[quote=AN][quote=CA renter]Let me clarify this a bit. I would tax passive income at around the same rate as earned income up to a certain amount (maybe up to $50K/year). After that, it graduates, and at some point, it would begin to get steeper (perhaps above $200K/yr, but this could be smoothed to avoid extremely high taxes on one-time sales, etc.). Passive income above $500K/yr would be taxed at the highest marginal rate. I’m pulling these levels out of thin air, and would want to do a more detailed analysis before determining the exact rates and income levels, but these numbers are probably pretty close to what I’d call optimal. Of course, I would allow for some smoothing, maybe over three years, so that windfall events don’t trigger the highest rate if most years only see very low returns.[/quote]
So, in essence, you are saying higher cap gain tax for EVERYONE. Those who currently make < $50k/year (those who are in the 10% and 15% tax bracket) are currently paying 0% in long term cap gain and same as their ordinary income for short term cap gain. You're punishing the investor in the 10% & 15% tax bracket, yet don't touch the day traders and the "speculators".
You've been railing against "speculator", yet your proposal don't touch those guys but drastically affect those who are investors (those who hold their investments for at least a year).
BTW, what's your definition of steep? Also, why stop at $500k? I'd say, we should have a billionaire tax. How about 80% tax on all time of incomes for billionaires? Is that steep enough?[/quote]
Okay, I'm not a CPA, and am not in the 10-15% rate group, so not sure how those with LT gains pay 0% if they earn $50K in regular income??? It's my understanding that you pay 15% on LT gains, irrespective of your earned income. Am I off on this?
edit: Wow, found this:
The tax rate on long-term gains was reduced in 2003 to 15%, or to 5% for individuals in the lowest two income tax brackets (See progressive tax).
