What does a BIDEN Presidency look like?

[Admiral Yi]

https://www.youtube.com/watch?v=NSfGARGIu34

Joe proposes raising cap gains from 23.8% to 43.4% (how do they come up with these numbers?) and making it retroactive to the beginning of the year.

[Zoupa]

"For incomes of over a million dollars".

Kind of an important qualifier. Also it'd be retroactive to April 28th, not the beginning of the year. It's a 2 minutes clip Yi, how do you miss those 2 points 

[Syt]

That money can't trickle down now.

[Zoupa]

The traders are committing mass seppuku as we speak.

[Sheilbh]

Also is it retroactive if it applies to this tax year?

Retroactive is more of a clawback of previous years, no?

[Tamas]

"For incomes of over a million dollars".

Kind of an important qualifier. Also it'd be retroactive to April 28th, not the beginning of the year. It's a 2 minutes clip Yi, how do you miss those 2 points 

He was told to panic so he panicked. :p

[garbon]

Also is it retroactive if it applies to this tax year?

Retroactive is more of a clawback of previous years, no?

Isn't it retroactive if it applies to decisions that were made before the legislation?

[Malthus]

Also is it retroactive if it applies to this tax year?

Retroactive is more of a clawback of previous years, no?

Ah, the good old "retroactive vs retrospective" issue. Always fun. 😄

Retroactive = changing the legal impact of a past determination. X was deductible last year, but a retroactive regulation was passed, changing X to non-deductible for that year. The taxpayer now owes on X for last year, even though the deduction was already granted.

Retrospective = changing the current consequences of past decisions. X was deductible last year and this year. A retrospective regulation was passed making X not deductible. The taxpayer owes on X for this year, but not for last year, as that deduction was already granted.

[alfred russel]

Seems this is retroactive under those definitions. A taxpayer sells stock on June 1 which has a certain capital gains rate, makes estimated tax payments based on that sale and tax rate, and then later in the year legislation is passed that changes the rate applicable to that June 1 sale.

The taxpayer made a determination on June 1 to sell the stock, and the estimate tax payments based on the rate then, but now the taxpayer owes a different amount due to current legislation on the historic transaction.

[Admiral Yi]

"For incomes of over a million dollars".

Kind of an important qualifier. Also it'd be retroactive to April 28th, not the beginning of the year. It's a 2 minutes clip Yi, how do you miss those 2 points 

Why do you assume I missed it?  I put a headline on it in case people were interested in getting more info from the link.

I did get the retroactive date wrong.

[Sheilbh]

Seems this is retroactive under those definitions. A taxpayer sells stock on June 1 which has a certain capital gains rate, makes estimated tax payments based on that sale and tax rate, and then later in the year legislation is passed that changes the rate applicable to that June 1 sale.

The taxpayer made a determination on June 1 to sell the stock, and the estimate tax payments based on the rate then, but now the taxpayer owes a different amount due to current legislation on the historic transaction.

But it's this tax year. So you're making estimated or provisional tax payments that will be confirmed when you file at the end of this tax year. I get that you might make different decisions knowing this legislation was coming but you don't know your overall tax position until the end of the year.

I don't think it's wildly uncommon for the US to be updating taxes through the tax year (because of how a lot of tax legislation is passed in the US v a parliamentary/budget model) - I know that the details of the AMT are almost patched every years and often not until August/September. I don't really see a difference between that and this.

Neither of Malthus's examples apply to a change to tax policy starting this tax year and going forward.

[alfred russel]

Sheilbh, in the US high income earners (probably almost everyone with revised tax rates under this provision) have to make quarterly tax payments and if those are not sufficient they get penalized. So they have to know their overall tax position before year end for those purposes.

Right now if a high earner sells stock eligible for capital gains the tax rate is 20%. That is already set in the statute for 2021. I don't get the theoretical difference between changing the rate for a sale last January 2021, or a sale last January 1972.

I'm not making a political point here only a semantic one. We have a discrete event (sale of an asset qualifying for long term capital gains treatment) with a defined treatment under current law. If that discrete event happened in the past and subsequent to that event a change in law also changed the defined treatment, I don't see how that is not retroactive.

[Sheilbh]

But are those payments final or are they provisional/estimated pending a final calculation/reconciliation at the end of the tax year?

If they're final then I agree it's retrospective and no different than clawing back from 20 years. If they're just provisional and you can sort of adjust the rest of your payments through the year based on them, then I don't think it is retrospective. It's all part of the same year which is current not past.

And I agree this is just a semantic point not political. But making changes to taxes during the tax year seems fine to me - it's like an extended present moment and you can know with certainty at the end of the tax year the rates and the payments you should make, even if you are making payments through it.

[alfred russel]

making changes to taxes during the tax year seems fine to me - it's like an extended present moment and you can know with certainty at the end of the tax year the rates and the payments you should make, even if you are making payments through it.

That is a political judgment though.

As I make personal decisions, what matters to me is the after tax proceeds I get from a sale. In January I may have made a sale expecting after tax proceeds of $80, and now the proposal is to reduce that to $60. That is retroactive imo. Had I known that the rate would go to 40%, I may not have made the sale (I might have deferred the sale to wait for the next Republican administration to lower the rate back to 20% for example).

I think capital gains rate changes need to be this way (a bit retroactive), or everyone will just recognize gains right before the go live date and capture the lower rate.

[Barrister]

Take my word on tax law at your peril, and this is drawing on my Canadian legal education, but I understood it was routine for a tax change to be announced in a spring budget, get passed in the summer to fall, and be proclaimed into law even later than that - and all to be retroactive to the start of the year.

If it is a truly dramatic change I think it is made retroactive to when it was first announced, but that is as far as it goes.