Swiss minimum wage equals $25 USD. How do they do it? Zero capital gains tax.
TB
New Zealand also has a high minimum wage at $18.90 NZD per hour. Guess what... zero capital gains there too!
AL
TB what do you think the connection is? That they bring in more from income tax because the minimum wage is higher? ??
TB
AL - From the government perspective, yes... it will help balance out the lost revenue.
From the employee's perspective they will make more but also pay more tax.
From the businesses perspective they will be less profitable, but will be able to keep their gain when they sell (and also find it easier to get investment to grow their business).
CPAs and tax lawyers hate it though... because it will make it easier for business owners do their own taxes ??
AL
TB that makes sense.

CL
I don’t understand how that correlates. Let’s NOT tax the rich to pay their share, and we can raise the minimum wage?
TB
Excellent question! The people who are against higher minimum wages are business owners.
So in order to get them on board you eliminate the capital gains tax like Switzerland and New Zealand did.
Business owners will benefit from zero capital gains because:
a) They will eventually make more money when they sell their business, and
b) It will be much easier to find investors to help start and grow their business since capital gains tax is an "investment tax".
CL
TB But your post Appears pro zero capital gains tax. As if that would help raise the minimum wage. Correlation is not causation.
 I expect there are a lot of other differences between the US and those countries with zero capital gains tax.
MN
TB Biden plans to crush us with gains taxes unfortunately as well as estate exemptions. I have spent a great deal of time in Switzerland and talked to some living there.
Lots of taxes and constant voting on things. Mandatory military training and the adult men are issued a gun to keep at home in the event of being called back to service.
Much we don’t know about other countries.
 I am a multiple business owner and could increase my wages provided consumers can handle increased prices because it’s not factored in at this point
TB
CL - Business owners are the ones who need to be brought on board to get support to increase minimum wage.
Eliminating capital gains will make them very happy. Plus it simplifies the tax code.
LJM
TB Now if only we could decouple health insurance from employment...

CL
TB I don’t support that, that shifts even more of the burden off the rich and onto the middle class.

JW
How about we tax unearned income at the same rate as income derived from labor?
TB
That sounds complicated. I think we need to simplify tax law.
LC
TB when you find a business that will actually do this, let me know.
JW
TB why is every tax simplification law 1200 pages? What would be simple is if capital gains were taxed at the same rate as other income. That would be simple.
TB
LC - When I find a business that will actually do what? I don't understand...
TB
JW - It would be simpler, and that's what California does, but it would not help the business owner.
What I'm suggesting is in exchange for dramatically higher minimum wage (which makes their businesses less profitable)... in the same bill,… See More
JW
TB are you saying business owners have no advantage over labor in this country? ??? Are you saying business owners have no tax advantage over laborers?
 I think you should talk with Bezos about that.
LC
TB simplify Their gains and losses to accommodate a higher minimum wage. It's an agree to disagree situation unfortunately. Sad but true
LC
TB It will never come to light
TB
LC I have friends in New Zealand that are constantly starting and selling businesses. The lack of the capital gains friction makes their lives so much easier.
TB
JW - I'm saying you have to get support from business owners in order to get the law passed for a much higher minimum wage.
Amazon is already at $15 per hour, so unless we are talking about a much higher minimum wage like Switzerland it's already a moot issue for Amazon.
TB
JW and LC - It seems as if the two of you feel very differently about this. Just to make sure I understand:
Lisa thinks that business owners would not support my plan because (I'm guessing) the potential for gains are too far in… See More
GM
Also, in addition to 1200 page "simplified" tax plans, simplified plans like flat tax tend to benefit some groups disproportionately and penalize others.
TB
GM - It seems like we just keep making it worse and more complicated all the time.
JW
TB you misrepresent me, but I’m working here. ??
GM
Not "we".
The conservative powers who pretend to be empowering working people and small business people, while actually engaging in the wealth creation and preservation business...
For themselves.
Maybe in addition to looking at income tax and capital gains tax we need to look at inheritance and wealth retention taxes.
The system we have now seems to be encouraging the sort of economic monarchy. The founding fathers I hate when that happens!
Dark Money by Jane Mayer is a wonderful read that touches on some of these subjects.
TB
JW - Sorry I didn't get it right...
LC
TB yep for me. With the economic on slot that is happened with the pandemic I don't think they can afford to pay higher wages.
Now there's always your choice to you I can but not everyone. There's a lot of businesses that have closed during this pandemic.
Maybe an old sunny California you make so much money but not for the rest of the good all USA
LC
TB you know I was just kidding. Lol.

