The Markets
Capital gains tax
reform comes with a big price tag: $100 billion over 10 years.
A capital gain is any
increase in the value of an asset, such as an investment, a home, land, etc.,
between its purchase and its sale. The amount of a gain is determined by
subtracting the purchase price from the sale price.
Last week, the White
House proposed capital gains be adjusted or ‘indexed’ for inflation before they
are taxed. Princeton Professor Alan Blinder explained the idea in The Wall
Street Journal:
“Why index gains?
Suppose you own a stock for many years, during which time overall prices have
doubled because of inflation. Over the holding period, the value of your stock
also has doubled. When you sell, the proceeds have precisely the same
purchasing power as the original purchase. There’s no gain, no loss. But under
current tax law, you owe taxes on the phantom ‘gain.’ Worse, if your stock went
up by less than the cumulative inflation, you’ll still get taxed despite your
loss. This is unfair and dysfunctional.”
While the suggestion
is appealing to many investors, it’s not without controversy. For example, the
White House suggested the Treasury Department change the tax code without
Congressional approval by modifying enforcement regulations. However, the
legislative branch – Congress – is constitutionally responsible for tax law.
In addition, adjusting
capital gains for inflation without doing the same for interest expense and
depreciation may allow some taxpayers to be able to generate significant losses
on paper. Current tax law includes provisions that limit this kind of tax
strategy, but indexing capital gains would reopen the door, reported the Tax
Policy Center.
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THE MILLENNIAL
WAY.
From social media to
housing options to banking, every generation has had its own preferences.
Today, millennials (individuals between the ages of 18 and 34) are having a
profound influence on lifestyle and culture. Here are three trends to watch:
1. Millennials are
moving to smaller cities. “Mid- or second-tier cities, loosely defined as
those under a million people that aren’t regional powerhouses like Austin or
Seattle, are increasingly seen as not just places to find a lower cost of
living, easier commute, and closer connections with family, but also a more approachable,
neighborhood-oriented version of the urban lifestyle that sent many to the
larger cities in the first place,” reported Patrick Sisson for Curbed.com.
2. Millennials like
point-of-sale loans. Point-of-sale loans are catching on. The Economist reported,
“Consumers who might previously have financed big-ticket purchases such as
furniture, electronics, or home-improvement projects with a credit card are
now opting to borrow at the checkout, often with an initial 0 percent
interest rate. These short-term credit products were once the domain of big
banks…[and] store-branded credit cards. Now tech startups are entering the
market with innovative techniques for underwriting and approving potential
borrowers, often in seconds.”
3. Millennials tend
to prefer healthier lifestyles. “For millennials, wellness is a daily, active
pursuit. They’re exercising more, eating smarter, and smoking less than
previous generations. They’re using apps to track training data and online
information to find the healthiest foods. And, this is one space where
they’re willing to spend money on compelling brands,” reported Goldman Sachs.
Weekly Focus – Think
About It
“The changes in our
life must come from the impossibility to live otherwise than according to the
demands of our conscience, not from our mental resolution to try a new form
of life.”
--Leo Tolstoy,
Russian writer
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