Question
Would taxing the top two brackets more make the USA a much richer nation?
How does that work in econ according to you? Or should the taxes on the top two brackets be lower?
The bottom of the second bracket is $231k in 2023.
NOTE I am not asking what sort of tax scheme should we have. I am not getting into the merits of other schemes. That would be for another thread you want to start.
Income can be structured a number of ways. One significant way it was changed when tax law reduced taxes on long term gains. So it was be relatively easy to use that existing tax procedure to pay many higher-income people. Taxes go from earned income table to 15% capital gains. So capital gains taxes would need to be increased substantially.
Yes capital gains was the same as the earned income tax rate years ago.
The long-term capital gains tax rates for both the 2022 and 2023 tax years are: 0%, 15%, or 20%. The higher your income, the more you will have to pay in capital gains taxes. The rate is 0% for: Single/married filing separately with a taxable income less than or equal to $41,675.Jan 24, 2023
This is, for the vast majority of people, absolutely incorrect. The primary value of a stock option, that is, the massive capital appreciation from grant date to exercise date, is taxed as wages at your highest ordinary income marginal rate in the year of exercise. The only part that is taxed as long-term capital gains is if you hold that stock for at least a year after exercise and it goes up. Most people exercise and sell at the same time to preserve their gains, so they pay taxes on their gains at the full ordinary income marginal rate.
Not the “C-level” executives or the Wall Streeters. Their tax rules are different. Executives are issued back-dated warrants so they are automatically long-term gains when cashed. I forget which group of Wall Street traders it was, but it was the “top end”. Congress specifically made those short-term gains taxable as long-term profits (specifically to avoid paying the “proper” tax rate).
Can you name one C-level exec that did this? (All the C-level execs report every trade, including all options on a Form 4, so we can easily see the details). One famous recent example is Elon Musk who exercised a massive amount of old options (nearly a decade old). He paid ordinary income taxes on the entire gain. It was reported back then in the media. And if he held any of those shares till today, all gains/losses would be considered to be long-term capital gains/losses after a year holding period (from the day or option exercise). And if he did hold those shares, they have a large loss at this point (because the stock went down), and if he sells them, the losses can only be taken as a capital loss, not against ordinary income. So even though he paid 37% federal income tax on the option exercise gain, he can only save 23.8% in federal income tax when taking those losses.
What year and what bill number? I’d like to see that in print.
Mark,
What we are discussing in part is off the books pensions for executives who then collect the money in retirement. That can be zero capital gains taxes.
Mark,
It would be nice if you knew anything about the topic before sternly misinforming people here.
Pensions
Because companies have not been reporting a monetary value for executives’
pension plans, as the rules have allowed thus far, standard datasets (such as ExecuComp)
have not included pension values. Executive Pensions, our empirical study, demonstrates
that this omission has led investors, researchers, and the media to have a substantial
distorted picture of executive pay.
This study analyzes the pension arrangements of CEOs of S&P 500 companies
that (i) are now serving and are near the retirement age, or (ii) left their positions during
2003 and the first half of 2004. With respect to the two-thirds of the CEOs that have a
pension plan, we found that:
• The executives’ pension plans had a median actuarial value of $15 million;
• The median CEO has a pension plan worth twice as much as the aggregate salary
payments received during the service as CEO;
• The ratio of the executives’ pension value to the executives’ total compensation
(including both equity-based and non-equity-based pay) during their service as CEO had
a median value of 35%; and
• Including pension values increased the median percentage of the executives’ total
compensation composed of salary-like payments during and after their service as CEO
from 15% to 39%.
In addition, the pension benefits in our sample varied considerably with respect to
both their magnitude and their relationship to the executives’ overall compensation.
Overall, our findings indicate that the standard omission of pension plan values by
researchers and the media leads to (i) significant underestimation of the magnitude of
executive compensation; (ii) severe distortions in comparisons among executive pay
packages; and (iii) significant overestimation of the extent to which executive pay is
linked to performance.
It is Harvard do not worry about the security of the site.
People with stock options in retirement not earning income may well have a zero capital gains tax rate.
All of it back in the 2004 period was a few trillion dollars in off the books pension funds for executives. Now 19 years later how much money is it? Imagine!
This FAA rule should be thrown out as well.
Executives fly in private jets effectively at coach prices.