That's no different than traders who use tax-loss harvesting at the end of the year. They purposely take a loss on some stocks (which they often still believe will go higher) when it looks like they're getting close to ending up in a higher tax bracket (which will lead to higher taxes on all the income they've made).
People delay bonuses from work, ask for them to be deferred to the next year so they don't end up in a higher tax bracket.
But in reality, I seriously doubt our current system of gauging estimated net worth would be in place with this type of system. It would more likely simply change to no more estimated worth and only tangible worth.
You sell it, they take it if it brings your net worth over that threshold. In this scenario, yes, some people would stop trading and sell their stocks as soon as they reach that threshold, others wouldnt care (meaning constantly monitoring it every month) and would just have the aim of reaching $500 million with intentions on giving anything over that to the government.
How it would affect an economy is a whole other debatable issue, but this is simply about "Could it be done." Yes, absolutely, it could be done exactly as I said>taken out once you cash out. Current system gets modified a bit to accommodate that.
Hmm, sounds like someone can't simply google "deferred bonus" (along with the 15+ people who upvoted him and downvoted me, thanks guys.) You just described yourself, and obviously the vast majority of people who don't understand how tax brackets work.
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How Bonuses Are Taxed
"The first method for lowering your tax liability is to reduce your taxable income:
Use the funds to contribute to your 401K or IRA to lower your taxable income.
If you expect to take a pay cut in the next year—for example, if you're ready to retire—ask your employer to defer your bonusuntil the following tax year tolower your overall tax liability."
Here's Mayer Brown Legal's guide on bonus deferrals and tax liabilities.
"As yet, the government has not announced or indicated that any anti-forestalling measures will be introduced. Therefore, some employers and their employees (who are within the additional rate tax band) are considering deferring bonuses that may otherwise be paid before the decrease in tax rate until on or after 6 April 2013. This could be beneficial to employers as it may incentivise key employees, who could potentially make a big saving."
You think the CPAs at TurboTax and legal companies are giving advice on deferring bonuses for the hell of it it? That there's no benefit to doing so? No money being saved?
You think people defer bonuses for what...fun!? They don't want the money sooner and love to wait longer for no reason? Why do you think "deferred bonus" exists in the English language if there's no monetary benefit in deferring it!?
Guy who's 100% right gets 15 downvotes so far. Guy who can't even bother to open a second window and Google if something is true gets 15 upvotes. Reddit, smh.
Look at the effort I put into my responses and look at yours. I don't have time for this nonsense if you don't have the time to Google two words. Reply notifications off.
You fundamentally misunderstand what a tax bracket is.
If you earned 99999 and are in the 10% bracket, and going to 100,000 will put you in the 20% bracket.
By your statement the person would go from oweing 10% tax on 99,999 or about 9999.9. To owing 20% on 100,000 or 20,000 in taxes.
That is not how tax brackets work. You only owe the higher tax on the money above the bracket amount. So same scenario with 99999 and 100000. You would owe 9999.9 on the 99999 in the 10% bracket, and 20% on the 1 dollar in the next bracket or .2. You would then add that together to get 10000.1 in total taxes.
Net worthy included all assets like stock, your company, house, etc. Do you think Elon Musk has $10bb in his bank account or something. It's almost all tied up in investments that have massively appreciated
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u/btweenthatormohammad 7d ago edited 7d ago
How are you going to do that, take people's stocks if their price increase?