JBW
I am a prime example of how the capital gains tax hurts Americans. I have real estate investments which I would love to turn over, but because of the 25% I would have to pay, I’m holding onto them. Sure, I could do a 1031 exchange, but the time restrictions are too draconian. Yes, if I’m lucky enough to find that perfect property within that time period, sign me up!
I’m all for the wealthy paying their fair share. I don’t mind giving up a sizable chunk of my income every year, as long as it goes to education, infrastructure, health care, etc.
However, the capital gains tax is not a “fair share” tax.
CL
JBW isn’t long term capital gains tax 15%?
CL
JBW if you make a lot of income from real estate, I think it’s fair to pay taxes on it. Everyone else is paying taxes on their normal income. Why should Income from real estate be exempt?
JBW
CL Great point, Christine! It depends on the amount of your investment, your current tax bracket, etc. The capital gains tax, however, disproportionately dings investors and is a disincentive to turn over investments. If those investments w… See More
TB
JBW - I hear you... I'm doing a 1031 AND a 1033 exchange right now because the government took my part of my land for the border wall. It's so complicated... There are so many loopholes like that set up to avoid capital gains. Why don't we just simplify it and eliminate them completely?
As a business owner, I spend so much time trying to figure out my taxes I'd be way more productive if I didn't have to worry about capital gains.
I would absolutely support a $25 per hour minimum wage bill if that same bill eliminated all the capital gains taxes and associated laws and loopholes.
JBW
TB Yes, I saw your post about that debacle. It’s terrible you’re having to do that. Is there no one or nothing within the current administration who could stop that eminent domain? At least I assume it was eminent domain...
TB
JBW - The timing was bad for me. They started the eminent domain condemnation in 2018. I fought it for a while but eventually realized the government would win and I would lose. There was nothing I could do. Spent over $200k in legal fees ??
Michael Neal
CL consideration for the risks are one reason.
GP
CL Do you understand the difference of paying taxes on income vs capital gains? From your responses, I am not sure.
CL
GP yes, do you?
CL
JBW Long term tax capital gains is only taxed at 15%. You don’t think that’s a fair rate?
CL
The long-term capital gains tax rate is 0%, 15% or 20% depending on your taxable income and filing status.
They are generally lower than short-term capital gains tax rates. And lower than regular income taxes.
CL
Low capital gains tax rates are major reason why the ultra wealthy pay such a low tax rate and the tax burden is disproportionately high on the middle class.
JBW
CL A flat rate of 15% is absolutely not the case. If you can cite some documentation of this and provide it to my CPA, I’m selling tomorrow!
CL
JBW see above
CL
2020 capital gains tax rates
Long-term capital gains tax rate Your income
0% $0 to $53,600
15% $53,601 to $469,050
20% $469,051 or more
JBW
CL Still looking for legitimate citations...
CL
JBW https://www.nerdwallet.com/.../selling-home-capital-gains...
Selling a House? Avoid Taxes on Capital Gains on Real Estate in 2020 - NerdWallet
NERDWALLET.COM

