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This room is for the discussion of current events,cultural issues and politics especially in relation to Catholic values.

Saint Thomas More was martyred during the Protestant Reformation for standing firm in the Faith and not recognizing the King of England as the Supreme Head of the Church.
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1954. Republican president (Dwight Eisenhower). Republican majority in Senate. Republican majority in House.
Top marginal income tax rate: 91%

2010: Democratic president (Barack Obama). Democratic majority in Senate. Democratic majority in House.
Top marginal income tax rate: 35%

Who is the socialist?

.

Business Insider had an article on the history of income tax rates: www.businessinsider.com

Excerpts:


"Of course, George Bush had broken a campaign promise by raising rates ("Read my lips: No new taxes"), so he was dismissed. And Bill Clinton came in and jacked the top bracket back up to 39.6%. And, lo and behold, the economy boomed! And the deficit shrank! And eventually, we even had a surplus."

"In 2003, the top bracket dropped to 35%. The deficit reappeared--and then soared. And, interestingly, we saw a repeat of the 1920s: An unsustainable economic boom that ultimately collapsed, followed by a massive recession and huge deficits."

"Obviously, no one likes tax increases, but the similarities between the 1920s-1930s and the 2000s-2010s seem hard to ignore. Today, after an era of very low taxes, we have enormous inequality and a huge deficit. Last time that happened, the top tax rate soared (and, it should be noted, the economy boomed--even with the top rate high)."

.

My additions:



The insidious infiltation of Ayn Rand-ish libertarian language into mainstream political discourse is about the most dangerous change among self-styled conservatives in recent years. You see people making insane assertions like "Taxes are stealing. They are a violation of the 10 commandments!"

I wonder if such conservative icons as Barry Goldwater and Ronald Reagan ever said anything as stupid as "taxation is theft".

Don't say: "you are free to contibute to the national debt all you want." That's not an argument. In my personal tax returns I will seek to pay as little as possible within the bounds of the law. You should, too.

Don't say: "it's easy to call for higher taxes if you aren't paying them yourself" or "you're just jealous! you just want to punish rich people" No. We live in a society and we make laws and rules together. Every person on this forum expresses opinions about the behaviors and duties of others. Some of those opinions are about etiquette - "he should respond to my emotigram!" Some are about life choices - "she shouldn't date that guy". Some are about responsiblities of citizenship. "he should have to pay more taxes". I wish we didn't have to pay taxes, but it's a matter of trade-offs. We want the benefits of government. (And the large majority of Americans, including those on CM, want those benefits). We have to pay for them.

Also, please don't talk down to me about how taxes tend (all other things being equal) to suppress economic growth at the margin. I KNOW that, and anyone who has read my posts over the past few months knows I know that. I also know that the big picture is more complicated than that.

11/15/2012 new

Great article! As I was driving to work today I was thinking about how the Republican party is seen as being fiscally responsible, and yet the deficit has ballooned in all of their recent administrations. This shows exactly how it happens. People like lower taxes but, like we tell children, "just because you like it does not mean it is good for you." Time to eat some broccoli instead of crying about candy! Raising taxes is a must if we want to balance the budget!

I like the points about objectivism and how, through the conservatives, it has lead to the outrageous ideas, like"taxes are a violation of the 10 commandments." Ideas like this are, to me, natural absurdities that result from trying to align a philosophy based on atheism and selfish principles to a theology based on love, sacrifice and respect.

The boom/ bust cycle of artificially lowering taxes (i.e. lowering the tax rate just to appease a voting public and win elections) is supported with many empirical examples. The money that is not spent on taxes does not trickle down, it inflates bubbles (like mortgage backed securities inflated the housing bubble) which eventually burst.

Trickle down economics is really bubble economics. The short term growth that is viewed as "proof" that it works is unsustainable (and usually in the form of capital gains which do not increase tax revenue as the theory states). The tragedy of the most recent examples are that the majority of people loose (people who could not afford a house but were tricked into buying one by predatory lenders like Countrywide, the people who's pensions and retirement plans bought into the AAA rating that was smacked on MBS, and the tax payers who bailed out the liars and cheats at the "to big to fail" banks) while others used their capital to short sell the market in derivatives, and make billions on the loss of others.

