IRS: Stolen property must be reported as income on taxes
mcclatchydc.com
mcclatchydc.com
> Missing or Kidnapped Children: You may be able to claim a child who was kidnapped by a non-family member. IRS treats a kidnapped child as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping.
https://www.eitc.irs.gov/other-refundable-credits-toolkit/un...
If a family member kidnaps them the it follows the usual formula of who cared for the kidnapped person for half the year plus a day.
To claim someone as your dependent child, they must be either:
- Your son, daughter, stepchild, foster child, or a descendant (for example, your grandchild) of any of them; or
- Your brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant (for example, your niece or nephew) of any of them.
To claim someone as your dependent relative, they must be either:
- Your child, stepchild, foster child, or a descendant of any of them (for example, your grandchild). (A legally adopted child is considered your child.)
- Your brother, sister, half brother, half sister, stepbrother, or stepsister.
- Your father, mother, grandparent, or other direct ancestor, but not foster parent.
- Your stepfather or stepmother.
- A son or daughter of your brother or sister.
- A son or daughter of your half brother or half sister.
- A brother or sister of your father or mother.
- Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
[0] https://www.irs.gov/publications/p501#en_US_2020_publink1000...
[1] https://www.irs.gov/publications/p501#en_US_2020_publink1000...
lol yeah I'm imagining some skit (or real life situation!) where the kidnapper is calling in to the IRS and explaining the situation to the agent, who dutifully works through the flowchart about which statuses apply when, completely oblivious to the missing child they're dealing with.
And then they just sit there listening in while the kidnapper interrogates the child for the SSN before coming back and reporting that they "can't obtain it", followed by the agent reading off their options.
With that said, not all "kidnappings" in this context are the "masked men/unmarked van" type, I assume you have these same considerations for stuff like "other legal guardian picked up child three days before court authorized them to".
Though the IRS has other ways to inform the police if they can find anything you didn't tell them
https://www.irs.gov/businesses/small-businesses-self-employe...
It's not like it's a line item on your 1040 "Crime: $4000". It's just self-employed income.
The article described how the SCOTUS in 1927 resolved this question.
>>Manly Sullivan was convicted in 1922 of evading federal taxes on the income he earned through “running illegal whiskey” in violation of the Volstead Act, according to The Mob Museum.
>> A U.S. circuit court of appeals, however, reversed Sullivan’s conviction. It ruled that, while income from illegally trafficking liquor was subject to taxation, the Fifth Amendment to the U.S. Constitution — which protects against self-incrimination — protected Sullivan from declaring that income on his tax returns.
>> But the U.S Supreme Court in 1927 reversed the court’s decision.
>> “We see no reason to doubt the interpretation of the Act, or any reason why the fact that a business is unlawful should exempt it from paying the taxes that, if lawful, it would have to pay,” Justice Oliver Wendell Holmes Jr. wrote in the majority opinion, according to Justia. "
This is what got Al Capone convicted, not his widespread criminal and murderous enterprises, but his tax evasion.
So, yes, you are required to report all illegal income to the IRS. However, you don't need to go into any detail - just say "Self Employment Income = $XX,000,000" for your drug smuggling empire and pay the tax.
There are also, afaik, strict rules for the IRS to firewall this info from criminal (as opposed to tax) prosecutions. The motivation for these rules is to not discourage people from paying tax on all their enterprises.
[[[ obviously not legal advice, only general info, consult your attorney for actual advise, and maybe avoid crimes ]]]
I don't know how well that works in practice, but I feel like if it is used at all in criminal prosecutions then that would still be a 5th Amendment violation. That is, imagine this hypothetical:
- They have evidence you're a head gangster.
- They raid your warehouses and find a set of accounting books showing profits of $17,530,000.
- They subpoena tax records that turn out to have you saying "Misc income: $17,530,000."
- They argue in (criminal) court that, "aha, he must be running a criminal enterprise because his books show the very same income he reported on his tax forms."
There, even though you didn't report it as criminal income, they're still using compelled testimony (legal requirement to report that criminal enterprise income) against you in prosecution of said criminal enterprise.
Again, I don't know what happens in practice, just saying that if they did it like that, that would be a clear 5th Amendment violation.