CL
JBW are you familiar with google?
CL
JBW I provided one, multiple sites have the same info.
JBW
CL Yes, dear. An individual can take up to $250,000 tax free and a couple up to $500,000 tax free on their primary residence.
This has been the case for many years.
However most of the people in this dialogue are (I assume) not thinking about their primary residence.
TB
The main intention of my post was to provide a way for business owners to get behind supporting a substantial minimum wage increase.
JBW
TB Yes!!!
CL
JBW clearly you didn’t read the full article, or even scroll down to the part about capital gains rates for non-primary residences.
CL
TB I don’t think zero capital gains tax is the right way to do that.
TB
CL LOL - I can tell that. It seems like everybody hates the idea ??
I guess I'll stop trying to solve the problem and go back to trying to figure out all taxes I owe.
CL
TB to be clear, I do support higher minimum wage.
TB
Me too... but so many of my business owner friends are really against it.
JBW
CL Yes, I’ve been familiar with capital gains taxes for a long time. God knows, I’ve paid enough of them.
But it goes a much longer way than the article you provided. And I apologize if I’m coming across as snarky right now, I’m just making Super Bowl dinner right now.
I’m all for paying taxes when taxes are warranted. Shit, I have two boys in UC’s right now, and four more in the pipeline! I am all for subsidized education and health care!!!
But the capital gains tax is not the way to go about it, particularly when there are so many means to get around it. Which anyone with a good CPA will take advantage of.
JBW
And just to clarify...I am all for higher taxes!!! If we can be assured that the tax revenue will be going toward health care, education, infrastructure, services for the mentally ill, etc. Some call me a Socialist for that, so be it. But I do not believe that my tax dollars are currently being used for such purposes.
CL
JBW eliminator mg the capital gains tax is not the way to go about it. The rich make the bulk of their money from capital gains, and that’s who do much of the tax burden falls in the middle class, and people like trump & warren buffet pay lower tax rates than most middle class taxpayers.
 If I make $100K in wages, you make $100K all in capital gains, why should I pay more in taxes than you? I think that’s messed up.
JBW
CL I totally get that. However, I believe that the majority of people who pay capital gains taxes are not the 1%, but are everyday working people who work for decades to be able to invest their hard-earned dollars for their families.
Even Warren Buffett believes that our tax system is fucked. I couldn’t agree more. And BTW, I don’t make my income by selling off my investments. I’m a sole proprietor consultant.
However, I do have real estate investments that could really pay off if I were to sell. But I won’t, because of the taxes I would have to pay.
JBW
And also, I probably didn’t make myself clear earlier...I don’t think the capital gains tax should be completely eliminated, just reformed.
CL
JBW if you have real estate investments which have appreciated so significantly, you are far better off than most Americans, and you shouldn’t begrudge paying 15% in taxes on that income, when others are paying a higher percentage on their income (wages).
CL
JBW reformed? Lower than 15%? Already too low IMO, since lower than wages’ income tax for most.

MA
Also, no wars
MR
It’s not either/or. I’ve always paid my peeps at least $25/hr, and I pay capital gains tax. I don’t see the connection. Apples and oranges. A budget for employees just has to be part of your business plan. ?????
MA
MR ??????
TB
MR - Good for you. You are setting an excellent example ??
The largest employers however are the ones who need the law to make the changes. Walmart for instance, the largest employer in the US will not pay everyone $25 per hour unless they are required to by law.
MR
TB I totally agree with raising minimum wage. I just don’t attach that to eliminating Capital Gains taxes, even though doing so would benefit me personally.
TB
MR - I'm looking for ways to get business owners excited about it. If you put both of those in the same bill, it might get approved!
JBW
MR I’m with you...maybe the capital gains taxes are not eliminated, but taxed in a different way than they are currently.
MR
JBW they’re already taxed at such a low rate (far less than earned income), and there are so many ways to get around them,
 I say F no. Keep the tax. Poor people will be paying the difference if we cut them.

SF
What are the immigration policies of New Zealand and Switzerland?
They don’t flood their country with cheap unskilled labor and then push for higher minimum wage.
TB
LOL - Right? I'm sure they would be happy to have you...
The problem is the exit tax from the US. You can't just leave. The IRS is going to take a substantial bite of EVERYTHING you own.
https://www.irs.gov/.../international.../expatriation-tax
Expatriation Tax | Internal Revenue Service
IRS.GOV

TB
I understand your question now. They have much more strict immigration policies than the US. That's a good point. You have to be skilled and/or have the capital to start a business.
Increasing minimum wage will make our immigration problem worse ??
JBW
SF I would love to emigrate to New Zealand! My favorite place on the planet! But you are correct, they require anyone who proposes to emigrate to bring a lot to the table. I don’t know what their refugee and asylum policies are however, and we have a lot of that to handle in the US.
TB
JBW I have some friends that did the big move to Zealand a few years ago. They bought a ranch in Wainui Beach on the north island. They love it there!
JBW
TB Oh my gosh...my dream! ??
MS
I would be uncomfortable thinking of the people who harvest and cook the food I eat as “unskilled.” But YMMV.

