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OFF-TOPIC The New US Tax Plan and Your New 50% Biz Partner (the US Gov)

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YanC

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Interesting. According to the same source, even the states with 0 tax would be higher than the highest cap gains in Europe (DK @ 42%).
View attachment 37814

Never in my life would I have thought I should be grateful to be French tax-wise. Well, unfortunately, it's not only about capital gains...
 

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thechosen1

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James007Hill

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I'm thinking it will pay to focus more on yourself during this time and not grow a business as much. Make what you must, but become self-sustaining.

Grow your own food, cut your own wood, don't borrow money from the banks, homesteader lifestyle.

I welcome any thoughts on this subject either way.
I'm kind of with you on this. I personally still want to grow a business but I'm at the same time leaning more and more into the self sufficient lifestyle which suits who I am anyway really (country bumpkin, introverted, love nature and the countryside etc.).

I've become somewhat of an expert on foraging (finding and eating wild food etc) recently and am wanting to build a business around this very soon once my knowledge is where it needs to be (which will be by the end of this year based on how I'm doing and progressing). I'm also learning bushcraft, woodworking, and have a 5 - 10 year vision to own my own woodland a build a small log cabin there, not to live in permanently but as a retreat, also to rent out to others potentially and as a back up plan if the world really goes to pot!

My best friend who is building a really great bee-keeping business is also looking to buy a small-holding within the next year too.

It's interesting isn't it that arguably the most important skills of all (providing yourself with shelter, food, clean water etc.) are not taught in school, thus ensuring you have to keep drinking from the governmental teat!
 

socaldude

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At this point even with politics set aside, I don’t see how any self-respecting person with an ounce of intelligence can’t see how big of trouble this country is in.

The government wants to be the one to allocate the resources instead of men and woman. History is unfolding and it’s happening. All with the help of academia and the media.

We should start an expat thread LOL.
 

Kak

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From what I understand, the 0% CG rate would only apply on gains after the date you move correct ? So for someone with an existing business worth 10m, you'd still owe the 43.4% on that if you decide to sell and the 0% would kick in only on the valuation delta after the move to PR.

The whole concept of moving to Puerto Rico is bit ridiculous in the first place if you think about it.

Anyone from any other country could potentially just decide to move wherever they want in the world and start paying taxes there instead. So if they would move to a low or no tax country, start and sell a fastlane business within a few years, they would just owe whatever the tax rate is there and be done with it.

As for us, we would still owe the 43.4% or whatever the CG rate is at the time regardless of where we are living (unless its frikkin Puerto Rico lol), and not to mention the mountains of paperwork to be filed in every year which makes living abroad so much more complicated than it needs to be.
Yes, you are correct.

If you hold some very very long term gains there is a pro rated calculation.

As for your businesses… This might require a talk with some tax experts in PR, but you may just be able to shut down your US company and just move your operation to PR under a PR entity.

There is no law that says you can’t shut your business down. And also no law that says you can’t start a new business and use all of your old methods, contacts, and whatnot to “start again.” Of course company owned assets make this a little more of a pain, but this is what we are relegated to now, figuring out how not to be slaves.

There is also the opportunity zone thing to consider. If you rolled into an apartment complex down there or something. You could in theory wrap up your big cash out from a few decades of mainland 1031 exchanges… Cap gains tax free after 10 years or something. That has nothing to do with Puerto Rico though, and everything to do with the opportunity zone stuff.

Yes it’s ridiculous, but we tax on foreign sourced income. I pray that we roll that crap back one day and Americans can just live like a resident of any other country.

For now, you can’t both be an American and not be taxed by the American government. You are their property. Unless of course Puerto Rico or USVI, and maybe a few other exceptions.
 
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Lex DeVille

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I'm thinking it will pay to focus more on yourself during this time and not grow a business as much. Make what you must, but become self-sustaining.

Grow your own food, cut your own wood, don't borrow money from the banks, homesteader lifestyle.

I welcome any thoughts on this subject either way.
I'm kind of with you on this. I personally still want to grow a business but I'm at the same time leaning more and more into the self sufficient lifestyle which suits who I am anyway really (country bumpkin, introverted, love nature and the countryside etc.).

