Top rate used to be 28% prior to 1990 or so. People still built wealth. Good luck to him getting Congress to approve it, though. Should be a gridlocked two years considering the bitterness on both sides.

The funnier part is the $500 tax credit for to encourage women to work. Does anyone really think that $500 per year is going to make the difference between staying home and working for anyone, considering that not working means forgoing at least $20k per year? And what’s wrong with one-working-parent families anyway?

With 28% rate, for a married couple making $230,450 or a single person making $189,300, there would be no point in keep stocks for a year for long term cap gain anymore. I wonder if this will drive up volume and volatility. At the very least those W2-er who participate in ESPP, there would be no reason to keep it for a year anymore.

[quote=AN]With 28% rate, for a married couple making $230,450 or a single person making $189,300, there would be no point in keep stocks for a year for long term cap gain anymore. I wonder if this will drive up volume and volatility. At the very least those W2-er who participate in ESPP, there would be no reason to keep it for a year anymore.[/quote]

The long-term captain gains tax rate is 20% if and only if your ordinary income tax rate is at 39.6%. The proposed rule change does not apply to the example you described.

[quote=flu]I wonder if the biggest impact what is being proposed have the biggest impact on the middle class that plans on passing on a small biz or primary home to their kids, especially the baby boomers.

Afterall, if my understanding is correct, the proposal also eliminates the capital gains exemption from properties over $500k (not sure how small farms would work)…So…..upon death, the youngsters will need to cough up the capital gains tax bill or sell the property (and most likely they won’t have the money to pay the tax bill)….So in high cost areas…ouch…..And chances are, most of these middle class heirs won’t have the money for the cap gains bill.

For rich(er) people, this won’t be a problem, since I’m sure aforementioned heirs already have their trust funds set up well before that…

Oh, an foreign money aren’t subject to this, so that’s great news for foreign money…

Can you say, screw the upper middle class again?[/quote]
If your understanding is correct and this goes through, then it would make perfect sense to do a cash out refi and then let the property foreclose near your death. That would guarantee your tax rate of the property to be 20% or less, depending on how much they let you pull out. Or you can slowly withdraw money out of your house to help your kids pay for their houses. Then foreclose on your properties. At near death. In another word, there’s no point in having a paid off house if the intention is to pass it on.

[quote=flu]Ever wonder when politicians go after “rich” and attempt to tax “rich more”….somehow, they always leave out all the corporate tax loopholes…but instead go after the much lower hanging fruit, typical higher W2 wage earners (double income earners) with supplemental dividends/investment income that is slightly 1 step above middle class but certainly not “rich”, the ones that typically can’t dodge the tax bill through some sketchy slight of hand… Funny how that always seems to work…..[/quote]

This doesn’t do anything like that. Taxes on wages would be unaffected. Some of the supplemental income would be affected if it was capital gains. No change to taxes on dividends or interest for high wage earners. The biggest effect will be those that have big cap gains. The cap gain tax rate will still be more than 25% lower than on marginal earned income for those affected. There’s no good reason it should be any lower.