Also, if it's any comfort, they wouldn't need to bother with your tax returns. Unexplained deposits and expenditures are often used to convict people of various crimes. So, I'd expect it to be quite an exception for them to bother with upsetting the IRS <-> criminal taxpayer equilibrium.
Hell, it seems pretty routine now for police, TSA, etc. to just find cash and seize it, forcing the owner to defend the legitimacy of the cash in court, as in funding the prosecution of "$12,345.67 vs State of Texas"; yup, you aren't even considered a party, the govt case is setup to be vs the cash pile itself, presumed to be guilty of being illegal proceeds.
Fun Stuff!
The question that lingers in my mind is if your dependent is kidnapped and gone for too long (but not dead... let's say they're kidnapped on December 31st and returned 366 days later conveniently removing custody for an entire calendar year), are you ineligible to claim them as a dependent while they're missing? Seems like strictly and amorally speaking your financial burde has been lessened and you wouldn't need the tax relief for caring for that person.
This conversation feels... familiar.
The original topic about stolen property is the patch for the same kind of loophole. Without this rule, you could arrange to have something of value stolen in order to avoid a taxable transaction. Imagine your employer giving a bonus by leaving an envelope of cash conspicuously unguarded.
Using a corner case of behavior to justify systemic suppression of otherwise rational behavior just perpetuates the cycle of pain. Welfare royalty exist. But not nearly in numbers high enough to ethically justify hamstringing the system.
If they exist, it's nowhere near the levels portrayed in popular media.
So, part of the problem is where people choose to draw the line on "royalty". If refrigerator ownership meet your criteria then sure, you're going to see royalty everywhere.
I’ve yet to hear an explicitly stated argument for why I’m supposed to think someone who has access to a refrigerator, internet, food, etc. is impoverished, except for, “Somesuch CEO earns 100000000x more than they do.”
That said, sure, “welfare royalty” seems like a misnomer. I assume they typically live like regular, “middle-class” people without the job part.
Maybe we are talking about "welfare" in different ways? In the US, welfare is a constellation of programs, not just one single program that gives $$ each week/month. Everything from subsidized school lunches, medicaid (CHIP for additional care for children), SNAP... your comment about "without the job part" indicates that you might not be aware that a very large number of people are on one or more of these programs and work fulltime+ jobs. Where I live it was a real crisis during COVID school closures because the poorest children had parents with jobs that could not be done remotely and parents could not find or afford alternatives, at the same time that any internet they had was through cell phones (usually the parents phones) so the school district needed to send out wifi hotspots & chromebooks so that students at least had the basic tools to learn... but had to be left alone (if they were old enough) or parents quit their already low-paying jobs to watch over their kids.
None of the above sounds like middle-class without the job part. As you began your comment: I hear people bring up your sort of argument to scoff at the idea that significant % of the population may fall through the cracks or just get left behind. I don't understand the point of view except as lack of direct experience with people living in these not-middle-class positions of poverty on the brink of collapse.
A lack of agency and security. Often their situation is such that they cannot change it. For the employed, there is no time or energy to improve life. For the unemployed, employment often has a negative net income (once accounting for transport costs, reduction in benefits and costs they can currently pay with time such as food prep which would have to be paid in money).
There are no spare resources for education or entrepreneurship. No resources for fulfilling hobbies or self development.
Even if you accept the negatives for long term growth, getting an entry level job from that position requires grovelling and outright lying to your 'betters' about how you want to dedicate your life to breaking your back stacking shelves for $8/hr on a split shift 100% availability basis (that doesn't give you enough time to get home in your 3hr 'break') because you love it so much.
Then there's the precarity that poverty brings. Not knowing how you'll afford an emergency, and constantly weighing eating vs. paying the power is mentally draining and incredibly harmful to your mental health. Not conceding to your landlord's insane demands could leave you permanently homeless, and now debt collectors are calling you for a bill you have receipts of paying every 3 hours.
A car is unaffordable, public transit is underfunded, demeaning and unreliable, and pedestrian or cycling infrastructure is unaffordable.
No level of government will listen to your concerns, in fact their decisions are actually anticorrelated with public support.
On top of that you are constantly told that everything wrong is your fault, and you just have to drink fewer lattes and vote with your wallet more.