I've become somewhat of an expert on foraging (finding and eating wild food etc) recently and am wanting to build a business around this very soon once my knowledge is where it needs to be (which will be by the end of this year based on how I'm doing and progressing). I'm also learning bushcraft, woodworking, and have a 5 - 10 year vision to own my own woodland a build a small log cabin there, not to live in permanently but as a retreat, also to rent out to others potentially and as a back up plan if the world really goes to pot!

My best friend who is building a really great bee-keeping business is also looking to buy a small-holding within the next year too.

It's interesting isn't it that arguably the most important skills of all (providing yourself with shelter, food, clean water etc.) are not taught in school, thus ensuring you have to keep drinking from the governmental teat!

I think it will be valuable to become more of the kind of person who is not only self-reliant but who also has the skills and ability to influence (which is another form of wealth as @Kak puts it). Having the ability to bring people together around you, or even to bring communities together, may be a particularly useful skill soon.
 

FlorianR

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I didn't see a thread on this but it looks like it will be big news...

https://www.bloomberg.com/news/articles/2021-04-22/biden-to-propose-capital-gains-tax-as-high-as-43-4-for-wealthy

President Joe Biden will propose almost doubling the capital gains tax rate for wealthy individuals to 39.6% to help pay for a raft of social spending that addresses long-standing inequality, according to people familiar with the proposal.

For those earning $1 million or more, the new top rate, coupled with an existing surtax on investment income, means that federal tax rates for wealthy investors could be as high as 43.4%. The new marginal 39.6% rate would be an increase from the current base rate of 20%, the people said on the condition of anonymity because the plan is not yet public.

A 3.8% tax on investment income that funds Obamacare would be kept in place, pushing the tax rate on returns on financial assets higher than rates on some wage and salary income, they said.

Stocks slid the most in more than a month on the news, with the S&P 500 Index down 0.9% at the close. Ten-year Treasury yields fell to 1.54% from an intraday high of 1.59% before Bloomberg’s report.

The proposal could reverse a long-standing provision of the tax code that taxes returns on investment lower than on labor. Biden campaigned on equalizing the capital gains and income tax rates for wealthy individuals, saying it’s unfair that many of them pay lower rates than middle-class workers.

White House Press Secretary Jen Psaki, asked about the capital-gains plan at a press briefing Thursday, said, “we’re still finalizing what the pay-fors look like.” Biden is expected to release the proposal next week as part of the tax increases to fund social spending in the forthcoming “American Families Plan.”


Other measures that the administration has discussed in recent weeks include enhancing the estate tax for the wealthy. Biden has warned that those earning over $400,000 can expect to pay more in taxes. The White House has already rolled out plans for corporate tax hikes, which go to fund the $2.25 trillion infrastructure-focused “American Jobs Plan.”

Republicans have insisted on retaining the 2017 tax cuts implemented by former President Donald Trump, and argued that the current capital-gains framework encourages saving and promotes future economic growth.

“It’s going to cut down on investment and cause unemployment,” Chuck Grassley of Iowa, a top Republican on the Senate Finance Committee and former chair of that panel, said of the Biden capital-gains plan. He lauded the result of the 2017 tax cuts, and said, “If it ain’t broke, don’t fix it.”

Biden will detail the American Families Plan in a joint address to Congress on April 28. It is set to include a wave of new spending on children and education, including a temporary extension of an expanded child tax credit that would give parents up to $300 a month for young children or $250 for those six and older.

Biden’s proposal to equalize the tax rates for wage and capital gains income for high earners would greatly curb the favorable tax treatment on so-called carried interest, which is the cut of profits on investments taken by private equity and hedge fund managers.

The plan would effectively end carried interest benefits for fund managers making more than $1 million, because they wouldn’t be able to pay lower capital gains rates on their earnings. Those earning less than $1 million may be able to still claim the tax break, unless Biden repeals the tax provision entirely.

The capital gains increase would raise $370 billion over a decade, according to an estimate from the Urban-Brookings Tax Policy Center based on Biden’s campaign platform.