Taxes are NECESARRY for sustained growth. We need the government to invest in the "unprofitable" things that businesses will not or can not invest in, but are needed to maintain the economic and social well being of our society. Things like providing health care for the poor so they are not forced into "Emergency Only" health care that inflates costs for everybody, building and maintaining transportation infrastructure so products and services can get to where they are needed and the economy as we know it can even exist, providing housing and food assistance to the poor so they can be free to work to better themselves and raise themselves to a higher economic bracket instead of just struggling to find their next meal.

11/15/2012 new

(Quote) Cathy-620979 said: 1954. Republican president (Dwight Eisenhower). Republican majority in Senate. Republican majorit...
(Quote) Cathy-620979 said:

1954. Republican president (Dwight Eisenhower). Republican majority in Senate. Republican majority in House.
Top marginal income tax rate: 91%

2010: Democratic president (Barack Obama). Democratic majority in Senate. Democratic majority in House.
Top marginal income tax rate: 35%

Who is the socialist?

.

Business Insider had an article on the history of income tax rates: www.businessinsider.com

Excerpts:


"Of course, George Bush had broken a campaign promise by raising rates ("Read my lips: No new taxes"), so he was dismissed. And Bill Clinton came in and jacked the top bracket back up to 39.6%. And, lo and behold, the economy boomed! And the deficit shrank! And eventually, we even had a surplus."

"In 2003, the top bracket dropped to 35%. The deficit reappeared--and then soared. And, interestingly, we saw a repeat of the 1920s: An unsustainable economic boom that ultimately collapsed, followed by a massive recession and huge deficits."

"Obviously, no one likes tax increases, but the similarities between the 1920s-1930s and the 2000s-2010s seem hard to ignore. Today, after an era of very low taxes, we have enormous inequality and a huge deficit. Last time that happened, the top tax rate soared (and, it should be noted, the economy boomed--even with the top rate high)."

.

My additions:



The insidious infiltation of Ayn Rand-ish libertarian language into mainstream political discourse is about the most dangerous change among self-styled conservatives in recent years. You see people making insane assertions like "Taxes are stealing. They are a violation of the 10 commandments!"

I wonder if such conservative icons as Barry Goldwater and Ronald Reagan ever said anything as stupid as "taxation is theft".

Don't say: "you are free to contibute to the national debt all you want." That's not an argument. In my personal tax returns I will seek to pay as little as possible within the bounds of the law. You should, too.

Don't say: "it's easy to call for higher taxes if you aren't paying them yourself" or "you're just jealous! you just want to punish rich people" No. We live in a society and we make laws and rules together. Every person on this forum expresses opinions about the behaviors and duties of others. Some of those opinions are about etiquette - "he should respond to my emotigram!" Some are about life choices - "she shouldn't date that guy". Some are about responsiblities of citizenship. "he should have to pay more taxes". I wish we didn't have to pay taxes, but it's a matter of trade-offs. We want the benefits of government. (And the large majority of Americans, including those on CM, want those benefits). We have to pay for them.

Also, please don't talk down to me about how taxes tend (all other things being equal) to suppress economic growth at the margin. I KNOW that, and anyone who has read my posts over the past few months knows I know that. I also know that the big picture is more complicated than that.

--hide--

Both Eisenhower and Obama inherited the tax rates, they did not create them.

11/15/2012 new
(Quote) Cathy-620979 said: 1954. Republican president (Dwight Eisenhower). Republican majority in Senate. Republican majority in House....
(Quote) Cathy-620979 said:

1954. Republican president (Dwight Eisenhower). Republican majority in Senate. Republican majority in House.
Top marginal income tax rate: 91%

2010: Democratic president (Barack Obama). Democratic majority in Senate. Democratic majority in House.
Top marginal income tax rate: 35%

Who is the socialist?



.

Business Insider had an article on the history of income tax rates: www.businessinsider.com

Excerpts:




"Of course, George Bush had broken a campaign promise by raising rates ("Read my lips: No new taxes"), so he was dismissed. And Bill Clinton came in and jacked the top bracket back up to 39.6%. And, lo and behold, the economy boomed! And the deficit shrank! And eventually, we even had a surplus."

