NISA change proposals

[Moneymatters]

Just for fun, let’s imagine the new lifetime limit is 1,200万 and the annual limit is 120万 then you’re potentially maxed out in 10 years.

Dislike

Thursday, you say?

https://news.yahoo.co.jp/articles/ce6f1 ... 463299dafa

The government and ruling party have decided to unify the two types of NISA (small amount investment tax exemption system), which currently allow investment trusts and other investment income to be exempt from taxation, into a single NISA centered on the Tsumitate NISA, with a lifetime investment limit of 15 million yen. The plan will be included in the ruling party's tax reform plan to be finalized in mid-December, and will be the centerpiece of Prime Minister Fumio Kishida's "Asset Income Doubling Plan.

LOL. Shame on me. I posted 5 mins after Yahoo. Clearly I'll need to draft my posts and do a proper google in future!
15 mil equates 25 years of the heavy speculated(just by me) 60万 revised tsumitate limit. So it makes sense to encourage the sort of steady investing they want whilst not being seen to favor the 1 percenters...
Those that want to use whatever growth investment allowance is there can just shorten the time to reach the lifetime allowance..

Why do I sense the elevator pitch explanation of new-new NISA super simple NISA will only be possible in Skytree..

And thursday is what all the cool kids are saying*

* Am not a cool kid myself.

[sutebayashi]

So there is to be a 15 million lifetime NISA limit, with half (7.5 million) restricted to "growthy investments", leaving another half for tsumitate oriented investments.

The other aspect is the annual limit of 3.6 million (1.2 million for tsumitate, and 2.4 million for growthy).

My calculator says one could use the whole allocation in about 4 years and 2 months, if starting out fresh, going as fast as possible.

If one already has maxed NISA, I am not clear if that would be subtracted from the new limit, or the new NISA is to be separate. Something I saw gave me the impression that they would be separate, but then that would mean one could protect a total 21 million of initial investments from taxes, which would favour existing NISA holders.

So surely I imagine they must intend to impose the 15 million limit across all types of NISA... if that's the case then a maxed out NISA user might be able to re-max out the new NISA in another 2.5 years, perhaps.

I am wondering how this will apply to J-NISAs too. Well, J-NISA is to end, but say you have your child a J-NISA maxed out, 4 million yen I think that is, and you can keep it invested there until kiddo is 18. Will one be able to get kiddo a new NISA and protect another 1.1 million yen a year there too? (I come up with 1.1 million yen from the gift tax free limit.) Rich kiddos might have a maxed out NISA by the time they are 18.

(It is curious that they are deciding on these extra tax breaks, at the same time as they are racking their brains about how to come up with trillions more yen for extra defense spending, but can only think of 1) taxing corporations more - aren't corporations where those NISAs are to be investing??, 2) taxing tobacco more (although Kishida said he wouldn't tax individuals more), or 3) snatching that Tohoku disaster recovery tax revenue... yeah I guess only a fool would have thought the disaster recovery tax would prove temporary. Ah well, these are the cards that are dealt, we just have to play them)

Edit 12/13: I see other reports of the lifetime limit to be 18 million, with a 12 million growthy / 6 million tsumitate breakdown. (i think they should simply abolish nisa and cut capital gains to 5 or 10% than do also this complex fiddling!)

[Bronson]

Limiting it to 12 million for "growth investments" really makes this change next to useless for those who have been investing in NISA since its launch, as continuous rollovers mean that anyone maxing out their account is probably already close to or exceeding that limit with how the market has performed over the last decade. Good for new investors I guess, but I fail to see how this will drastically increase investment from those already in the market.

[zeroshiki]

They shouldn't ever cut capital gains because that just disproportionately favors the rich.

As for the lifetime limit, I guess the calculation is 400k x 38 years (starting work from 22 and retiring at 60) = 15.2M which sounds fair to me, I guess. I have to imagine everyone who already have NISA accounts will be "grandfathered" in although what I'm interested in knowing is if this lifetime limit is a use it once and its over thing or if you sell something off you can replace it.