For $1 million earners in high-tax states, rates on capital gains could be above 50%. For New Yorkers, the combined state and federal capital gains rate could be as high as 52.22%. For Californians, it could be 56.7%.

Democrats have said current capital gains rates largely help top earners who get their income through investments rather than in the form of wages, resulting in lower tax rates for wealthy people than those they employ.

Capital gains taxes are paid when an asset is sold, and are applied to the amount of appreciation on the asset from when it was bought to when it is sold.

Congressional Democrats have separately proposed a series of changes to capital-gains taxation, including imposing the levies annually instead of when they are sold.

“There ought to be equal treatment for wages and wealth,” Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat who’s the chamber’s top tax-writer, told reporters in a phone briefing Thursday. “On the Finance Committee we will be ready to raise whatever sums the Senate Democratic caucus thinks are necessary.”

the best thing we can do is move our businesses to lower taxed states like Florida or if you wanna go all out move to Puerto Rico where you literally pay almost zero in federal taxes. Other than that expating to low investment taxed countries like Switzerland would be the second best. Many countries in Europe offer much lower investment taxes than the US if this goes through. Even Canada would. Something to think about
 

Lex DeVille

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Y'all could just start businesses at the local level where people pay in cash. Told you there was lots of opportunity there. :cool:

And just like that, @Johnny boy 's lawn mowing business goes from ew hard work to the next gold rush.

200.gif


Maybe that's a separate thread to start. Businesses where customers pay in cash. >)
 

Kid

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It goes like this:

1. Someone: You live in hell, we promise you haven!
2. Everybody: Yay lets vote for them, put them into gov and give them guns to protect us!
3. Someone: Now that we are the gov, we dictate laws and we have guns so we allow ourselves to shoot you.
4. Everybody: But what about our haven???
5. Someone: What haven?

This is a war of ideology.

Sometimes people have to learn the hard way. My biggest concern is that people won't actually learn.
 

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redshift

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MJ DeMarco

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Businesses where customers pay in cash. >)

I expect cash to disappear soon as well. Anything the authoritarians can't control, monitor, or audit is a risk.
 

thechosen1

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I think it will be valuable to become more of the kind of person who is not only self-reliant but who also has the skills and ability to influence (which is another form of wealth as @Kak puts it). Having the ability to bring people together around you, or even to bring communities together, may be a particularly useful skill soon.
This is something I am working on. I can be open and have some abilities with leadership IRL, but when it comes to things like this, I tend to turn sour and divisive. Meaning I would fail in politics if I ended up making everyone hate me from getting too pissed off and exasperated.

It is a difficult balancing act between being a people-pleaser and a hardliner and I think people who manage to overcome that can really move mountains.
 

thechosen1

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Would be nice but you'd still owe the 43.4%.
I'm young. Maybe it would be better to spend my life building a business somewhere else.

If I start from zero in another country (maybe not Switzerland on further investigation - cantons have wealth taxes) and eventually sell, perhaps that would be better than doing it in the US tax farm.

The tyrants in America, like Janet Yellen (at least, she brought up this idea as far as I know), actually want to have global tax systems though and force all countries to have the same high levels of taxation. So there is no escape.
 

[X]

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I was already thinking of potentially moving to a lower tax state just in general before. I thinking of moving once I'm ready to begin operating as a business. But this potential tax increase makes it even worse. I live in a middle tax burden state, but now Puerto Rico or USVI are sounding really nice.

I would think this tax rate would really discourage new businesses or large capital investments, so it would certainly entrench the large monopolistic companies even more. Funny how that always happens when there is a crisis. "Never let a good crisis go to waste."

I know this isn't the inflation discussion thread, but if you are concerned about rising inflation, then these policies and current supply chain issues would increase the possibility of stagflation - high inflation, combined with high unemployment and stagnant economy.

In the end, the common person will get all of these costs pushed onto them, even with the talk that it only affects the wealthy and high income earners.
 

MoneyDoc

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At this rate, what really is the point in doing anything in life? Imagine you sell a business for $100m, that's almost $50m in taxes! WTF!

$50m in taxes because you used your brain and made something out of yourself while the obese social justice warriors feeding off of welfare get a tax refund? Yeah, let's tax the wealthy because clearly they'll be motivated to produce more for the lovely country.