"In 2003, the top bracket dropped to 35%. The deficit reappeared--and then soared. And, interestingly, we saw a repeat of the 1920s: An unsustainable economic boom that ultimately collapsed, followed by a massive recession and huge deficits."

"Obviously, no one likes tax increases, but the similarities between the 1920s-1930s and the 2000s-2010s seem hard to ignore. Today, after an era of very low taxes, we have enormous inequality and a huge deficit. Last time that happened, the top tax rate soared (and, it should be noted, the economy boomed--even with the top rate high)."



.



My additions:



The insidious infiltation of Ayn Rand-ish libertarian language into mainstream political discourse is about the most dangerous change among self-styled conservatives in recent years. You see people making insane assertions like "Taxes are stealing. They are a violation of the 10 commandments!"

I wonder if such conservative icons as Barry Goldwater and Ronald Reagan ever said anything as stupid as "taxation is theft".

Don't say: "you are free to contibute to the national debt all you want." That's not an argument. In my personal tax returns I will seek to pay as little as possible within the bounds of the law. You should, too.

Don't say: "it's easy to call for higher taxes if you aren't paying them yourself" or "you're just jealous! you just want to punish rich people" No. We live in a society and we make laws and rules together. Every person on this forum expresses opinions about the behaviors and duties of others. Some of those opinions are about etiquette - "he should respond to my emotigram!" Some are about life choices - "she shouldn't date that guy". Some are about responsiblities of citizenship. "he should have to pay more taxes". I wish we didn't have to pay taxes, but it's a matter of trade-offs. We want the benefits of government. (And the large majority of Americans, including those on CM, want those benefits). We have to pay for them.

Also, please don't talk down to me about how taxes tend (all other things being equal) to suppress economic growth at the margin. I KNOW that, and anyone who has read my posts over the past few months knows I know that. I also know that the big picture is more complicated than that.

--hide--


When the top marginal income tax rate was 90%, the percent of GDP that the government collected in taxes was about 18%. When the top marginal income tax rate was much lower, the percent of GDP that the government collected in taxes was still about 18%. This has been consistent over the last 7 decades. As a percentage of GDP, the particular tax rate is irrelevant.

But historically, as tax rates are higher, the overall GDP as a whole is smaller, meaning that the 18% is a much smaller amount in real terms. On the flip side, as tax rates are lower, the overall GDP is higher, which increases the tax revenue in real terms.

This side of the Laffer curve, you lower tax rates if you want to increase tax revenue.
11/16/2012 new

(Quote) Cathy-620979 said: 1954. Republican president (Dwight Eisenhower). Republican majority in Senate. Republican majorit...
(Quote) Cathy-620979 said:

1954. Republican president (Dwight Eisenhower). Republican majority in Senate. Republican majority in House.
Top marginal income tax rate: 91%

2010: Democratic president (Barack Obama). Democratic majority in Senate. Democratic majority in House.
Top marginal income tax rate: 35%

Who is the socialist?

.

Business Insider had an article on the history of income tax rates: www.businessinsider.com

Excerpts:


"Of course, George Bush had broken a campaign promise by raising rates ("Read my lips: No new taxes"), so he was dismissed. And Bill Clinton came in and jacked the top bracket back up to 39.6%. And, lo and behold, the economy boomed! And the deficit shrank! And eventually, we even had a surplus."

"In 2003, the top bracket dropped to 35%. The deficit reappeared--and then soared. And, interestingly, we saw a repeat of the 1920s: An unsustainable economic boom that ultimately collapsed, followed by a massive recession and huge deficits."

"Obviously, no one likes tax increases, but the similarities between the 1920s-1930s and the 2000s-2010s seem hard to ignore. Today, after an era of very low taxes, we have enormous inequality and a huge deficit. Last time that happened, the top tax rate soared (and, it should be noted, the economy boomed--even with the top rate high)."

.

My additions:



The insidious infiltation of Ayn Rand-ish libertarian language into mainstream political discourse is about the most dangerous change among self-styled conservatives in recent years. You see people making insane assertions like "Taxes are stealing. They are a violation of the 10 commandments!"

