Sweeping Reform Would Tax Capital Gains Like Ordinary Income

Re:Sweeping Reform Would Tax Capital Gains Like Ordinary Income by abakker on Sunday April 07, 2019 @11:58AM (#19597592)

I suspect that this would be good for the economy. I can’t prove it, but I strongly suspect that cap gains deferrals over time are an important component of encouraging asset bubbles. A huge benefit of The benefit of ETFs have been to encourage permanent tax deferral of appreciating stocks through swapping out specific stocks.

On the other hand, as someone in the middle class, i would Really prefer to not lose my capital gains benefits. If we taxed them as normal income, I’d love if they would reduce the effective income tax rate.

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Re:Sweeping Reform Would Tax Capital Gains Like Ordinary Income by coredog64 on Sunday April 07, 2019 @12:20PM (#19597779)

I don’t think that’s how an ETF works. I can’t buy into an ETF, realize gains, and then cash out tax free.

The part that is (and IMO, should be) tax free is that when the ETF swaps out components to maintain their ratio, they aren’t being taxed on it. If they were, it would just turn into a drag on the fund. It’s not like they’re using the ETF for HFT.

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Re:Sweeping Reform Would Tax Capital Gains Like Ordinary Income by abakker on Sunday April 07, 2019 @03:54PM (#19599426)

You’re right - I was a bit unclear. What I mean is that ETF balancing activity ends up being untaxed.

Effectively, you get diversification, gains, reinvestment of dividends, etc but never have to realize the gains unless you sell. The avoidance at large probably induces bubbles of asset prices as collectively, early investors avoid realizing gains.

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