Instead of taxing the wealthy, they should propose a higher tax on cheeseburgers, a higher prison sentence for looters, a higher prison sentence for those socially influencing trials, and a higher prison sentence for terrorist groups. That's where the focus should be.

Sorry for the rant. I'm not even American and this pisses me off. Biden doesn't even believe in this crap. He "has" to do it because otherwise, tik tok users will get angry.
 

MTF

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I'm young. Maybe it would be better to spend my life building a business somewhere else.

If I start from zero in another country (maybe not Switzerland on further investigation - cantons have wealth taxes) and eventually sell, perhaps that would be better than doing it in the US tax farm.

The tyrants in America, like Janet Yellen (at least, she brought up this idea as far as I know), actually want to have global tax systems though and force all countries to have the same high levels of taxation. So there is no escape.

As Andrew Henderson says, go where you're treated best. If entrepreneurship is very important to you but the place where you live makes it very hard, for how long will you be able to tolerate it? How is it going to limit your life? How many experiences you won't have and possible cool projects you won't start because with such high taxes you wouldn't be motivated to work more than necessary?

I currently pay a flat 19% tax no matter how much I earn. Since the set-up is extremely simple I feel pretty good about this.

The government gets its "share" but it could be so much worse in many other countries. Also, the country has been developing pretty well. While I don't like the government and don't want to live here full-time because of the weather, at least I feel that my taxes contribute to something because I can see the economic upward trajectory of the country (people getting richer, infrastructure getting better), not its visible deterioration.

I could possibly structure this differently using other jurisdictions and pay even less but the lifestyle problems may not be worth it (like managing different international companies, having to find a new tax residence, etc.).

BUT if they changed this and I had to pay over 50%, I'd definitely pack things up and set it up elsewhere. And I'm still diversifying myself internationally regardless of how okay things are now.

I like Switzerland. If I didn't mind cold weather and being landlocked, I could definitely live there.
 

Lex DeVille

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At this rate, what really is the point in doing anything in life? Imagine you sell a business for $100m, that's almost $50m in taxes! WTF!

$50m in taxes because you used your brain and made something out of yourself while the obese social justice warriors feeding off of welfare get a tax refund? Yeah, let's tax the wealthy because clearly they'll be motivated to produce more for the lovely country.

Instead of taxing the wealthy, they should propose a higher tax on cheeseburgers, a higher prison sentence for looters, a higher prison sentence for those socially influencing trials, and a higher prison sentence for terrorist groups. That's where the focus should be.

Sorry for the rant. I'm not even American and this pisses me off. Biden doesn't even believe in this crap. He "has" to do it because otherwise, tik tok users will get angry.
Keep your head up MoneyDoc. Hope is on the horizon!

FMCAPITALISM.png

*Side note: anyone need a skilled vector art VA? 100% increase in cost for my art! Limited time only! Act now though, because the price increase might last forever!
 

Martin.G

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I expect cash to disappear soon as well. Anything the authoritarians can't control, monitor, or audit is a risk.
That's the beauty of crypto, in theory government can't control it. Remains to be seen if they can live up to it.

The other thing is that when government start to rise tax, people tend to use more cash. It is something that happened in Argentina, where we have one of the higher tax pressure in the world. At the end, the reward to evade taxes is higher that paid them.
 

Raoul Duke

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At this rate, what really is the point in doing anything in life? Imagine you sell a business for $100m, that's almost $50m in taxes! WTF!

$50m in taxes because you used your brain and made something out of yourself while the obese social justice warriors feeding off of welfare get a tax refund? Yeah, let's tax the wealthy because clearly they'll be motivated to produce more for the lovely country.

Instead of taxing the wealthy, they should propose a higher tax on cheeseburgers, a higher prison sentence for looters, a higher prison sentence for those socially influencing trials, and a higher prison sentence for terrorist groups. That's where the focus should be.

Sorry for the rant. I'm not even American and this pisses me off. Biden doesn't even believe in this crap. He "has" to do it because otherwise, tik tok users will get angry.

View: https://www.youtube.com/watch?v=kV09yOeOkN4


Hope is around the corner.
 