I wonder if such conservative icons as Barry Goldwater and Ronald Reagan ever said anything as stupid as "taxation is theft".

Don't say: "you are free to contibute to the national debt all you want." That's not an argument. In my personal tax returns I will seek to pay as little as possible within the bounds of the law. You should, too.

Don't say: "it's easy to call for higher taxes if you aren't paying them yourself" or "you're just jealous! you just want to punish rich people" No. We live in a society and we make laws and rules together. Every person on this forum expresses opinions about the behaviors and duties of others. Some of those opinions are about etiquette - "he should respond to my emotigram!" Some are about life choices - "she shouldn't date that guy". Some are about responsiblities of citizenship. "he should have to pay more taxes". I wish we didn't have to pay taxes, but it's a matter of trade-offs. We want the benefits of government. (And the large majority of Americans, including those on CM, want those benefits). We have to pay for them.

Also, please don't talk down to me about how taxes tend (all other things being equal) to suppress economic growth at the margin. I KNOW that, and anyone who has read my posts over the past few months knows I know that. I also know that the big picture is more complicated than that.

--hide--

Interesting thread topic; and you've had only four replies so far. So, I'll chip in and reply.

It's hard to prove the moving the top marginal rate just from 39.6% to 35% or vice versa has much of an effect on the economy. When Clinton raised it to 39.6%, the economy was already recovering from George H.W. Bush's recession, which proves that raising the top rate 5 or 10 percent, or whatever it was, does not dampen a recovery. What really caused the Clinton economy to boom and the surplus to appear was the lowering of the capital gains tax in 1995. Everytime the capital gains tax is lowered, revenues go up, or so I'm told. Or maybe it had nothing to do with taxes and everything to do with the fact that the Cold War was finally over, the baby-boomers were entering the prime of their careers, and the high-tech industry was growing fast at the time.

And then the dot-com bubble burst around 2000 because Clinton had the highest rate at 39.6% for too long. Okay, well, maybe the 36.9% rate had nothing to do with it. Okay, then maybe, just maybe, the Bush tax rates didn't have everything to do with the housing bubble bursting in 2008. The Bush tax cuts probably did keep the recession after the dot-com burst from becoming severe. This recession that started under Clinton was just as responsible for new deficit as was the tax cuts. By the way, deficits are not caused by tax cuts. Deficits mean that we're spending too much, more than we're taking in. Under Bush we were paying for wars. As the economy recovered, the tax cuts started paying dividends. The capital gains tax was lowered once again under Bush, and record revenues started pouring into the treasury. The deficit wasn't eliminated, but was greatly reduced. Then the deficits grew again in 2007 when the Democrats took control of Congress (and thus they crafted the budgets) and a recession began. Also, baby-boomers were nearing retirement. Then came 2008 and, as we know, everything came apart.

Of course, we know that there are other theories as to what caused the 2008 crash. We can point fingers at Fannie and Freddie, sub-prime mortgages, blah, blah, blah. Austrian economists and Ron Paul followers point to easy money from the Federal Reserve inflating both the dot-come and housing bubbles. But the charge that the Bush tax cuts caused it is also intriguing. They did let the rich stay rich and get richer, and this contributed to the increased wealth concentration, concentrations that we hadn't seen since right before the 1929 crash.

So, maybe there is something to having really high top marginal rates (like 91%). They don't yield great revenues, as Charles explains. They just put a limit on how rich the rich get; thus, the put a limit on wealth concentration. I would slap such insanely high rates only on milionaires, if I do so at all. On all other income levels, raising taxes significantly will slow or stop our recovery. Our economy seems more fragile now, so raising taxes now might not work for us like they worked for Clinton. Better to extend the tax cuts for now and work on comprehensive tax reform in the second term.

11/16/2012 new

(Quote) Clarence-698070 said: Great article! As I was driving to work today I was thinking about how the Republican party is...
(Quote) Clarence-698070 said:

Great article! As I was driving to work today I was thinking about how the Republican party is seen as being fiscally responsible, and yet the deficit has ballooned in all of their recent administrations. This shows exactly how it happens. People like lower taxes but, like we tell children, "just because you like it does not mean it is good for you." Time to eat some broccoli instead of crying about candy! Raising taxes is a must if we want to balance the budget!