[TokyoBoglehead]

They shouldn't ever cut capital gains because that just disproportionately favors the rich.

As for the lifetime limit, I guess the calculation is 400k x 38 years (starting work from 22 and retiring at 60) = 15.2M which sounds fair to me, I guess. I have to imagine everyone who already have NISA accounts will be "grandfathered" in although what I'm interested in knowing is if this lifetime limit is a use it once and its over thing or if you sell something off you can replace it.

A fairer approach would be 18 million* lifetime NISA contribution - Current existing NISA contributions

However, that would be counter to my own self-interest.

*The number changed

[RetireJapan]

I really doubt they would include past contributions in the lifetime total. How would that even work?

[zeroshiki]

They know how much you've put in so it would be trivial for them to start your "Lifetime NISA allowance used" to have a value at the start.

They'd have to figure out how to handle the people who have it beyond the maxed out limit but I don't think that's possible (NISA started 2014 so its been 9 years of NISA, if you put in 1.2M every year since 2014 your total lifetime contributions is only upto 11M).

[Bronson]

They know how much you've put in so it would be trivial for them to start your "Lifetime NISA allowance used" to have a value at the start.

They'd have to figure out how to handle the people who have it beyond the maxed out limit but I don't think that's possible (NISA started 2014 so its been 9 years of NISA, if you put in 1.2M every year since 2014 your total lifetime contributions is only upto 11M).

That’s not how it works since the previous traditional NISA capped you out at 5 years of contributions, so you could only technically invest 6 million. However, every rollover effectively resets this amount to the value of your investment after 5 years, meaning many with traditional NISA would have over 10 million invested because of the last decade’s bull market.

[sutebayashi]

They shouldn't ever cut capital gains because that just disproportionately favors the rich.

That is one aspect, but I think there would be great benefits from simple systems. Complex ones create incentives for people to study and strategize how to best milk the systems, rather than think about more productive matters. (I like RetireJapan, but I should really be reading a book now!)
And the complexity demands the securities and banking industry keep spending tons of money every few years changing their systems to accommodate for the changes, again rather than more productive activities.

Since the government wants to encourage more consumer investment and are willing to lower tax burdens for those ends, simply lowering the tax rate for all would seem to be much lower economic costs and achieve similar ends, although I haven't a proper cost-benefit analysis. I'd bet the government hasn't got one either though!

Tonight on Tokyo TV they said that the 18 million limit was set to address potential claims of the rich being favoured. For me 18 million tax sheltered (in addition to iDeCo, DC plans) seems pretty high, and I would consider those who could be fully invested in a handful of years rich, myself.

Tokyo TV had something else the 100 million yen income "wall" topic - there will be some special taxation treatment for people with over 3000 million yen in income per year (yes I think I have that number right - 30 oku). The show said the estimated number of such people in-scope for this "rich" treatment would be 200-300 people. (I don't think a lot of people make more than "just" 100 million a year either, but good on those who do I say! I suspect all this stuff is just for the political optics rather than any practical benefit...)

[zeroshiki]

They shouldn't ever cut capital gains because that just disproportionately favors the rich.

That is one aspect, but I think there would be great benefits from simple systems. Complex ones create incentives for people to study and strategize how to best milk the systems, rather than think about more productive matters. (I like RetireJapan, but I should really be reading a book now!)
And the complexity demands the securities and banking industry keep spending tons of money every few years changing their systems to accommodate for the changes, again rather than more productive activities.

It's not just one aspect, it's the whole thing. If I'm reading this right, in 2020, Japan's tax revenue from capital gains on stock sales and dividends was 5.3 trillion yen. Cutting capital gains by half would put the country in a hole by 2.7 trillion. How do you propose the government is able to sell this tax break primarily for the rich to its citizens? "Oh its now more simple" "Also, we will cut social services because we have no money"

They didn't do an analysis because there's no way 2.7 trillion can be made up.