Screen Shot 2018-12-16 at 12.31.37 PM
PM Carpenter, your host. Email: pmcarp at mchsi dot com.
Screenshot 2024-05-27 at 11.05.06 AM


  • ***


« Wrong | Main | The utter disgrace of the media's reaction to Trump's speeches »

June 28, 2016


Peter G

It is complex. You have unsuspected allies and unsuspected foes. Or at least they are unexpected if you don't understand how things work. The fundamental argument is sound. Maybe not terribly environmentally friendly but sound. Domestic demand is driven by disposable income. More is better. This makes for very strange bedfellows indeed. Walmart, the progressives bete noir, is likely to support a minimum wage increase, as they have in the past, for a substantial number of their customers have only that to spend. Unions are likely to oppose any increases in capital gains taxes that adversely affect the income their pension funds have to pay pensions. Good luck threading the needles! Of your two presidential candidates which do you think knows these things?


Peter, capital gains rates are irrelevant to pension plans. Pension distributions are taxed as ordinary income even though pension assets generate capital gains. Why would unions care about capital gains rates?

But I do agree on the benefits of spreading the wealth through higher minimum wages and governmental benefit plans. As CPA, I see my business clients as being much better off with a vibrant demand economy than with another tax cut.


Sanders tends to strike me as more of a Marxist socialist than a democratic one. His attitude towards losing the popular vote and delegate counts in the primary certainly isn't democratic: it's prone to regarding his defeat at the hands of the electorate as a conspiratorial subversion of The Revolution by nefarious bourgeois elites and their lackeys and dupes rather than a rejection of it by people whom it failed to persuade.

Similarly, Sanders' take on wealth inequality sounds like it grows out of a perspective rooted in Marxist class conflict: a textbook case of the bourgeoisie oppressing the workers. Obama's on the other hand sees it from a democratic standpoint: it's a faulty understanding on the part of businessmen regarding where their true interests lie - short term profits or long-term yields?

Of course, to be a Marxist socialist is not to be a Marxist-Leninist, a point apt to be lost on most folks. Bernie emphatically is not that. But he does seem to see issues more often through an ideological lens than an empirical one.

Peter G

I'm afraid you are looking at the wrong end. Pension distributions are taxed as ordinary income as you say. But the capital gains that pension funds accrue from their investments are subject to capital gains taxes just like everybody else. At least in my neck of the woods and most jurisdictions I know of. And there are a lot of underfunded pension funds chasing high investment returns in consequence. This is one of the things that drives policy making. There were a lot of individuals in unions who could not understand why their pension funds were paying high fees to play in high risk pools. But the pension managers knew why.

John S

Having squandered part of my youth as a tax lawyer and having followed the field ever since, Tunadaddy is right on capital gains taxes in qualified pension plans - investment income is not taxed, but the distributions in excess of employee contributions are ordinary income., You can see this for yourself with some google searches. The carried interests PE firms and hedge funds earn from pension money they invest are subject to capital gains tax by those firms which is a whole other level of injustice.

Peter G

I have no dispute with that argument. But pension funds which buy and sell stocks or bonds pay capital gains on the profits they accrue just like any other entity. They pay taxes on income earned from REITS too. The capital gains taxes become payable when the asset is sold and the capital gains are realized. They are not exempt. I do agree that the distributed funds are simply ordinary income to the pension recipients. I am not talking about personal capital gains exemptions either such as a farmer or small business owner might have. A pension fund is no different than any other investment fund.

John S

Saying it over again more emphatically won't make it true. I normally enjoy your commentary but you are simply wrong. It is possible for an unqualified plan to get its investment income taxed but qualified plans are not taxed on invesstment income. You need to reasearch that which you write about. The very words like any other entity is indicative of one who does not know tax law. Some entities are pass through and pay no tax themselves, some entities are qualified retirement plans and do not pay tax on their capital gains just like I haven't paid tax on my 401k gains and income for the past 25 years - that's so it works like a pension plan that it is legally designed to replace. And btw many investment funds are pass through entities that do not pay taxes themselves but issue K-1s to their limited partners (aka investors).

Peter G

So is a pension fund for a manufacturer's employees taxed or not. Is it qualified for tax exemption. Most here are not. The taxes are paid on one end or the other. Tell me which pension plan pays neither capital gains on their investments nor capital gains on their distributions. You can have one or the other but not both. That would be awesome for those pensioners. And very bad for the suckers who do. You might as well be a church if you don't. I'm forced to understand this for I, like most people who manage their own pensions, have a limited exemption on the capital gains on my business. Are you telling me those investors who get distributed funds on which capital gains weren't paid don't have to pay it once their personal limits are exceeded? I have what is called an RRSP which is equivalent to what you call a 401k. It is only taxable as income once I take money out. But the mutual funds in which it is invested surely do pay capital gains when required. I read the annual reports. It would be nice if it were any other way. I could sock away all my money in a retirement fund and never pay taxes at all. But there is always a limit on contributions isn't there? That would be one hell of a tax loophole.

The comments to this entry are closed.