Public space is stolen and turned into space for cars or privately owned malls.
Anything your community does build for mutual benefit is torn down and rebuild to be extractive.
This is not the life of nobility. It's basically just the same as a peasant with easier access to propaganda, protein, calories, and mentally destructive dopamine buttons.
In many ways it is worse because it is so isolating, and the source of the harm is so nebulous.
Many people are way more against crimes which offer them little returns than against crimes that may happen in their social circles.
Edit: I want to clarify that it's not some kind of conspiracy, it's that we simply are more empathic with people in a similar position to us
This is the kind of unhinged batshit economic thinking that leads to people dying because they can’t afford insulin.
People dying because they can't afford insulin are usually not dying because they have insurance where the prescription co-pays for insulin is too high, but because they either are actually uninsured, are effectively uninsured because of a high deductible, or have insurance that works on a coinsurance rather than co-payment model.
And even then that's usually not really the problem, the problem is usually that they can't afford a more basic life necessity (often food or shelter) for themselves or their dependents, and voluntarily forego (or limit use of) insulin to afford the other need. Which is a real problem (and a real public economic policy problem), but usually not fundamentally a healthcare policy problem.
(On the other hand, it's often a problem where moral hazard arguments of the type at issue here contribute to the failure to solve, so the argument about that being the problem may still be correct by a less direct route then seems to have been intended.)
Some tangential articles to show that people exploit children for money. https://www.newyorker.com/magazine/2021/10/25/how-an-adoptio... https://www.npr.org/2019/10/09/768533784/arizona-official-ar...
Since Veblen goods are defined as anything where the demand curve slopes upward, that would only be a result of an empirical study if the study was designed to test, and strong enough to confidently disprove, the existence of goods with a flat demand curve. But it's not meaningful in any case.
> Veblen goods, which kidnapped children most certainly are not.
[citation needed]
Look at the other things that are Veblen goods. They are status symbols. Handbags, rare cars, etc. Kidnapped children are clearly not a member of this category.
> [citation needed]
Please. This is a ludicrous demand for rigor, and not how science actually works.
Captives and slaves, which kidnapped children are the first and often also the second, can be either tools or status symbols (or both simultaneously).
Obviously, flagrantly illegal (and not wink-wink-nudge-nudge tolerated in public) goods tend to only be status symbols in particular criminal subcultures, but those subcultures very much exist.
Yes, that's true. But that's the wrong side of the transaction. This IRS policy is disincentivizing false kidnapping. Not actual kidnapping.
The IRS policy is designed to prevent you from claiming a child as a dependent indefinitely after they have been kidnapped. So, for this to be a Veblen good, it'd have to be a status symbol in your social circle to have had a child kidnapped from you.
Health care for profit rewards companies who limit supply, increase prices, and set the goal of having long-term “customers” because each of those things brings in more cash.
It’s not economic thinking that’s driving the ship though.
So, first, the "cobra effect," like most economic proverbs, is apocryphal. It didn't happen. It's a story economists tell their kids to keep them from sharing.
Second, there's a big damn difference between "I'm going to grow a snake because I'm getting paid for it" and "I'm going to get my kids kidnapped so I can collect a tax credit without actually having to pay for the kids." It may not appear that way if one's working model of people is "dispassionate rational actor," but it turns out in the real world most people have some kind of irrational emotional attachment to their kids.
Finally, I'd submit that "Cobra Effect"-type problems arise as a factor of two errors - the first is misunderstanding the cultural group for which you're designing practices, and the second is a weirdly inflexible view of society that accepts someone manipulating the system as just a sort of thing that happens and not an egregious breach of the social contract warranting a response.
Don’t assume that everyone else subscribes to your morality, ideology or “ethics”. It’s a brutal world out there and some people value power much more than you do.
There's no reward, you'd be getting the same tax break if the child was not kidnapped. The rule is about how long it takes to lose the tax break in case of kidnapping.
Except if the kid was not kidnapped, you have to pay for the kid's expenses and welfare.
I expect somebody who wants to keep the tax break without the kid is not too worried about the kid's intrinsic welfare.
