Current Income Gains are Unequal

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steross

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#41
My error, I mistyped access instead of assess. I was attempting to show that transactions are the key and help you with you definitions of income, wealth, and net worth.

Think of income as monetary value that is derived from a transaction. These are monetary values (money) that you can use today. Transactions like: being paid a wage, dividend from a stock, selling something, rental income, interest from a savings account.

While income is what you get now for a return from work or a sale ….wealth is something that can help you live your life now or in the future. (Ie house, accumulated assets, stock growing).

Maybe the best example I can give is the growth of value retirement accounts like a Roth or a 401K. Those have been rising for all of us. But they are not income for us now. They will be when we start taking distributions because distributions are transactions. And the transaction of the sale of a share of a mutual fund in our 401K and distributed to us is income.

Hence your original graph in your first post was about wealth. For the 1% their growth is largely due to investment growth. For the bottom 50% their wealth growth is likely due to federal relief payments that they have saved.
If the bottom 50% received $3T in payments and immediately spent $3T on food, their personal income, for a graph like you linked, would have been $3T, but their wealth would have increased $0. (note: a business would normally define income as “net income” which is different).
Conversely, if the bottom 50% received $3T in payments and saved $1.5T (or spent $1.5T on homes), their income would still be $3T, but their net worth would increase $1.5T.
Honestly, it doesn’t matter how many ways you guys try to give your perspective. You may personally not consider it income, and that is fine, I’m not arguing against your way of thinking. But, to claim it isn’t income when I have shown multiple financial professionals discussing that it is income just isn’t accurate. Even if you guys convinced me of your opinion, it doesn’t change reality that for many people it is income.
 

Rack

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Oct 13, 2004
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#42
Unrealized capital gains aren’t even gains unless you take them as income or debt. Once you do that, then they can be considered gains…I’m so glad that back during the W administration they fixed the problem with personal real estate being unfairly taxed on capital gains upon sale. I don’t understand the people who thin the answer lies in more taxes to an inept federal system…it’s sad and silly at best.
 

jobob85

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#43
Summary of the stupid debate: @steross thinks any increase in your assets' value is income. The rest of us who have piped up so far seem to think the more common definition is that it's only income once it's converted into some monetary asset (e.g., if your house went up in value, but you didn't sell it, @steross says that's income and some of the rest of us don't).

Why does that debate matter? I don't know.
If your house went up in value under certain parameters and you sell it, it is not taxable income according to the IRS. So, where do we all sit on taxable vs nontaxable income?
 

steross

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#46
A CEO is paid stock options with a value of $100 million and a salary of one dollar this year.

He is at the company Christmas party and states that his income was the lowest of any employee. Would the workers be upset or would they say, yep, that is accurate?
 
May 4, 2011
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#47
Hell, I don't know. Dealers choice. Why not both?
I have no interest in the former.

I'm open to ideas on the latter. I like the idea of progressive tax policies that don't tax some base level of income that you need just to survive and then has progressively higher tax rates. We've more or less had that for decades and have argued more about how steep that increase should be.
 

steross

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#48
People will riot if the dems actually get to tax unrealized capital gains. That I think would actually lead to armed conflict. I know my family would be immediately leaving the country if that gained serious steam.
Just to be clear, while I do think I realized gains are income, I do not think they are or should be taxable income.
 

OSUCowboy787

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#49
Just to be clear, while I do think I realized gains are income, I do not think they are or should be taxable income.
I could fully agree with this and I believe your house should be taxed forever at what you paid for it, not for the unrealized gains the county believes your property/house is worth after 20-30 years.
 
Mar 11, 2006
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#50
A CEO is paid stock options with a value of $100 million and a salary of one dollar this year.

He is at the company Christmas party and states that his income was the lowest of any employee. Would the workers be upset or would they say, yep, that is accurate?
You are leaving out information needed to answer. What is grant date? Vesting date?
Also, because employees do not agree or are upset…that does not alter the definition of personal income.



Let me give you this scenario. Say a brand new painter has a showing. The art critics go crazy and universally say his portrait of his mother is the next Mona Lisa and is worth at least $50M.
But the painter doesn’t want to sell the portrait now. If he did sell he would have $50M in income. Are you saying he has $50M in income even when he doesn’t sell?
 
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Mar 11, 2006
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#51
Just to be clear, while I do think I realized gains are income, I do not think they are or should be taxable income.
Incorrect. Realized gains are taxable.

It is UN-realized gains that are not income and not taxable.

EDIT: Nm. I think you just left off the “un”.
 

steross

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#54
You are leaving out information needed to answer. What is grant date? Vesting date?
Also, because employees do not agree or are upset…that does not alter the definition of personal income.



Let me give you this scenario. Say a brand new painter has a showing. The art critics go crazy and universally say his portrait of his mother is the next Mona Lisa and is worth at least $50M.
But the painter doesn’t want to sell the portrait now. If he did sell he would have $50M in income. Are you saying he has $50M in income even when he doesn’t sell?
Yes. He has $50 million in unrealized income.
 
Nov 23, 2010
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#58
I'm not defending his definition, but in fairness, he was very clear that he did not support taxing unrealized gains.
But that's exactly what a wealth tax is. Elon's wealth that Warren wants to get at is his Tesla stock. It's the fundamental issue of a wealth tax.
 
May 4, 2011
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#59
But that's exactly what a wealth tax is. Elon's wealth that Warren wants to get at is his Tesla stock. It's the fundamental issue of a wealth tax.
Just to be clear, while I do think I realized gains are income, I do not think they are or should be taxable income.
Well, then ask him to clarify his position. I have no idea if he supported a wealth tax, but the statement above is pretty clear that he doesn't support taxing unrealized gains.
 

llcoolw

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#60
A CEO is paid stock options with a value of $100 million and a salary of one dollar this year.

He is at the company Christmas party and states that his income was the lowest of any employee. Would the workers be upset or would they say, yep, that is accurate?
Most Americans think 1.9 million is the cutoff to being wealthy. Which is off by 700,000 negatively from the year before (2.6 million).
https://www.cnbc.com/2021/05/12/net-worth-to-be-considered-wealthy-in-2021.html

In my book, that won’t even get you in the neighborhood. Perceptions are way off almost uniquely to each individual. Is money important? Should you save all you can? How?

3 major questions that aren’t even in basic public education anymore. This years senior class from Marcus High School ( named after Neiman Marcus ) had a survey showing more than 55% couldn’t or never heard of how to write a check and balance a checkbook. They let apps do it for their debit cards automatically. Even worse, hardly anyone knew what the “debit” meant.

The top 1% in the US control almost 44 trillion dollars in wealth. That much money doesn’t even exist. The bottom 50% control 2.5 trillion. The other 49% control 63 trillion.
( that number was 97 trillion in 2017 so I bumped it to 110 trillion and took the 44 and 2.5 billions out and we are left with 63 trillion for the remaining 49% of population).
https://www.celebritynetworth.com/a...boosts-total-net-worth-americans-96-trillion/


What I’m seeing as the biggest barrier to success of those financially challenged in today’s world is a lack of finance understanding, lack of exposure to finance in youth and lastly an almost cultural shunning of fiscal responsibility.

Mind boggling that some people think that wealth is a static number. That whatever money is in circulation is the only wealth there is. We have to teach each child in this country, that they themselves create wealth. Not earn it.