GM
I understand your proposition. I'm not sure I agree. It's sort of reminds me of the people who argue from a different part of the political spectrum that Medicare for all will reap all kinds of savings compared to what we have currently. The most frequently cited study supporting that comes out of Yale. Unfortunately, it was written by an epidemiologist, not an economist or a public health specialist. And it doesn't address the issue of uprooting a $187 billion a year industry employing 2 million people directly and millions more downstream and transitioning to a model that is the polar opposite of our current system.
Frequently, the medical insurance systems in other countries are cited as obtaining better outcomes at lower cost. Which sort of ignores the fact that for the past seventy years, their systems have been focused on achieving those goals, whereas ours have been focused on improving the bottom line for private insurers.
I'm always open to looking at new and potentially better approaches. And I know that many countries have very different Taxation and Healthcare approaches that work very well.
And did I mention the challenge of attempting to do this in the face of global economic meltdown and pandemic?
The issue is how do you manage the transition, and how do you deal with unintended consequences?
JBW
GM I love your post!
People are always talking nowadays about the happiness level of countries like Sweden, which have very high taxation rates but good quality health care, education, satisfaction with life, etc.
However, my smarty pants Econ major son at UCLA is quick to remind me that Sweden went through years and years of economic struggle to get to that point.
And Sweden is extremely different from the US in...just about everything!
TB
We have so much work to do to fix things!
GM
TB that's one reason, I have been in the tank for Joe Biden since the beginning. He and Barack are really the only ones who can reasonably say that they've looked over the kind of cliff that we are perched on. Just on steroids.
My concern is that reasonable people could spend an entire presidential term just fixing the damage that was done and plugging the holes that our assumptions of normalcy and civility we left unguarded. And it might kill even someone like Joe. There's that much work to be done.
Also, we're facing huge structural changes in our economy and our working lives. Before the pandemic,
reliable sources suggested that as much as 40% of existing jobs might vanish by 2030 because of automation, outsourcing, robotics and artificial intelligence.
And with many companies realizing that they can do a lot more with a lot less, I anticipate that it's going to get worse.
It's clear that the usual solutions of retraining and temporary financial support are not the answer, because that's a twentieth-century solution that didn't work for the last 30 years of that century, and they're proposing that it be applied to 21st century problems that impose such incredible burdens on the country and the world.
Income and wealth disparity are just the beginning.

ZS
Makes sense. No reason to not increase minimum wage.
GM
TB "Swiss minimum wage equals $25 USD. How do they do it? Zero capital gains tax." I'm not sure there is a causal relationship between those two. Contributory, most possibly. But I'm sure it's a little more complicated than that.
TB
Yes - definitely... there are a lot of factors. However, two big levers for economic output are:
Capital
Labor
From a macroeconomic perspective if you decrease one and increase the other you can still keep a balance.
I'm proposing that Switzerland has gotten it right. They have systematically increased labor cost while simultaneously decreasing cost of capital.
GM
TB True. But they also don't have the types and scale of wealth and income inequality that we have to deal with.
TB
GM Agreed... but what if we did make the changes I'm proposing? Everyone with a minimum wage job would suddenly be making twice or maybe three times as much money. That would go a long way toward fixing the inequality.
GM
In regard to the cost of capital, debt is pretty cheap these days, isn't it? Historically low? And what with the lovely tax cuts, the buyback of stock has increased the value, no?
GM
TB I personally don't expect that the people who are currently benefiting the most from wealth and income inequality are going to stand still and let that happen! LOL. Suddenly? Hmmm...
TB
GM - Debt is really cheap, yes. But there's going to be a reckoning at some point. When it happens... it's not going to be good.
https://www.reuters.com/.../global-debt-to-hit-record-277...
Global debt to hit record $277 trillion by year end on pandemic spending splurge: IIF
REUTERS.COM

TB
GM - Of course the ones who a benefitting from cheap labor now won't want to increase minimum wage, that's why I'm proposing the trade off for increased wages and decreased capital gains to find a way to get support from both sides.
GM
Corporate America isn't in give back / good corporate citizen mode. It's gonna take "the stick" to make anything remotely like that stick.