Who would even agree to kidnap somebody else’s child for this purpose? I’d suspect the first 9 out of 10 convicted felons would still tell the police your plans. Most people would be too suspicious that you’re trying to entrap them, asking them to kidnap your child.
And what can you offer someone to agree to do this if your own reward is a temporary tax break? At this point, you might as well kidnap your own child.
you already have a tax break for the kid, it's a dependent, all that was being said if your kid gets kidnapped you can still claim it as a dependent for half a year and the commenter thought it would be reasonable to allow longer.
The people applying the tax code can make exceptions at their discretion. It's a difference.
Presumably the rule is there to subsidize child-rearing. When the child is gone (kidnapping, death, ascention to heaven, etc), the law would logically not apply any more, so there will be details about where the cuttoff falls. If people wanted want to give cash to unfortunate parents, judges interpreting the laws should tell you to pass another law for it.
Edit: @toolz: I can both be satisfied how they provide customer service and dissatisfied that they were in bed with Intuit preventing obsoleting commercial tax prep services. Nuance! (HN throttled, had to reply here to your comment)
When someone asks a question that requires clarification, they go get the answer through whichever channel(s) are required, then they not only respond directly to the customer (taxpayer) but they also format the response for public consumption.
If more companies treated documentation this way, life would be a whole lot easier.
No it's not. The IRS didn't make it that way, Congress did (bought and paid for by Intuit & Co.).
1) even if the kid is kidnapped, we still theoretically want the person watching that child to receive financial support (keep in mind most kidnappings are from ex-spouses or other family members).
2) It provides one more paper trail for authorities to track the child down.
Legal custody seemed to be whomever had the kid in whichever state at any given time.
One episode ended when her bio dad showed up at air port with a shotgun and bio-mom had convinced the out of state police to be on her side. After a night in jail anyway. Police made the bio-dad go home.
My mom tailed her at school for a few years. Stopping another attempt before it ended.
Was messed up every way possible.
Based on what? The expansive interpretation is usually traced to Wickard v. Filburn (1942), the court packing scheme was introduced and ultimately fizzled in 1937; the one case while it was an active issue that is sometimes credited to the threat of the court packing scheme was one weighing state police powers (in setting a minimum wage) against the Constitutional guarantee against states restricting freedom to contract, which didn't involve the Commerce Clause at all. (And even that case the decisive shift in position appears to have actually occurred before the court packing threat, in any case.)
There is no general federal law against murder. There are some specific federal laws against murder on federal property, or against federal employees, or committing a terrorist act, or a few other very limited situations.
Oh. I thought there was.
1. Don't report stolen property as income? Tax evasion. 2. Report stolen property as income? Proof of theft, readily shared to other TLA's
https://money.cnn.com/2013/02/28/news/economy/illegal-income...
> If you tell the IRS you made $1 million from stealing money or dealing drugs, does the agency tip off the cops?
> Legally, it can't, unless a law-enforcement agency gets a court order granting it access to a specific taxpayer's return. The IRS isn't supposed to proactively alert other agencies about misdeeds unless terrorism is involved. In that case, it still needs a court order to disclose anything, but the IRS can initiate the legal process on its own.
Which, IMHO, violates the Fifth Amendment, as any compelled testimony shouldn't be admissible against you, but of course our jurists gave the government a pass on that.
I’m no lawyer, but doesn’t _everybody_ have to share information once met with a court order?
As a more mundane example, a court can grant a search warrant compelling you to turn over your computer so that police can look for proof of suspected criminal activity. Likewise, they can get a court order compelling the IRS to hand over your tax returns.
It can't force someone to give potentially self-incriminating testimony (not all “information” is “testimony”, and not all incrimination is self-incrimination.)
Lawyers, doctors, and therapists (also technically doctors) do not need to share and cannot be forced.
They cannot be forced to share privileged information they may have. However, this does not protect the class of information as a whole. IE if you share your medical or legal information to a third party, they can be forced to share it.
This is not quite correct.
Lawyers, doctors, and therapists (who very often technically are not doctors of any kind), spouses, and clergy have various privileges which limit the scope and circumstances in which they can be compelled, which limits what court orders should be issued and may be raised on motions to quash such orders after they are issued.