I like the points about objectivism and how, through the conservatives, it has lead to the outrageous ideas, like"taxes are a violation of the 10 commandments." Ideas like this are, to me, natural absurdities that result from trying to align a philosophy based on atheism and selfish principles to a theology based on love, sacrifice and respect.

The boom/ bust cycle of artificially lowering taxes (i.e. lowering the tax rate just to appease a voting public and win elections) is supported with many empirical examples. The money that is not spent on taxes does not trickle down, it inflates bubbles (like mortgage backed securities inflated the housing bubble) which eventually burst.

Trickle down economics is really bubble economics. The short term growth that is viewed as "proof" that it works is unsustainable (and usually in the form of capital gains which do not increase tax revenue as the theory states). The tragedy of the most recent examples are that the majority of people loose (people who could not afford a house but were tricked into buying one by predatory lenders like Countrywide, the people who's pensions and retirement plans bought into the AAA rating that was smacked on MBS, and the tax payers who bailed out the liars and cheats at the "to big to fail" banks) while others used their capital to short sell the market in derivatives, and make billions on the loss of others.

Taxes are NECESARRY for sustained growth. We need the government to invest in the "unprofitable" things that businesses will not or can not invest in, but are needed to maintain the economic and social well being of our society. Things like providing health care for the poor so they are not forced into "Emergency Only" health care that inflates costs for everybody, building and maintaining transportation infrastructure so products and services can get to where they are needed and the economy as we know it can even exist, providing housing and food assistance to the poor so they can be free to work to better themselves and raise themselves to a higher economic bracket instead of just struggling to find their next meal.

--hide--


Clarence, you are not entirely correct when you try to compare the money pooled into wall street investments and the money
spent in the economy which buys goods and services. Wall street is a separate animal. And it is also a separate animal to correlate
the unethical and egregious contracts sold by banks and mortgage companies to make money and defraud people to the money
spent by the average person trying to clothe and feed and put a roof over the family. Wall street money only produces more
money, not a product. But money in ones pocket spent in the community spurs growth and job development for each dollar
spent. If you don't understand the seperation, you will feel the way you do.

Anyone who has taken Economics 101 knows that for every worker hired, he uses his money and supports his local economic
community. That is how growth is achieved. The more money he has left in his pockets after taxes, the more he can and will spend.
and the more that spending will effect other businesses.

You have a good point that the money may be used to feed into the frenzy of wall street. But, even those that made a lot of
money from Wall Street investments (not workers on wall street) bought nicer homes and hired people to build them
and the building material companies grew, and they bought more clothes and more food, and so on. It is a natural progression.
Not a dishonest one.

It is a shame that wall street is able to go from one scam to another and the Government, with its power to regulate,
lets it happen. But look at who is on the cabinet under Obama. There are a lot of former Wall Street types. Even
Leon Panetta, the Secretary of Defense was on the board of directors of The New York Stock Exchange. That is known as
"the big board," where historically the large trades are done.

11/16/2012 new

(Quote) Marianne-100218 said: Clarence, you are not entirely correct when you try to compare the money pooled into w...
(Quote) Marianne-100218 said:



Clarence, you are not entirely correct when you try to compare the money pooled into wall street investments and the money
spent in the economy which buys goods and services. Wall street is a separate animal. And it is also a separate animal to correlate
the unethical and egregious contracts sold by banks and mortgage companies to make money and defraud people to the money
spent by the average person trying to clothe and feed and put a roof over the family. Wall street money only produces more
money, not a product. But money in ones pocket spent in the community spurs growth and job development for each dollar
spent. If you don't understand the seperation(sic), you will feel the way you do.

Anyone who has taken Economics 101 knows that for every worker hired, he uses his money and supports his local economic
community. That is how growth is achieved. The more money he has left in his pockets after taxes, the more he can and will spend.
and the more that spending will effect other businesses.