Ron Pouraty
People from all over the world deposit their wealth in Swiss Bank accts. Many die and Swiss gets to keep their money!
TB
Clever Swiss! With their secret numbered bank accounts...
JBW
TB I just re-watched “The Spanish Prisoner” with Jackson when he was home over winter break. David Mamet. Not to give the suspense away, but there’s a Swiss bank account reference that is integral to the plot.
ACS
-- A study of 137 minimum-wage increases, -- On average, minimum-wage increases eliminated jobs paying below the new minimum, but added jobs paying at or above the new minimum. The two changes effectively cancel each other out. https://beta.washingtonpost.com/.../raising-the-minimum.../ ----------------------------- Denmark McDonald's Workers Get Paid $20/HOUR ! And the Big Mac costs just 80 cents more . Thanks to unionization, they also get paid sick leave and overtime pay. Every worker gets 4 weeks Paid Vacation.
The U.K. brought in a national minimum wage in 1999, AND unemployment actually fell between 1999 and 2007 despite regular increases in the wage. .https://www.businessinsider.com/denmark-mcdonalds-pays-20...
Analysis | The effects of 137 minimum wage hikes, in one chart
WASHINGTONPOST.COM

TB
Most people are surprised to learn that Denmark has very low corporate taxes. Danish companies pay 22% corporate tax, but only pay tax on Danish sourced income. They pay zero corporate tax on any income earned outside of Denmark.
US companies pay 21% but must pay tax on all income earned anywhere in the world.
SF
ACS how much is a gallon of gas in Denmark? $5.93 a gal. Almost every in Denmark is significantly more expensive making the minimum wage amount for very little.
https://www.nationmaster.com/.../United.../Cost-of-living
https://www.numbeo.com/.../compare_countries_result.jsp...
Denmark vs United States: Cost of living Facts and Stats
NATIONMASTER.COM

ACS
SF I'd imagine that for people earning Minimum Wage:
Major outlays are Rent, followed by Utilities then Food ?
--- Consumer Prices Including Rent in United States are 11.49% lower than in Denmark
--- Rent Prices in United States are 17.02% higher than in Denmark
--- Groceries Prices in United States are 2.61% lower than in Denmark
https://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=Denmark&country2=United%20States&fbclid=IwAR0YKR987-yh4Fw0H4F0Vy8n--TBFXyvpOzi3EaqIJVRauBAdMwzyasWusw
Cost Of Living Comparison Between Denmark And United States
NUMBEO.COM

Chuck
SF Interesting.

FD
America was built on the backs of the poor. We could afford a $15/hour minimum wage but the Republican robber-barrons benefit from having people locked into a cycle of poverty.
FD
https://www.cbsnews.com/.../biden-minimum-wage-proposal.../
Biden minimum wage proposal could lift more than 1 million workers out of poverty
CBSNEWS.COM

TB
It might pass this time without giving business a concession. It all depends on the Senate which is currently 50 Republicans, 48 Democrats, and 2 Independent. Kamala is the tie breaker, but that's only if it's 50/50. If you give business a concession, then there's a much better chance of swinging some Republicans.
JHM
Tim, honest question: do you really think the federal gov should be involved in this? Cost of living/wages are vastly different in different states. $15 in Iowa is diff than $15 in SF or NY. This is a states issue.
TB
Excellent point. Even within states, this is an issue. $15 per hour in Marin and Modoc counties are completely different.
Per capita income difference between those two California counties is almost 300%.
The simple idea is to give employees more and give businesses a break at the same time with the same bill to find support from both sides.
Some states do not even have income tax, much less capital gains tax. This lever can be applied at the federal level, however.
https://en.wikipedia.org/.../List_of_California_locations....
List of California locations by income - Wikipedia
EN.WIKIPEDIA.ORG

Jeanne Hupp McCreadie
TB exactly.

SF
Has anyone traveling to Switzerland or Denmark lately and said to themselves “wow things or so much cheaper here”?
My last trip to Europe made me feel like my parents because every was expensive...
TB
Nope... way more expensive. However, I was so impressed when I was in Switzerland right before the pandemic with how happy and well behaved everyone is there.
Getting a pay raise generally makes workers happier and no capital gains tax would make business owners and investors happier too.
I do hear you about the immigration problem though... that might be the fly in the ointment.
Sean Ryan
how do you feel about a Wealth Tax as Switzerland's regions have them?