Don't think so. It's not any compelled testimony. The Fifth only covers compelled testimony against one self, not against others. There are some limited exceptions like lawyers, doctors, spouses but the IRS is not covered under it. You can be compelled to testify against your friend(if the information doesn't incriminate yourself), the Fifth doesn't protect against that.
If the cops seize your diary in a raid using a warrant, it can be introduced at trial. It's evidence, not testimony.
The caveat here is that you can list it as misc or various. So no admissions.
https://en.wikipedia.org/wiki/Fifth_Amendment_to_the_United_...
It is somewhat less true in the sense where “can claim X” includes the implication that the claim of X stands a whelk’s chance in a supernova of prevailing in court.
That most judges are so morally bankrupt as to disagree with you is a separate issue.
https://www.cbc.ca/news/politics/revenue-canada-has-new-powe...
So when we re-wrote all of our marijuana laws, most infractions were made to include a sentence that ranged “up to” 14 years, e.g. sharing a joint with a 17 year old or growing 5 plants instead of your legally permitted 4.
https://www.justice.gc.ca/eng/cj-jp/cannabis/
Who says the war on drugs is dead…
The IRS says you can declare “miscellaneous other income”.
> such as money from dealing illegal drugs
Given the number of states which have legalized some drugs, there will be a growing, non-trivial number of people who have some income which is legal in their state but not at the federal level. I don't know what fraction of them would be trying that purely as a tax dodge but I could very easily believe someone at the IRS wanted to have an FAQ to point to in that situation.
I would argue they don't want you to pay so they have this option, however they're generally required by law to make it possible for you to pay without incriminating yourself so that it was legal for them to prosecute you for not doing so.
Convicting someone of a crime is expensive, and police and prosecutor resources are scarce. In many cases it's not cost effective to catch and prosecute people. There are also soft crimes like independent escorting where the government would appreciate the tax revenue rather than try to prosecute every violation of law.
> Almost no dealers actually [anonymously purchase narcotics tax stamps], nor does [then-NYS governor] Mr. Spitzer expect them to. The vast majority of revenues from the tax are collected after law enforcement officials seize the drugs, said Kimberly Y. Brooks, a spokeswoman for the North Carolina Department of Revenue.
> “It’s really about cutting the drug dealers off at the knees,” said Ms. Smith of the tax administrators group. “It kind of goes back to the Al Capone model.” Proving tax avoidance is much easier than proving a drug crime, she said, so the tax laws help the authorities keep seized drug money even when a suspect accused of dealing drugs goes free.
[1] https://www.nytimes.com/2008/01/24/nyregion/24drugs.html
But the Supreme Court reversed it, which could lead some to want to disagree with how the court uses the constitution
But its important to remember that income taxes require a newer amendment to the constitution to begin with
So although the bill of rights (first 10 amendments) was pretty solid, at the time with an understood balance for the society, the appeals court neglected to consider the 16th amendment, which operates outside of that balance. Any amendment can undermine other parts of the constitution or break the point of the whole thing.
But the humans involved do leak things to media etc
If you want cash thats worth the same amount as post tax clean cash, you will want to launder and report the now innocuous clean earnings for taxes
I wonder if there are any tax journals or case law about this
Its up to the government to learn of the illegal activity to levy a charge on that, to then tack on any money laundering charge or wire fraud charge. So if they dont have ways to figure it out, then everyone is good. And investigating something specifically due to fifth amendment use I think would not work well as probable cause - as long as you can afford all the motions and appeals court to afford your rights
I know they could impound the money but the onus is on the law enforcement side to eventually have some evidence of a crime and the guy doesn't have any obligation to answer any questions.
I'm sure there might be some laws in place for this (maybe?) but it's still a fun thought experiment.
This part is where you want to not say they were illegal. The IRS is saying declare all income, not admit the source.
So for this thought exercise, one would take the fifth on the income report, and report the income. Say whatever you need to say for the bank deposit to not scare the bank's compliance officer.
You want to avoid denial of service and denial of liquidity. So its inconvenient to make a reason for the money to be frozen for some time.
The idea is that they don't want you to pay so that they can prosecute you for tax fraud, which in many cases is a much easier charge to prove. For instance, why prove theft of property when you can instead demonstrate that you own the property and didn't pay taxes for it?
