What does a BIDEN Presidency look like?

[Admiral Yi]

I can't remember a single tax change that applied to me retroactively.

[Sheilbh]

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.

Sure and I agree it may be that people would behave differently.  But in your description of why it's semantic and this I feel like you're slightly treating capital gains as if it was like a sales tax or something. It's assessed on your annual qualifying income which is known at the end of the tax year. Even if it is triggered by discrete events it is not taxing discrete events but the whole year. If we had tax quarters or tax months or it was like sales tax and the payments made were final then I'd agree it'd be retrspective

I can't remember a single tax change that applied to me retroactively.

The AMT patch has been passed in December, after the IRS had already printed their forms and documentation, but it applied to that tax year.

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.

Yeah I think that's the norm here. The Finance Bill is normally working its way through parliament in the summer/autumn - but the obviouly there's a big difference because it has been announced at the start of the tax year (and often pre-announced) because of how the parliamentary system works.

But as I say the only example I know for sure is the AMT in the US, but I'd be surprised if that's totally unique. From a very quick Google search this is not unique and has happened with capital gains rate cuts in 2017, 2012, 2003, 2001, 1998 and 1997. I get why a rate cut is easier to swallow but the principle is the same it is normal to amend tax rates within a tax year and for that change to take effect at the start of that tax year rather than either at the start of the next tax year or part-way through a tax year.

And, as AR says, there's a very good public policy reason for it. If you're trying to raise the rates to increase revenue you'd probably just see a massive amount of sales before the date it took effect; if you're trying to cut the rates to stimulate the economy or cut revenue you'd probably see a huge reduction in the run-up to the effective date. Either way it'd be a bit of the tail wagging the dog and not really what you'd be trying to do with tax policy.

Edit: And I think it would be wrong and retrospective to apply this type of change to, say, 2020 capital gains.

[alfred russel]

Sure and I agree it may be that people would behave differently.  But in your description of why it's semantic and this I feel like you're slightly treating capital gains as if it was like a sales tax or something. It's assessed on your annual qualifying income which is known at the end of the tax year. Even if it is triggered by discrete events it is not taxing discrete events but the whole year. If we had tax quarters or tax months or it was like sales tax and the payments made were final then I'd agree it'd be retrspective

But it kind of is like a sales tax. Yeah the rate is partially dependent on annual income, but right now the max rate is 20%. Most people can know the cap gains rate they will need to pay under current statutes at the time they dispose a long term capital asset. Even if I don't know, I know the potential rates are 0-20%, and a rate of 40% outside of that range.

There have been several examples of retroactive ( ) tax changes in the US: it isn't unprecedented, and it is really necessary from a public policy point of view.

[Tonitrus]

I can't remember a single tax change that applied to me retroactively.

I remember it being a big deal when Clinton was in office...

https://www.investopedia.com/terms/t/tax-reform-act-of-1993.asp

Understanding the Tax Reform Act of 1993
The Tax Reform Act of 1993 contained several major provisions for individuals. It created a 36% and 39.6% marginal tax bracket for filers, eliminated the tax cap on Medicare taxes, increased taxes on Social Security benefits, and raised gasoline taxes by 4.3 cents per gallon. It also curtailed itemized deductions and raised the corporate tax rate to 35%.3

The Act was also one of the first bills to retroactively raise taxes, effectively making the increases apply to taxpayer incomes from the beginning of the year. By 1998, the effects of the bill helped the U.S. government to produce a budget surplus, its first since 1969.2

[Admiral Yi]

Well I'll be danged.

[crazy canuck]

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.

I think it is pretty rare to have a change made retroactive to the beginning of the year in which the budget is released.  Normally the changes apply from the day the budget is tabled in Parliament or it is prospective.

[grumbler]

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.

I think it is pretty rare to have a change made retroactive to the beginning of the year in which the budget is released.  Normally the changes apply from the day the budget is tabled in Parliament or it is prospective.

In the US tax laws are generally retroactive to when they are proposed in committee, to prevent both gaming the system in advance of the proposed law passing, but also not taking the public by surprise by retroactively enforcing a law unforeseeable when actions were taken.  An exception seems to be laws that correct errors in previously-passed legislation, which are sometimes retroactive to the effective date of the erroneous law.  Outright retroactive-to-first-of-the-tax-year legislation is rare.

[crazy canuck]

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.

I think it is pretty rare to have a change made retroactive to the beginning of the year in which the budget is released.  Normally the changes apply from the day the budget is tabled in Parliament or it is prospective.

In the US tax laws are generally retroactive to when they are proposed in committee, to prevent both gaming the system in advance of the proposed law passing, but also not taking the public by surprise by retroactively enforcing a law unforeseeable when actions were taken.  An exception seems to be laws that correct errors in previously-passed legislation, which are sometimes retroactive to the effective date of the erroneous law.  Outright retroactive-to-first-of-the-tax-year legislation is rare.

It used to be that all changes here were dated to budget day - the day the budget was tabled, for the reasons you described.  But governments have gone more toward providing notice of the changes.  So for example, changes to interest deductibility from corporate earnings was announced, is still being figured out and will become effective next year.  It would be interesting to see a study that addresses how much gaming of the system goes on as a result. 

[Sheilbh]

Sunak announcing that G7 have reached a deal on global minimum corporate tax:

Rishi Sunak
@RishiSunak
At the @G7 in London today, my finance counterparts and I have come to a historic agreement on global tax reform requiring the largest multinational tech giants to pay their fair share of tax in the UK.

The thread below explains exactly what this means. #G7UK
2/ Under the principles of the landmark reforms, the largest global firms with profit margins of at least 10% will be in scope – with 20% of any profit above the 10% margin reallocated and then subjected to tax in the countries where they make sales.
3/ The G7 also agreed to the principle of a global minimum corporation tax on large firms of at least 15% operated on a country-by-country basis – creating a more level playing field for UK firms and cracking down on tax avoidance.
4/ I've made securing an agreement on digital tax a key priority of mine for the G7 Presidency with the fairer system raising more tax to pay for public services.

This will now be discussed in further detail @G20 Financial Ministers & Central Bank Governors meeting in July.

I think the point in number 2 is key and apparently a source of opposition from countries like France and the UK because they may be the source of lots of sales but wouldn't really benefit from a global minimum corporate tax. This does something to address both sides.

It's a low rate, but I imagine it'll increase in the future. It's going to operate as a floor but I think will increase over time.

Edit: and obviously the real impact will be around aligning accounting standards on a global level.

[viper37]

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.

No, it was not.  It was in effect for January 1st the next year.  And the budget is voted on immediately.  What follows is the credit appropriation process, parliamentary commissions that approve of X$ going to Department of ABC.
Only when taxes were reduced, just before an election, were the changes retrospective to January 1st of the same year.

[Admiral Yi]

Just read that immigration is the one policy area Americans have a net negative opinion of Joe.

[The Minsky Moment]

In an epoch of generalized population collapse, the nations that succeed in pulling in a regular flow of immigrants will have a critical strategic advantage; the rest will stagnate.

[Oexmelin]

This sort of abstraction means very little in the face of the sort of constant fearmongering by the right.

[Eddie Teach]

In an epoch of generalized population collapse, the nations that succeed in pulling in a regular flow of immigrants will have a critical strategic advantage; the rest will stagnate.

Still a bit early to call it that. Earth's population has grown 1.5 billion in past 20 years.

[Tamas]

In an epoch of generalized population collapse, the nations that succeed in pulling in a regular flow of immigrants will have a critical strategic advantage; the rest will stagnate.

As is evidenced by the Roman Empire.