My Thoughts on Losing A Million Dollars

My thoughts on losing a million dollars with the new tax plan

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Andrei Jikh

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In this video I want to explain how investors may lose money with the new plan. Whether you're invested in crypto, stocks, or real estate, this affects everyone. The new tax plan is targeted toward the richest 1% however, raising taxes always has ripple consequences. I personally have nothing against paying higher taxes, I'm very fortunate to make a high income and I need to pay my fair share.

WHAT IS A FAIR SHARE?

A study back in 2018 looked at the top 1% of earners which are people making more than $540,000 a year - that 1% of people represented 21% of all the income that was made that year. Now as far as taxes go, they paid 40% of the all the federal income taxes.

If we zoom out and look at the top 10% of people, which is anyone making more than $145,000 a year - which most people would still consider to be high income earners, they earned 48% of all the income. Hold on, that doesn’t sound fair - 10% earned nearly half of all the money? However they also paid 71% of all the federal income taxes. So if rich people pay more in taxes - the question becomes, why is there a myth about rich people not paying their fair share of taxes? Here’s the truth.

A lot of the wealthiest people make most of their money not through an active incomes like most people do from their job, but from the interest of their investments or the sale of stocks or other assets. And the sale of those assets get taxed at different, more favorable rates than incomes. So their incomes that they get from their jobs as CEOs means they still get taxed much more. So the rich do pay more, but they also pay less when it comes to investments because the majority of their money doesn’t come from an active income, it comes from the sale of assets - so it kind of makes sense why the rumor was started.

The interesting part about the myth that the rich get favorable taxes, is that its actually true for anyone who chooses to live like the rich do - which is to be an investor - so if you want to be rich that means spending less on fancy cars and watches, and spending more on assets like real estate, stocks or crypto - and then those tax rates will apply to you as well. So now let's take a look at the changes.

THE CHANGES:

Long term capital gains taxes will go up from 20% to 39.6% (taxed for investments held longer than a year). Income taxes going up from 37% to 39.6% and corporate taxes going up from 21% to 28%. We're told most of these changes affect only the richest 1% or anyone making over $400,000 a year. The truth however is a little more nuanced. Here are my thoughts on how each of these tax changes will affect regular investors.

HOW IT AFFECTS YOU:

When it comes to income taxes, I don’t think it’s going to change much of anything, it’s going up from 37% to 39.6% - that’s hardly anything, a very small increase that any rich person can afford - who cares.

When it comes to capital gains taxes for example the sale of assets here’s how it would affect someone like me if hypothetically at the end of the year my stocks are worth a million dollars, and I sell that plus my entire crypto portfolio, and I lived in a state that had income taxes on top of it like California where I would pay an additional 12.3% on top of that, I could in theory end up paying a million dollars in taxes. Another downside is less revenue

The biggest change is a potential change to corporate taxes. If you make it more expensive to operate a business, they’ll increase the cost of their products. To what degree prices will go up - we’ll have to wait and see. At the end of the day, this proposed tax plan is not necessarily what will become law.

*None of this is meant to be construed as investment advice, it's for entertainment purposes only. Links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.