If a crime is committed the state will get their cut in the end anyways.
They have to make it possible for you to pay without incriminating yourself so that you can be charged for not doing so. This is one tax they would rather you not pay.
Nonsense. The IRS is not a mandatory reporter by design. The IRS indeed does not care about any crime other than tax-related ones, not only is it not their job, it's their not-job, as in, applying any sort of moral or legal consideration outside of tax-related ones will get employees in trouble.
And that point is wrong. The IRS just wants you to pay your taxes, period, end of the story.
Exactly the same number of people as pay for narcotics tax stamps. [1] The only people buying them are stamp collectors.
> In a report discussing a (failed) 2008 proposal by New York’s then-governor Elliot Spitzer to institute a drug tax stamp program in his state, the New York Times noted that “almost no dealers” actually buy the stamps, adding, “the vast majority of revenues from the tax are collected after law enforcement officials seize the drugs.” [1]
If drug dealers aren't buying drug tax stamps, shoplifters aren't reporting their stolen goods on their 1040.
In fact, this NYT article spells it out.
> “It’s really about cutting the drug dealers off at the knees,” said Ms. Smith of the tax administrators group. “It kind of goes back to the Al Capone model.” Proving tax avoidance is much easier than proving a drug crime, she said, so the tax laws help the authorities keep seized drug money even when a suspect accused of dealing drugs goes free. [2]
[1] https://theoutline.com/post/4173/drug-dealers-are-supposed-t...
[2] https://www.nytimes.com/2008/01/24/nyregion/24drugs.html
Those numbers cannot be used against you.
They will, however, lead to parallel construction from another 3-letter agency, just by coincidence, and your opsec is as good as compromised at that point.
The venn diagram of people who make the rules overlaps with those who benefit.
That said I do fully support a far heavier taxation on capital gains if your net worth is in the hundred millionaires.
We’ve been talking about taxing billionaires for as long as I’ve been alive and the solution seems so simple to me: income caps. We use income caps all the time for poor people but when talking about capital gains the arguments gets easily neutered because they get propose across the board, critically kneecapping the productive value of capital in capable hands.
It’s simple, just cap it at hundreds of millions at not so unreasonable rate. And all the talk on wealth inequality will have a very strong counter argument.
Instead every time we get a new tax it seems to hit everyone except the lowest sectors. Even here in Canada.
* income from capital is taxed extremely highly at a progressive rate
* the allowance/exempt amount is high enough to cover most investment based retirement plans
* the definition of "income from capital" was left open enough to at least cover most trading and rent-seeking but require explicit narrowing before the law could be passed
The goal was pretty much explicitly to tax income from actual labor less and income from simply already having capital a lot more.
And his famed slogan was “justice for the tens-of millionaires; never shall we suffer under the yoke of the hundreds-of millionaires again”.
That will be middle class if the gov keeps printing money the way they are. Setting tax rates on net worth is absurd. Taxes should be a flat rate cut of income, and all forms of income should be taxed the same.
A rich person who does this quickly stops being rich. Few rational rich people will do that. Raising capital gains tax will have the opposite effect: rich peoples' income will go down and they will spend less.
No, that depends on how fast you're consuming it. For example, instead of investing most of your excess revenues, you can invest only half of it, and consume the other half. Or, if you are wealthy enough, you can keep consuming without investing for a long time. Lastly, you don't have to stay rich forever, as you can't take your wealth with you to the other side.
> Raising capital gains tax will have the opposite effect: rich peoples' income will go down and they will spend less.
Unlikely: the rich already spend only rather small fraction of their incomes, and it is the prospects of making more money in future that is keeping them from spending more.
Of course, if you’re motivated by punitive instinct, instead of goal of taxing optimally to achieve maximum general welfare (including among low wage earners), you likely won’t find it appealing.
Why do you think an incentive is needed? If the tax rate on investment gains was higher, do you think rich people would reduce the amount of money they invest? What would they do with their money other than investing it?
> the tax on labor should be brought down
Which government services would you cut to go along with the reduction in government tax revenue? Or would you put those payments on the next generation by borrowing?
as far as removing government services, I can't say exactly which ones I would cut, there are most certainly several, but the federal government needs to take a huge step back and allocate the money and power of many of its departments back into the hands of the state and local governments. there is too much nuance that the federal government doesn't understand about local communities that ends up inflating costs by ridiculous amounts because things are generalized across the entire population, and not tailored for the specific needs of a region.
