innocent to reward the lowest of the low.

Give away all your stuff to people who spit in your face and demonize you if you truly believe your propaganda, but we both know that in your world “fairness” only applies to others peoples property don’t we?


#8

My analogy did not include “selling” my vegetables, my analogy was eating my own vegetables.

You changed it because your position is indefensible.


#9

[quote=“RET423, post:4, topic:36480”]
I am defending the long term capital gains tax rate and the ability to amortize income and expenses over 5 or 7 years instead of treating all income and expenses as current year conditions.

You are condemning the lower rate for long term capital gains than short term capital gains AND the ability to amortize income over a predetermined span of time.

And Long Term Capital Gains is not “Narrowly Defined”, any Capital Gain that is realized on an investment that you have held for longer than 1 year can be entered on your tax return as a “Long Term” Capital Gain. I do this every year, don’t tell me I don’t know what I have to pay for long and short term capital gains.

And of course there are tax laws that are “only limited to investors”, there are also tax laws that are “only limited to trucking companies” and laws “only limited to restaurant” and every other damn thing that exists on the planet. Our tax code is an immoral monstrosity of corruption that those like you use to convince the ignorant that the people who are paying** ALL THE TAXES** right now are not yet giving you enough money to be “fair”.

You are not entitled to one single penny of anyone’s earnings but your own, what you get now you steal and what you advocate for here is more stealing.

ALL Capital Gains whether long or short term are earned on dollars that have ALREADY BEEN TAXED , taxing them again at any rate is like paying sales tax to buy seeds and then being taxed again every time you eat something out of your garden.
[/quote]For some reason, I am inclined to believe your end of this argument. :wink:


#10

[quote=“JStang, post:9, topic:36480”]
For some reason, I am inclined to believe your end of this argument. :wink:
[/quote]Ditto


#11

RET423, I did not rewrite your analogy. I continued it by speculating as to “if”.
I’m not at fault for your unwillingness to or inability to contemplate and deal with "If”.

Regarding your analogy, no one’s taxing you for eating from your garden.

Respectfully, Supposn


#12

No but you want to, that is exactly what you are arguing for in this thread.