You have a good point that the money may be used to feed into the frenzy of wall street. But, even those that made a lot of
money from Wall Street investments (not workers on wall street) bought nicer homes and hired people to build them
and the building material companies grew, and they bought more clothes and more food, and so on. It is a natural progression.
Not a dishonest one.

It is a shame that wall street is able to go from one scam to another and the Government, with its power to regulate,
lets it happen. But look at who is on the cabinet under Obama. There are a lot of former Wall Street types. Even
Leon Panetta, the Secretary of Defense was on the board of directors of The New York Stock Exchange. That is known as
"the big board," where historically the large trades are done.

--hide--

I am afraid you misunderstood me. I am not saying that there is a no difference between "wall street" money and "main street" money. In fact I am saying that in the current economic climate, based on the encroachment of Ayn Rand's Objectivism (once again a philosophy based on the atheistic idea that actions is self interest, i.e. selfishness, leads to the best economic and social development) into conservative political conscience, the low tax rates on capital gains, and the ability to use derivatives to make money on declining stock we see a situation where the "Wall Street" money is actually being used to develop wealth for those who have the money to invest in hedge funds, based on the decline of market value.

The "trickle down" metaphor is based on water trickling down (i.e. gravity forces the water down on the path of least resistance). In the current market (for the reasons outlined above) there is no "gravity" to force the money to come down. It circulates in the low tax derivatives market instead of being a real investment. By real investment I mean an investment that adds value, such as property development, business expansion, research and development, etc. This is the cause of the sluggish nature of the recovery. Why take the risk of a long term investment that has significant risk, when you can hedge the market and make money no matter what the market does and pay the low tax rate of capital gains? The answer for Wall Street is, You don't. Making money based on the economic struggles is fine because "greed is good," selfishness is good, selfish profit motive leads to the highest good.

The Republican model had its place. In the well regulated market of the late 70s and early 80s when taxes were higher it was good to decrease taxes because the regulations made real investment the best option and forced the "trickle-down." The the situation is not the same, tax rates are too low, and regulations are too lax for that system to work. At this point trickle down economics is just a conjunctive fallacy. The links from tax cuts to economic stimulation have been removed, and instead have been replaced with links to economic bubbles.

ps Condescend much? Just make your point. You don't need to insinuate that I am unedjucated or unintelligent.

11/16/2012 new

(Quote) Clarence-698070 said: I am afraid you misunderstood me. I am not saying that there is a no differe...
(Quote) Clarence-698070 said:

I am afraid you misunderstood me. I am not saying that there is a no difference between "wall street" money and "main street" money. In fact I am saying that in the current economic climate, based on the encroachment of Ayn Rand's Objectivism (once again a philosophy based on the atheistic idea that actions is self interest, i.e. selfishness, leads to the best economic and social development) into conservative political conscience, the low tax rates on capital gains, and the ability to use derivatives to make money on declining stock we see a situation where the "Wall Street" money is actually being used to develop wealth for those who have the money to invest in hedge funds, based on the decline of market value.

The "trickle down" metaphor is based on water trickling down (i.e. gravity forces the water down on the path of least resistance). In the current market (for the reasons outlined above) there is no "gravity" to force the money to come down. It circulates in the low tax derivatives market instead of being a real investment. By real investment I mean an investment that adds value, such as property development, business expansion, research and development, etc. This is the cause of the sluggish nature of the recovery. Why take the risk of a long term investment that has significant risk, when you can hedge the market and make money no matter what the market does and pay the low tax rate of capital gains? The answer for Wall Street is, You don't. Making money based on the economic struggles is fine because "greed is good," selfishness is good, selfish profit motive leads to the highest good.

The Republican model had its place. In the well regulated market of the late 70s and early 80s when taxes were higher it was good to decrease taxes because the regulations made real investment the best option and forced the "trickle-down." The the situation is not the same, tax rates are too low, and regulations are too lax for that system to work. At this point trickle down economics is just a conjunctive fallacy. The links from tax cuts to economic stimulation have been removed, and instead have been replaced with links to economic bubbles.

ps Condescend much? Just make your point. You don't need to insinuate that I am unedjucated or unintelligent.