The charts here speak for themselves, https://inequality.org/facts/wealth-inequality/
Lower taxes on the rich just makes the rich richer and everyone else poorer. We need fair taxes for all, not breaks for the rich and hope that they spend some of their extra cash.
US Government revenue is 32.5% of GDP, one of the lowest in the OECD
When you invest in a venture, you pay taxes on the profits. You pay taxes on the dividends it throws off. Whatever accumulated value remains when you sell your share gets hit by capital gains tax.
The "tax on money you made with money you have" is the combination of the profit tax, dividend tax, and capital gains tax.
That's not to say the total taxation of capital income is or isn't unfair (or is or isn't double/triple taxed), but it's misleading to just look at capital gains as an income source in isolation.
This is not true. When you invest in a venture, hold its stock for 60 days, and it pays you its profit, this income is considered "qualified dividends" and is subject to capital gains tax.
> The "tax on money you made with money you have" is the combination of the profit tax, dividend tax, and capital gains tax.
What are "profit tax" and "dividend tax"? These are not terms used in USA.
From the IRS rules:
> Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.
https://www.irs.gov/taxtopics/tc404
> Qualified Dividends > Holding period. You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date.
https://www.irs.gov/publications/p550#en_US_2020_publink1000...
And? Okay, that's a) a special case, and b) confirmation of the point I was making that you get taxed on dividends (and on capital gains) only as one piece of total "capital income taxation". (The fact that something is taxed at the capital gains rate does not somehow mean that the dividends were not taxed, as you seem to be implying.)
>What are "profit tax" and "dividend tax"? These are not terms used in USA.
It sounds like you're just trying to be difficult and uncurious at the cost of a productive discussion.
I was speaking in the most lay, general terms. Profits are taxed. Dividends are taxed. In normal, ordinary usage of English, one can refer to those taxes as "profit taxes" and "dividend taxes", even if the technical term is different. (Your native language probably does the same.)
If I go through you posting history, am I going to find you always using the technical term?
Yes, the "profit tax" I referred to would be more technically referred to as the corporate income tax. The dividend tax also might have a more technically accurate term, similarly irrelevant to this context or point.
>Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.
I don't know why you think this is relevant to my point. It just means sometimes the rate is different from "the" capital gains tax. In no way does it refute that the events of profit and dividend payment are subject to a separate tax, making the "capital gains tax" an incomplete picture of the tax rate on capital income.
If you agree with that latter point, then you agree with my comment, and you're just cluttering the discussion with misdirection and red herrings.
You replied with "Because the capital gains tax is only a portion of the tax applied to capital income." You went on to list several kinds of taxes.
My reply shows that the taxes you listed are all capital gains tax. To support your claim, you could list taxes that are not capital gains tax.
> > Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates.
> I don't know why you think this is relevant to my point. It just means sometimes the rate is different from "the" capital gains tax.
No. Please take a few minutes to read the sections I linked to. Here's an article that explains it https://www.investopedia.com/ask/answers/12/how-are-capital-... .
One issue you have to consider is inflation. If you buy a house in 1980 for 100k and sell it for $314k in 2020, you didn't really make any real income. You can adjust for inflation, so it shouldn't stop you from trying to make capital gains the same as ordinary income. But you do need to adjust.
Also, some types of assets subject to capital gains are separately taxed. If you own corporate stock, that corp might be paying a lot of income tax. That reduces the value of the stock, which means you are indirectly being taxed. Sometimes that indirect tax is basically a drop in the bucket compared to capital gains (holding Amazon or Uber long term), but for some assets it could be quite significant.
But one big reason is that the upper middle class are easier marks and hold much less power than the capital class.
If you know this you may think everybody knows this but a lot of people don't and find it highly unintuitive, so I'm going to spell it out:
In a very broad sense there are two definitions of "justice" and people will think of one or the other as obviously correct.
On the one hand you have people who think justice means that everyone can take what they need and give what they can. These people usually think that humans are cooperative by nature and are intrinsically motivated to do good by others as long as they aren't taken advantage of, i.e. as long as everyone else also gives as much as they can and only takes what they need.
