>>A household that makes $500k on a good year is actually in the 1% statistically. They have left the working class long ago. They could work for about 7-10 years in their career and retire with an above-median salary (withdrawing following the 4% rule) in perpetuity. That is by definition not the working class: that family barely has to work in order to secure a lifetime of comfortable living.<<
The "in a good year" qualifier in both your comment and the parent comment means that your conclusion that this person has left the "working class" is untrue. It's not uncommon to get a windfall (stock option vesting cliff, inheritance, capital gains, etc.) that boosts income in a single year to many multiples of one's typical income. Such an occurrence does not boost the recipient out of the working class. Managed carefully, it can change their life (buy a house, turbo-charge retirement savings, etc.) but no one's buying a private island with a single year of $500k income.
I think you're extending "working class" to mean "people who live on wages instead of capital". But most people make an additional distinction inside wage earners between workers and professionals, i.e. mechanics, factory workers, nurses, assistants vs. doctors, lawyers, software engineers, managers, etc.
It's helpful in this little side discussion because policies that might affect people with (as GP says) any ability to make six figures in a year are pretty different than those that affect people without. The "works for a living" distinction isn't super relevant.
>I think you're extending "working class" to mean "people who live on wages instead of capital". But most people make an additional distinction inside wage earners between workers and professionals, i.e. mechanics, factory workers, nurses, assistants vs. doctors, lawyers, software engineers, managers, etc.
This is a meaningless distinction because there was a time where mechanics and factory workers also made 6 figure salaries. The divide should always be between someone who makes most of their money from labor rather than capital. Actors and basketball players are not people that I think should necessarily be more impacted by a wealth tax.
It maybe was meaningless when that was true, but unfortunately it isn't now. There are so many differences between the professional class and the working class that it's hard to really think where to start, huge things like health outcomes, educational opportunities, bankruptcy risk, air pollution, wealth generation, political engagement, social politics, fertility rate.
I don't disagree that there are also huge differences between people making income from wages vs. capital, but that's beside the point.
Your comment about actors and basketball players confuses me a little. I think those are textbook high wage earners, not people who primarily live on capital (at least until they retire anyway). And presumably yeah, once you cross $100m (which I would guess not that many actors/athletes really do), it seems reasonable for a wealth tax to kick in. Isn't wealth wealth? Why should we make carve outs for specific professions?
I don't want to diminish the importance of the distinction between income coming from wages vs capital, but I think there is also an important divide between people who are able to get ahead/accumulate wealth, and those who have to work as hard as they can just to scrape by.
> It's not uncommon to get a windfall (stock option vesting cliff, inheritance, capital gains, etc.) that boosts income in a single year to many multiples of one's typical income
Estate taxes don't kick in for estates worth less than $11.58 million and most states make immediate family exempt from all inheritance taxes.
Of course it does. The working class doesn’t get stock options, vesting cliffs, inheritance, or capital gains!
Or much of a savings account or 401k, for that matter.
The option to stop working for more than a few weeks or months takes you squarely out of the working class.
Basically, what I’m trying to say is that the parent comment to ours is attempting to advocate for taxing just the billionaires and not to tax the moderately wealthy so much. I think that’s a flawed argument, because the moderately wealthy don’t need help, and are perhaps even more wealthy than they realize.
Not at the 500k level most of them aren't getting capital gains. Or is this "anyone can be a multimillionaire - just play the lottery and get lucky" level of technically true?
In the US in 2021 (aka, right now) the magic threshold for capital gains is $445,850-$501,600 depending on filing status. So you're technically correct that $500k isn't a magic threshold, but it's certainly in the middle of it.
But more importantly, you're going down a technical rabbithole. The point of this comment chain is "what happens to people experiencing a one-time windfall capital gains of $500,000". The response was "what about RH investors". My point was they weren't making 500k, so it was irrelevant that they made income taxed as a capital gain. And I stand by that.
> In the US in 2021 (aka, right now) the magic threshold for capital gains is $445,850-$501,600 depending on filing status.
No, its not.
The transition point between the top (20%) and middle (15%; the bottom is zero) marginal rate of long-term capital gains rates are either exactly the top or bottom of that range for 3 of 4 tax filing statuses (you left off married filing separately, which is much lower than even the low end), but that’s not a “magic threshold” by any reasonable definition.
Its a threshold, but not one below which capital gains stops mattering, which was the significance falsesly ascribed to the “magic number".
If you had cited the bottom of the 15% bracket instead of the top as the magic number below which cap gains don’t matter, well, “magic” would still be overdramatic but you would at leaast have something of a point. But that’s close to an order of magnitude lower.
It's also irrelevant as I called out in my post. The question was "how do we tax average people making a windfall of 500k", not "let's talk exclusively long-term capital gains"
The "in a good year" qualifier in both your comment and the parent comment means that your conclusion that this person has left the "working class" is untrue. It's not uncommon to get a windfall (stock option vesting cliff, inheritance, capital gains, etc.) that boosts income in a single year to many multiples of one's typical income. Such an occurrence does not boost the recipient out of the working class. Managed carefully, it can change their life (buy a house, turbo-charge retirement savings, etc.) but no one's buying a private island with a single year of $500k income.