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redshift

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As Andrew Henderson says, go where you're treated best. If entrepreneurship is very important to you but the place where you live makes it very hard, for how long will you be able to tolerate it? How is it going to limit your life? How many experiences you won't have and possible cool projects you won't start because with such high taxes you wouldn't be motivated to work more than necessary?

I currently pay a flat 19% tax no matter how much I earn. Since the set-up is extremely simple I feel pretty good about this.

The government gets its "share" but it could be so much worse in many other countries. Also, the country has been developing pretty well. While I don't like the government and don't want to live here full-time because of the weather, at least I feel that my taxes contribute to something because I can see the economic upward trajectory of the country (people getting richer, infrastructure getting better), not its visible deterioration.

I could possibly structure this differently using other jurisdictions and pay even less but the lifestyle problems may not be worth it (like managing different international companies, having to find a new tax residence, etc.).

BUT if they changed this and I had to pay over 50%, I'd definitely pack things up and set it up elsewhere. And I'm still diversifying myself internationally regardless of how okay things are now.

I like Switzerland. If I didn't mind cold weather and being landlocked, I could definitely live there.

US citizens are taxed on their worldwide income regardless of where they live though, so even though its easy to go where you are treated best, its not so easy to get out of the US tax net. You usually have two options, either move to PR like @Kak mentioned, or renounce, like Andrew Henderson did, but this is not something most people would want to be doing.

There's generally provisions to exclude foreign income up to a certain amount if you live full time abroad (~100k and other deductions), so it's fine if you have a lifestyle business like many digital nomads, but if you are making big money, you'll end up still paying some back home. You also have to declare most of your foreign assets.

You used to be able to setup a foreign corporation and retain those earnings, but now there's something called GILTI, which is kind of like a minimum corporate tax you have to pay to USA. I don't fully understand this but I think its like 10.5% minimum or something accompanied by a mountain of paperwork. Also, look up the "Repatriation Tax" which trump signed in 2017. It was basically a one time retroactive tax of 15% on foreign corps held by Americans on their retained earnings from like 1986! Imagine having to deal with that!

As far as cap gains go, as far as I know the main thing you can do to offset them is Foreign Tax Credits, which you would only get if you are living in a foreign country with a higher tax rate (good luck beating 43.4% lol). So if you are living in a low tax country, you'd be SOL. So in @thechosen1's example, if he were to start over in switzerland and create and sell a business, he would still owe the USA CG tax (43.4%) even if switzerland doesn't charge any tax.

Which is why many Americans end up renouncing (like Andrew). In that case also you have the exit tax, so if you have large assets you'll end up paying cap gains anyway. But the fact that you even have to think about that just to avoid all the tax mess is just ridiculous. People from other countries can just move abroad and go on with their life similar to what you suggested. They still have to pay taxes for assets they own in their home country but that's totally reasonable.

I only just have a brief understanding of all of this, a CPA might have some tricks up their sleeve, but the point is, it would still be a pain and mess to deal with, even just to review the paperwork every year. Kind of like the complex setup you mentioned to lower your tax from 19%. It's really just making your life more complicated.

So yeah, the only easy options then would be either to just scale up and not sell when the CG is crazy high like this, or move to PR and hope you are treated well there!
 
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thechosen1

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At this rate, what really is the point in doing anything in life? Imagine you sell a business for $100m, that's almost $50m in taxes! WTF!

$50m in taxes because you used your brain and made something out of yourself while the obese social justice warriors feeding off of welfare get a tax refund? Yeah, let's tax the wealthy because clearly they'll be motivated to produce more for the lovely country.

Instead of taxing the wealthy, they should propose a higher tax on cheeseburgers, a higher prison sentence for looters, a higher prison sentence for those socially influencing trials, and a higher prison sentence for terrorist groups. That's where the focus should be.

Sorry for the rant. I'm not even American and this pisses me off. Biden doesn't even believe in this crap. He "has" to do it because otherwise, tik tok users will get angry.
Nailed it, honestly.
US citizens are taxed on their worldwide income though, so even though its easy to go where you are treated best, its not so easy to get out of the US tax net. You usually have two options, either move to PR like @Kak mentioned, or renounce, like Andrew Henderson did, but this is not something most people would want to be doing.

