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> When you take into account corporate taxes, inflation, and risk the difference between tax rates on wages and cap gains aren't as big as you might think. Th

> When you take into account corporate taxes, inflation, and risk the difference between tax rates on wages and cap gains aren't as big as you might think. This doesn't make any sense. All of these things (with the exception of corporate taxes, which shouldn't exist) are priced into the return of the investment[1] and have nothing to do with taxation. Why would you take risk into account for purposes of taxation? Should gambling income be taxed at a commensurately lower rate? [1] More precisely, investments with a lower return are less desirable and their price tends to drop until the return (including risk, inflation, etc) is.

bhickey 11y ago
> Why would you take risk into account for purposes of taxation? Should gambling income be taxed at a commensurately lower rate? There's actually some bizarreness in the English tax code around this. Most taxpayers are subject to a 28% levy on investment returns. Gamblers themselves aren't taxed on winnings while the house pays 15% on their profits. (The treatment of professional gamblers is a conversation for your accountant.)
harryh 11y ago
If I buy an asset that only appreciates at the rate of inflation, then I end up paying taxes on what amounts to a fake gain. Even if it appreciates faster my effective tax rate is higher than the actual number used to calculate my taxes.
- wutbrodo 11y ago
  > If I buy an asset that only appreciates at the rate of inflation, then I end up paying taxes on what amounts to a fake gain. Even if it appreciates faster my effective tax rate is higher than the actual number used to calculate my taxes. The same is true of getting a raise and paying higher taxes on a "fake gain" (i.e., your effective tax rate slowly rises as each boundary shifts lower in real terms). That being said, I guess my main complaint wasn't with the inflation claim but rather with the idea that the risk/return line is somehow relevant to taxation.
  - deleted 11y ago
    [deleted]
  - harryh 11y ago
    What you are describing is different from what I'm talking about. You are talking about how tax rates can go up over time if the brackets are not adjusted for inflation. What I'm talking about is the fact that you can have a nominal gain that you pay taxes on that is not a real (inflation adjusted) gain at all. These are two different problems. The first we handle by adjusting the tax brackets every year. The second we do not handle. I suppose we could, but it would be a lot more complicated.

bhickey 11y ago

> Why would you take risk into account for purposes of taxation? Should gambling income be taxed at a commensurately lower rate? There's actually some bizarreness in the English tax code around this. Most taxpayers are subject to a 28% levy on investment returns. Gamblers themselves aren't taxed on winnings while the house pays 15% on their profits. (The treatment of professional gamblers is a conversation for your accountant.)

harryh 11y ago

If I buy an asset that only appreciates at the rate of inflation, then I end up paying taxes on what amounts to a fake gain. Even if it appreciates faster my effective tax rate is higher than the actual number used to calculate my taxes.

wutbrodo 11y ago
> If I buy an asset that only appreciates at the rate of inflation, then I end up paying taxes on what amounts to a fake gain. Even if it appreciates faster my effective tax rate is higher than the actual number used to calculate my taxes. The same is true of getting a raise and paying higher taxes on a "fake gain" (i.e., your effective tax rate slowly rises as each boundary shifts lower in real terms). That being said, I guess my main complaint wasn't with the inflation claim but rather with the idea that the risk/return line is somehow relevant to taxation.
- deleted 11y ago
  [deleted]
- harryh 11y ago
  What you are describing is different from what I'm talking about. You are talking about how tax rates can go up over time if the brackets are not adjusted for inflation. What I'm talking about is the fact that you can have a nominal gain that you pay taxes on that is not a real (inflation adjusted) gain at all. These are two different problems. The first we handle by adjusting the tax brackets every year. The second we do not handle. I suppose we could, but it would be a lot more complicated.