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"A working class hero is something to be / If you want to be a hero well just follow me"
Trump made an interesting proposal recently to end taxes on overtime wages. I think this proposal is a non-starter for practical reasons, but is still directionally correct. Ending taxes on overtime wages is intended to help the working class. And the working class in America are not being given a fair shake. Our society feels as if it is run for the benefit of retirees and people with fake email jobs. We need to take action to rectify this.
Despite what some people may say, blue collar work is awful. It pays little, it's hard on your body, it's often hourly (so no pay when you take off to go to the dentist), the benefits are typically bad, etc.. While some people can get rich by operating a business providing blue collar services, this is an extremely hard and frustrating path. Is it any wonder that young people only want white collar jobs?
The Democratic Party solution for this is of course more welfare for the working poor. I think this policy is deeply destructive as it disincentives labor, and creates a captive class who are dependent on the government to live. (This might be a feature, not a bug, to some Democrats who envision a permanent ruling majority).
But I think a more constructive way forward is to increase the value of blue collar work. Tariffs help with this, even if they reduce overall prosperity. This overtime proposal is interesting since it only rewards people who are already working more than 40 hours a week. And it will, of course, hit mostly blue collar workers.
And, with that, the party alignment feels complete. Trump is winning among blue collar workers by nearly 20 points, and losing among white collar workers by similar margins. Democrats are promising subsidies for white collar workers such as student loan forgiveness. Trump is promising to reward his own base. Personally, if we're buying votes, I think Trump's proposals are better.
Reducing taxes on blue collar work doesn't increase it's value, though it does reduce its price. The working of the market should result in wages falling as a result, though various distortions like minimum wage and required time-and-a-half may change that. Sans gaming, the undesirable consequence I'd be most sure of is that hiring fewer employees and working them longer would become even more popular than it already is, both among employees (the ones still working) and employers.
If this proposal were to pass (and I give it a big fat zero chance), gaming would of course be extreme. Give me a contract that guarantees me 41 hours a week and pays me almost all the money in the 41st hour please.
Both Harris's proposals and Trump's are absolutely terrible this time around. Tariffs are bad, tax-free tips are stupid, and this tax-free overtime idea would be be a horror show of distortion and revenue loss if passed, which it won't be. On the other side, Harris's increased tax proposals and unrealized gains tax are terrible and have a better chance of being passed. Price controls are even worse and perhaps like Nixon she could do them by executive order. So Harris is still worse but Trump is closing that gap.
In a nutshell, they require massive periodic selloffs of stocks to pay for, which will have tons of second order effects. That in addition to the fact that the government already pulls in enough tax money to piss down the drain/burn in a giant fire, it doesn't need more.
Why on earth would anyone believe that the way to attack a strategy that relies on a very specific step up basis policy was to invent an entirely new type of tax? This makes no sense at all. End the step up basis, I'm on board, why would you keep the strategy working and but then add another tax on top instead of actually fixing it?
Taxing unrealized gains is dumb regardless of what other actions are taken. One does not depend on the other.
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If you are rich enough to use that strategy, you still are paying the full 40% on most of your estate. That more than makes up for not paying the lower capital gains tax.
Your interest rate will not be particularly favorable unless the bank is confident that even if the stock significantly devalues you will still pay them back.
There is a reason that this "strategy" is mostly just a speculative law review article and like 1 example. No one complaining about bie borrow die has ever demonstrated that its actually being used to any large extent.
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https://x.com/RyanHanley_Com/status/1826286357892784269
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Tax loss harvesting isn't "avoiding" paying capital gains any more than deducting expenses "avoids" paying tax on profits.
If one of your stocks goes from $10 to $20 and the other from $20 to $10, you haven't actually made any gains for the governemt to tax
Little slips like this convince me the whole thing is an excuse for seizing all assets that aren't owned by blackrock or NGOs.
I keep saying it: somebody is going to have to pay for the black holes that are state budgets because interest on debt is reaching critical levels.
Since all the value is piling into investments to avoid inflation, now governments are trying to seize those investments. Property taxes and seizure of government backed pension schemes have both been floated already.
I have bad news for you...
I meant wealth taxes, my ESL ass keeps tripping over taxation jargon somehow.
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State budgets, in the administration department, are generally themselves welfare schemes. People who benefit from that will never vote for a party that promises to put the brakes on that, which is why the Democrats are the interest party of those people. They have to be.
Will public employees' voting power to make sure they keep receiving those benefits outrank the voting power of the old (though young men are increasingly catching on) to not pay them? Well, stay tuned...
Usually, in cases like these, the two interest groups put their heads together to do something both stupid and evil, and this is called compromise.
This compromise is likely to be inflation.
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From the pro-tax perspective, if you make $10 on one stock you should be taxed on it; if you lose $10 on another stock, too bad so sad. Why would they give up the tax on the first stock just because you lost money on some unrelated stock?
Because we have an income tax; not a takings
It's already the rule that gains in certain categories can't be offset against losses in other categories. I have no doubt making it so each and every financial instrument one owned had to be treated separately is the kind of thing people who like taxes would put in place.
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If you wanted to target buy-borrow-die, you can just eliminate the step-up basis. Much simpler and less distortionary than unrealized gains taxes.
It would be more focused to target buy-borrow-die by expanding the definition of realization to include using the asset as collateral for a loan. Buy for $100, take out loan for $90 secured on asset, no tax liability. Notice that the asset is now more valuable. Convince lender that the increase in value is durable. Take out another $90 loan secured on the asset. Now you have realized $180 so a $80 gain becomes taxable, and you have money (the loan) to pay it without having to sell the asset.
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And taxing unrealized gains has also been avoided since 1913.
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Buy, borrow, die doesn't seem to actually be enough of a problem as to make unrealized gains taxes a reasonable alternative.
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