Capital gains is income but not a loophole. - Alex Scoble

I believe that LTCG taxes are set too low, but in the mean time, I tell all startup employees to take advantage of it: http://piaw.blogspot.com/2009... - Piaw Na

LTCG are both. - Todd Hoff

(Deleted my silly comment after realizing this turned into a real conversation) - Mike Reynolds

Todd, thanks for that in depth explanation. I suppose people risking capital makes no difference to you then, and you'd rather they put their money in to tax free muni bonds. - Cristo

There are two parts to a capital gain. One is a real increase in asset value and the other is a nominal increase in the price of an asset due to inflation. You get taxed the same on both even though you really only benefit from the former. - Morton Fox

I think people risking capital know what they're doing. Certainly, whether LTCG taxes are 20% or 25% makes no difference to my investments. - Piaw Na

10-13% more makes a difference in my investments, and it also instructs me when to sell. Luckily I know when to sell al my stocks before rates go up. - Cristo

For most investments, whether you picked the right one makes more difference than a 10% difference in cap gains. If you owned Berkshire Hathaway all through the 90s, I doubt if 20% or 30% cap gains would have made any difference to your final net worth. Now, to encourage long term investing, I do believe that LT CG should be lower, but how much lower? 15% is probably way too low. 25% would be fine. 35% would be no discount versus ST CG. - Piaw Na

Piaw, you don't always make money, sometimes you lose it. I've lost lots of money, and $3000 carried forward as a loss every year doesn't buy all that much. Investing capital is a risk, and it should be rewarded more than just ordinary income, otherwise, I'd rather just hang on to my money. - Cristo

Another difference (aside from incentives) is to change the size of the investment pool. Increasing ltcg decreases the total amount of money invested because much of those ltcg would be re-invested. Every tax has problems like this though, so there really is no "right" answer. - Paul Buchheit

Investment income isn't income? What's your definition of income then? Also, I assume you mean LTCG taxes aren't a loophole. Clearly LTCGs aren't. So I disagree with you, but I certainly think estate taxes are taxes on something other than income. "Tax what comes in, tax what goes out, and tax what is saved, too." Why not just devalue the dollar 5% a year and print 5% of the total US assets for government use instead of taxing anything at all? (joke) - Kevin Fox

Kevin, no offense, but I'm not nominating you as treasury secretary with that plan. :) My definition of income is what is taxed as ordinary income. It's not discretionary in the same way as investment income. I should have been more clear. - Cristo

It needs to be taxed or it will become a larger loophole. If not taxed. executives of a large corporations can simply take more of their income in stock. Then only sell after the appropriate time has elapsed. Thus having gaining huge tax advantage over you and I. - Dario Gomez

I favor a wealth tax, like the Swiss and no capital gains taxes of any kind. - Private Sanjeev

Dario, if they are given stock, they will be taxed on that stock when it is given as income. Sanjeev, you too are not on my treasury nomination list. :) - Cristo

Don't the Swiss have a big problem with people hiding their wealth though? - Paul Buchheit

No, Paul...WE have that problem thanks to the Swiss. :) - Alex Scoble

It's hard to hide wealth without using a broker or bank. As long as these have reporting requirements you'll catch most cases. You won't catch the guy with gold buried in his yard but that won't be lots of people. - Private Sanjeev

What is the rate of wealth taxes on the Swiss? - Cristo

I think it's ~0.5% per year. - Private Sanjeev

Except for those banks that refuse to disclose because they are in countries that allow that sort of thing, Sanjeev. - Alex Scoble

Alex: I heard there weren't any of those left anymore... Seriously. - Brian Johns

look, obviously the swiss have solved it, right? - Private Sanjeev

I'm pretty sure there are still tax havens available for the right price in the Caymans, but I could be mistaken. - Alex Scoble

Sanjeev: Keep in mind no capital gains tax is for individuals. Corporations and professional traders pay income tax on cap gains. Wealth tax rate is between 0.0002 and 0.003% of your wealth, to be paid once / year. The actual rate depends on the canton (state) you live in. - Gabor Cselle

Also, depending on the canton, you only pay wealth tax if your total wealth is above a certain limit. In Zurich, that limit is CHF 71k, in Ticino CHF 201k. 1 CHF == $0.92 - Gabor Cselle

Wondering what the corporate web watchers will think when they see me googling "tax shelter" and "hiding large sums of money" while on work time... - Brian Johns

Actually, the 0.003% number was wrong, it's up to 0.008%. Definitely not 0.5% as Sanjeev quoted. Graph here: http://bit.ly/OqaXM (German) - Gabor Cselle

Wow, I didn't realize it was that low. Even Cristo would dig a tax structure like that :) - Private Sanjeev

A little different than the UK in the seventies, where there was a surcharge on investment income above and beyond regular income tax: "In 1974 the top-rate of income tax increased to 83%. This applied to incomes over £20,000 [$46,000], and combined with a 15% surcharge on 'un-earned' income (investments and dividends) could add to a 98% marginal rate of personal income tax" http://en.wikipedia.org/wiki... - Simon

Sanjeev, while I'm against wealth taxes in principle, I could live with 0.008%. :) Simon, I will not be moving to the UK in the seventies. - Cristo

Cristo I gave the same indepth explanation you gave. - Todd Hoff

Todd, good. I'm glad you agree with me then. - Cristo

LTCG is incentivized(made up word I think) income to encourage investment. - Geoff Schultz