--hide--


I am afraid I am still misunderstanding you. Also, it would be easier if you edited your work. And lastly, I am not
insinuating that you are uneducated or not intelligent. I am having a hard time reading your run on sentences.

When I have more time to spend on figuring out why you think money has to stop at the bottom and that bottom is
derivatives, I will try to answer you. I think you did not consider that capital gains does not kick in on an
overnight investment. And I don't think you are factoring in that companies have no faith in
this economy and are fearful of the new Obamacare about to hit which will increase the fringe benefit payouts
for each new employee.

There is a built in risk investing in the market, but the powers that be have
tried to diminish that risk with these new instruments that you constantly mention, which are deceitful
and unethical. The only way to handle this is to outlaw them.

11/16/2012 new

Guess who gets hurt by the Capital Gains tax.

Unless you say the old folks who bought their house years ago and are now selling it to downsize, you would be wrong.

If you remember, years ago if you sold your house for more than you paid but were buying one that was the same price or higher, no Capital Gains tax was due.

Of course your cost basis was always that low, low price you paid for the original hose plus the costs of improvements to that house or any subsequent house you might have owned.

That tax benefit was done away with. As a result Grandma and Grandpa found themselves paying whopping Capital gains taxes.

So Congress instituted the $250,000 ($500,000 for a couple) exemption.

But here is another gotcha. My current home is worth 60% less than my wife and I paid for it. Under the estate tax law, property receives what is called the stepped up basis. Without getting too technical or discussing the difference in treatment between a community property state, etc. that means any property for future capital gains purposes receives a new cost basis as of the date of death or the alternate valuation date. Unfortunately, although the term is "stepped up" basis it can also mean "stepped down" basis, if the property is worth less.

When my wife died last year, the property was worth 50% less. So I am stuck with a cost basis 50% lower than what I paid for it. If I hold it long enough for the market to come back, every penny I get in excess of my original cost is going to be taxed at the then Capital Gains rate. And Obummer wants to raise the CG tax rate in order to hit the rich and make them pay their fair share. And if some people here had their way, there would be no Capital Gains rate so it will be taxed at the higher levels they believe we should all pay.

Its called the law of unintended consequences. Politicians and people who belive the rich don't pay enough or that taxes need to be raised never, ever give a single moment of thought to that law.

11/16/2012 new

(Quote) Paul-866591 said: Guess who gets hurt by the Capital Gains tax. Unless you say the old folks who bought their...
(Quote) Paul-866591 said:

Guess who gets hurt by the Capital Gains tax.

Unless you say the old folks who bought their house years ago and are now selling it to downsize, you would be wrong.

If you remember, years ago if you sold your house for more than you paid but were buying one that was the same price or higher, no Capital Gains tax was due.

Of course your cost basis was always that low, low price you paid for the original hose plus the costs of improvements to that house or any subsequent house you might have owned.

That tax benefit was done away with. As a result Grandma and Grandpa found themselves paying whopping Capital gains taxes.

So Congress instituted the $250,000 ($500,000 for a couple) exemption.

But here is another gotcha. My current home is worth 60% less than my wife and I paid for it. Under the estate tax law, property receives what is called the stepped up basis. Without getting too technical or discussing the difference in treatment between a community property state, etc. that means any property for future capital gains purposes receives a new cost basis as of the date of death or the alternate valuation date. Unfortunately, although the term is "stepped up" basis it can also mean "stepped down" basis, if the property is worth less.

When my wife died last year, the property was worth 50% less. So I am stuck with a cost basis 50% lower than what I paid for it. If I hold it long enough for the market to come back, every penny I get in excess of my original cost is going to be taxed at the then Capital Gains rate. And Obummer wants to raise the CG tax rate in order to hit the rich and make them pay their fair share. And if some people here had their way, there would be no Capital Gains rate so it will be taxed at the higher levels they believe we should all pay.

Its called the law of unintended consequences. Politicians and people who belive the rich don't pay enough or that taxes need to be raised never, ever give a single moment of thought to that law.

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Boy, Paul, you really are in a bad financial situation with the new stepped-down basis. Doesn't that mean that any payment received
from selling your house that is higher than the new stepped-down basis will be considered capital gains?

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