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HailHailtoMichigan!
Michigan Fan
Trabuco Canyon, CA
Member since Mar 2012
46285 posts

The 1% gains most of its income through capital gains, which makes inequality misleading
so argues Dr. Thomas Sowell
quote:


Even individual income statistics have pitfalls when they lump together very different kinds of income, as is usually the case. Incomes from salaries are very different from incomes from capital gains.

A salary is usually earned and paid in the same year. Capital gains received in a given year can be paid for value accrued over a number of years. If you paid $100,000 for a home or a business in the past, and then sold it 20 years later for $300,000, have you made $200,000 per year when you sold it or $10,000 a year for 20 years?

In the income statistics, your income will be recorded the same as that of someone on a salary of $200,000 a year.

What difference does that make? It makes a big difference when most low and moderate incomes are from salaries, while incomes in the highest brackets are more likely to be primarily capital gains -- whether from the sale of homes or businesses, or receiving an inheritance, cashing in stock options, or some other forms of capital gains.

This means that statistics on income inequalities are often comparing high multi-year earnings with lower single-year earnings -- that is, comparing apples and oranges.


don't see this point very much


SEC. 593
Missouri Fan
Chicago
Member since Aug 2012
1615 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
All income should be taxed the same, at whatever rate is decided appropriate.

Would someone actually pay gains on a home sale after 20 years?
This post was edited on 2/25 at 1:06 pm


funnystuff
Member since Nov 2012
3873 posts
 Online 

re: The 1% gains most of its income through capital gains, which makes inequality misleading
But then wouldn’t that mean that the homeowner effectively has $0 of income for 19 of the 20 years? If we are seeing the 1 high earnig year skewing income up, why don’t we see the 19 no income years skew the income down? Over the country-wide aggregate, I would think it would all wash out.


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11
narddogg81
Alabama Fan
Vancouver
Member since Jan 2012
11634 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
quote:

All income should be taxed the same, at whatever rate is decided appropriate.

Would someone actually pay gains on a home sale after 20 years?
actually capital gains shouldn't be taxed at all, the income used to invest and generate those gains was already taxed


Azkiger
Member since Nov 2016
2975 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
quote:

actually capital gains shouldn't be taxed at all


It wont, so long as you stayed in you house a few years (I think its 2). The house flippers, who buy/fixup and sell quickly do pay capital gains if they don't stay in it long enough.



doubleb
LSU Fan
Baton Rouge
Member since Aug 2006
16730 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
Income from wages or salaries should be analyzed separately from capital gains, or earned interest, etc.



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21
cokebottleag
Texas A&M Fan
King of Knee Jerk Reactions here.
Member since Aug 2011
19145 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
Yes, you would pay capital gains regardless.


90proofprofessional
LSU Fan
Member since Mar 2004
20735 posts
 Online 

re: The 1% gains most of its income through capital gains, which makes inequality misleading
quote:

don't see this point very much

i'm not sure the point is actually useful


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21
HempHead
Alabama Fan
Appalachia
Member since Mar 2011
40990 posts
 Online 

re: The 1% gains most of its income through capital gains, which makes inequality misleading
quote:

All income should be taxed the same, at whatever rate is decided appropriate.



Agreed. 0% is a good way to go.

quote:

Would someone actually pay gains on a home sale after 20 years?



Yes.


SEC. 593
Missouri Fan
Chicago
Member since Aug 2012
1615 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
Really? Are we talking about the sale of Houses or a home, I see a distinct difference. Flippers will obviously pay the tax.

I sold a home we lived in for 10 years and made almost 125k of profit and paid no CG.


doubleb
LSU Fan
Baton Rouge
Member since Aug 2006
16730 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
Did you immediately purchase a new home and move into it?


Azkiger
Member since Nov 2016
2975 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
quote:

It is true in most cases. When you sell your home, the capital gains on the sale are exempt from capital gains tax. Based on the Taxpayer Relief Act of 1997, if you are single, you will pay no capital gains tax on the first $250,000 you make when you sell your home. Married couples enjoy a $500,000 exemption. There are, however, some restrictions on this exemption.

In order for the sale to be exempt, the home must be considered a primary residency based on Internal Revenue Service (IRS) rules. These rules state that you must have occupied the residence for at least two of the last five years. If you buy a home and a dramatic rise in value causes you to sell it a year later, you would be required to pay capital gains tax on the gain. This rule does, however, allow you to convert a rental property into a primary residence because the two-year residency requirement does not need to be fulfilled in consecutive years. For example, suppose that you invest in a new condo. You live in it for the first year, rent the home for the next three years and, when the tenants move out, you move back in for another year. At the end of this five-year period, you will be able to sell your condo without having to pay capital gains tax.


- Investopedia

For the vast majority of people, when they sell their home, they will be exempt from paying capital gains taxes.

Specifically addressing his example, even if the person owning the 100,000 dollar home that sold for 300,000 is single, the difference is still within the 250,000 allowance for single people and they'd be exempt.
This post was edited on 2/25 at 1:44 pm


HempHead
Alabama Fan
Appalachia
Member since Mar 2011
40990 posts
 Online 

re: The 1% gains most of its income through capital gains, which makes inequality misleading
I stand corrected.


Robin Masters
Alabama Fan
Birmingham
Member since Jul 2010
13746 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
$250k exemption for single and $500k for married if you lived in house for last two years.


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10
MrCarton
UNO Fan
Paradise Valley, MT
Member since Dec 2009
17364 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
quote:

All income should be taxed the same, at whatever rate is decided appropriate.



Yeah. Zero.


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21
SEC. 593
Missouri Fan
Chicago
Member since Aug 2012
1615 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
I don't know what is considered immediate, but within a few weeks. It involved a move out of state for the job. We were put up in a hotel here and then there for a short time.


MrCarton
UNO Fan
Paradise Valley, MT
Member since Dec 2009
17364 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
quote:

All income should be taxed the same, at whatever rate is decided appropriate.


Agreed. 0% is a good way to go.

quote:
Would someone actually pay gains on a home sale after 20 years?


Yes.



Agree. Taxation is Theft.

But they probably won't pay taxes on the sale of a home.


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Robin Masters
Alabama Fan
Birmingham
Member since Jul 2010
13746 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
quote:

I stand corrected


You stand while at the computer? That’s weird.


Dawgfanman
Member since Jun 2015
5022 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
quote:

It wont, so long as you stayed in you house a few years (I think its 2). The house flippers, who buy/fixup and sell quickly do pay capital gains if they don't stay in it long enough.


I lived in a home for 10 years, moved out during the crash, rented it and paid on time every month, paid taxes all along on the rental income..and will own cap gains when I sell. It’s not just investors who get hit with this kinda stuff


SEC. 593
Missouri Fan
Chicago
Member since Aug 2012
1615 posts

re: The 1% gains most of its income through capital gains, which makes inequality misleading
I have never understood this argument, and think most in the political middle would also.


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