On the other hand you have people who think justice means that everyone gets what they deserve. These people usually think that humans are competitive by nature and are intrinsically motivated to take advantage of others and need to be kept in their place as defined by the hierarchy they view as natural and self-evident.
You seem to be part of the former group. The people who think "it's OK to pay less on money you made with money you have" are part of the latter. Neither of the two views is "wrong" in a meaningful way, they are just fundamentally incompatible when it comes to pushing for what they see as "good" or "just".
Big problem with the economy is that it rewards zero-sum leeches rather than compensate the sacrifice of labor. And the superwealthy are always people who figured out or inherited a way to be parasites.
What an odd sentence to be followed by describing the extremely rich as "leeches" and "parasites".
Sarcasm aside, I think the problem with your analysis is that it doesn't account for people who don't benefit from the system being extremely invested in maintaining it, especially those who understand that they have no realistic chances of coming out on top.
There are a lot of hierarchical mindsets that can be deconstructed given the right exposure and sufficient time, but the belief in the necessity, inevitability and moral good of hierarchies themselves is extremely difficult to unlearn and can be found in most parts of the political spectrum (though of course being overrepresented in some groups, e.g. Evangelical Christian conservatives).
Most people therefore take some hierarchies for granted while being in disbelief that anyone could take the ones they reject seriously. You can believe in absolute meritocracy without believing in "race realism" for example.
Do you deny the existence of human-human parasitism?
> I think the problem with your analysis is that it doesn't account for people who don't benefit from the system being extremely invested in maintaining it
I don't see how that is a problem with, or even a part of, "my analysis."
> hierarchical mindsets
Hierarchy isn't the same thing as economic parasitism; it's a prerequisite of it.
Really having some difficulty connecting your comment to mine. I don't get the talk about hierarchy-in-general.
Hierarchies justify themselves either by not allowing parasitism, or else by denying and covering up its existence.
Given all of this, I expect that the capital gain rate is specified as lower to encourage me to invest.
If the capital gain rate were higher than the income rate, I would not make risky investments. I could use my money to invest in my own business -- where I have expenses available. And, take an income. Any loss would then be an expense.
I just wouldn't invest in other business.
How would you encourage investment behavior?
Money is taxed over and over all the time. Your income gets taxed, then it's taxed again when you spend it, then it's taxed again when the store owner reports it as earnings, and on and on. There's no rule that once a dollar is taxed it shouldn't be taxed again. But, for some reason, it's only shareholders who complain about how unfair "double taxation" is [1].
I would no longer purchase stocks -- I would then prefer bonds (loans). Which means I would take risk into account, and this would stifle (some) innovation.
I don't mind taxation at all!
Seems like a dicey place to be given how fiercely ICE has been deployed in the US recently though.
https://www.irs.gov/individuals/individual-taxpayer-identifi...
> What is an ITIN? An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. The IRS issues ITINs to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain, a Social Security number (SSN) from the Social Security Administration (SSA).
> About half of undocumented immigrants also file income tax returns, often using an Individual Taxpayer Identification Number (ITIN) in lieu of a Social Security Number.
https://fiscalpolicy.org/wp-content/uploads/2021/02/Pathway-...
Searched ddg using: pathway toward citizenship income taxes history undocumented
You could also try calling the IRS and tell them what you’re trying to do to help somebody and ask what the their preferred methods are.
I’ve had occasionally good experiences calling major government offices and asking questions.
It's just like online shopping. You were technically supposed to report all of that to your state and pay whatever appropriate sales taxes were applicable. In reality, it was a bunch of tax-free shopping.
When its bigger or corporations are involved you get to say things like "non-monetary compensation" and so on.
Don't forget you can deduct the expenses incurred too, tho: if it cost $20 to buy the masks and water pistols and all you got was a couple of candy bars, that's probably a loss you could carry forward to next year.
perhaps we should also be taxed on what we borrow
"Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in an increase in equity, other than those relating to contributions from equity participants."
For example, if you need to claim insurance on something that was stolen or damaged, insurance will usually pay on the FMV of the item (given its year, condition, etc)