There's generally provisions to exclude foreign income up to a certain amount if you live full time abroad (~100k and other deductions), so it's fine if you have a lifestyle business like many digital nomads, but if you are making big money, you'll end up still paying some back home. You also have to declare most of your foreign assets.

You used to be able to setup a foreign corporation and retain those earnings, but now there's something called GILTI, which is kind of like a minimum corporate tax you have to pay to USA. I don't fully understand this but I think its like 10.5% minimum or something accompanied by a mountain of paperwork. Also, look up the "Repatriation Tax" which trump signed in 2017. It was basically a one time retroactive tax of 15% on foreign corps held by Americans on their retained earnings from like 1986! Imagine having to deal with that!

As far as cap gains go, as far as I know the main thing you can do to offset them is Foreign Tax Credits, which you would only get if you are living in a foreign country with a higher tax rate (good luck beating 43.4% lol). So if you are living in a low tax country, you'd be SOL. So in @thechosen1's example, if he were to start over in switzerland and create and sell a business, he would still owe the USA CG tax (43.4%) even if switzerland doesn't charge any tax.

Which is why many Americans end up renouncing (like Andrew). In that case also you have the exit tax, so if you have large assets you'll end up paying cap gains anyway. But the fact that you even have to think about that just to avoid all the tax mess is just ridiculous. People from other countries can just move abroad and go on with their life similar to what you suggested. They still have to pay taxes for assets they own in their home country but that's totally reasonable.

I only just have a brief understanding of all of this, a CPA might have some tricks up their sleeve, but the point is, it would still be a pain and mess to deal with, even just to review the paperwork every year. Kind of like the complex setup you mentioned to lower your tax from 19%. It's really just making your life more complicated.

So yeah, the only easy options then would be either to just scale up and not sell when the CG is crazy high like this, or move to PR and hope you are treated well there!
My example would include renouncing.

I mean completely cutting ties with the United States and starting your life elsewhere... before it gets worse.

Of course, I would rather see the US improve.
 

Johnny boy

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Y'all could just start businesses at the local level where people pay in cash. Told you there was lots of opportunity there. :cool:

And just like that, @Johnny boy 's lawn mowing business goes from ew hard work to the next gold rush.

200.gif


Maybe that's a separate thread to start. Businesses where customers pay in cash. >)

god that would be a nightmare collecting from 130 people each month :rofl:
 

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this might sound like a stupid idea or a genius one,
start 2 companies in 2 countries giving each 50% of your company at a price of 1$.
not pay 1$ tax and sell it in tax-free country.

IDK, just a random thought.
 

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35
Trust me when I say that this will not end up nearly as high as the first proposed plan.

Secondly, I think it is foolish and remarkably predictable of the neoliberals to suggest a short term plan like this that doesn't actually solve the real problem. A more effective and long term proposal to strengthen America and create adequate social mobility and GDP output would be raising the inheritence tax or perhaps a capital gains tax on networths above 100m that depends on how long the person has held that net worth.

edit: can I buy stock in the Camen Isles? lol


Obviously, this is a plan created by the truly ultra rich to tax to death all the small up and coming small businesses so the business of monopoly can continue, reasonable since the current population wants an expanded welfare state. The private welfare states/company towns of the 1950s are enabled by monopiles such as Kodak, GE, IBM and oil companies.
 

Timmy C

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Y'all could just start businesses at the local level where people pay in cash. Told you there was lots of opportunity there. :cool:

And just like that, @Johnny boy 's lawn mowing business goes from ew hard work to the next gold rush.

200.gif


Maybe that's a separate thread to start. Businesses where customers pay in cash. >)
Lol, funny you mention this as I just started a lawn mowing business.
 

Timmy C

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Nailed it, honestly.

My example would include renouncing.

I mean completely cutting ties with the United States and starting your life elsewhere... before it gets worse.

Of course, I would rather see the US improve.

I would leave 100%.

I wanted to visit the USA one day as I thought it would be freaking awesome.

I haven't thought that for a couple years now.

Now, I dont want to go at all. Even to visit.
 

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