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Does not change that the product of lower capital gains tax rates than income tax means those who earn absolutely less in a given year are paying a higher perce

by zanny 11y ago

Does not change that the product of lower capital gains tax rates than income tax means those who earn absolutely less in a given year are paying a higher percentage of their income in tax than those who make absolutely (much) more. I think the fundamental problem is everyone talks about capital gains as some flat thing. It needs to be progressive like income tax (or at least in the US, way more progressive than current income tax) to have the positive effects economists want so long as the gains are distributed across many people than centralized in the hands of few. I'd say the same with waged income. In a theoretical better society we would even be taking income up to the happiness threshold and would progressively tax to an absolute income limit beyond that. And that is not just for bitternesses, sake, the problem we are going to face is that automation and the private ownership of automated production will produce literal money machines, where no human labor is required but goods are made and then sold which transfers money to you, that you then never spend back out again so long as you can own the whole supply chain. That situation is not sustainable - it is money flowing uni-directionally - and the consequences of uncapped income have precipitated how in the past five years we went from a little over 300 billionaires having more wealth than half the human population on Earth to just over 50 today.

bzbarsky 11y ago
The problem with thinking of capital gains as "income" is that you end up with a tax system that punishes people for deferring consumption (aka saving). Or put another way, if I earn some money and don't spend it immediately, I end up paying more of it in taxes than if I do spend it immediately. Only taxing above-inflation capital gains would help some; only taxing capital gains above some discount rate (which one, though?) would help more. The ideal thing here would probably be a progressive consumption tax, but implementing that in practice is rather difficul, unfortunately. Oh, and there is no happiness threshold. Or more precisely, more money doesn't necessarily buy more happiness, but it does tend to buy less unhappiness (which is not the same thing!), albeit not linearly.
- zanny 11y ago
  Hence the idea of progressive capital gains. In the same way you would not tax normal income up to an approximation of the happiness threshold you would do the same with capital gains. Progressive consumption taxes do nothing to ablate the central problem of the argument, the centralization of wealth as a means to distort society to your whims. The wealthier you are the less you spend on goods and services as a percentage of income and the more you save. Eventually most of your income just goes back into reinvestment to make you more money. The current model basically lets anyone business savvy enough just make perpetually more money, increasing their wealth... just for the sake of having more wealth. The majority of billionaires are not rich with a purpose of how they want to use that money, they just control incredible amounts of capital for the purposes of accumulating more. The Bill Gates are the exception, not the rule, and even then while Bill spends tremendous amounts of money for good he only spends money he is already making off a considerable fortune to begin with. And those kinds of fortunes are what I am talking about. > Oh, and there is no happiness threshold. Or more precisely, more money doesn't necessarily buy more happiness, but it does tend to buy less unhappiness (which is not the same thing!), albeit not linearly. More money buys less unhappiness up to a limit[1]. It is simply the fulfillment of base needs in Maslow's heirarchy, and once you have enough not to worry about starving, homelessness, or sickness ruining you, you have a much better quality of life, less stress, and more importantly, peak productivity. My argument is not that everyone has the same limit, or that it is constant regardless of inflation - it is of course a function of the real cost of needs, and varies from place to place. But that is why I argue to start taxation at a normalized threshold like this, to potentially extract the most revenue in the least harmful way possible. [1]http://www.advisorperspectives.com/dshort/commentaries/Happiness-Benchmark.php http://www.advisorperspectives.com/dshort/commentaries/Happi...
  - bzbarsky 11y ago
    The study you cite conflates happiness and unhappiness. More money can buy less unhappiness to a _very_ large limit, much larger than $75K in the US. Most simply, any serious medical treatment you have to go through will quickly blow past the $75k number. And of course even in this study the magic number is very much location-dependent, which makes it even harder to craft policy around it....

by zanny 11y ago

bzbarsky 11y ago

The problem with thinking of capital gains as "income" is that you end up with a tax system that punishes people for deferring consumption (aka saving). Or put another way, if I earn some money and don't spend it immediately, I end up paying more of it in taxes than if I do spend it immediately. Only taxing above-inflation capital gains would help some; only taxing capital gains above some discount rate (which one, though?) would help more. The ideal thing here would probably be a progressive consumption tax, but implementing that in practice is rather difficul, unfortunately. Oh, and there is no happiness threshold. Or more precisely, more money doesn't necessarily buy more happiness, but it does tend to buy less unhappiness (which is not the same thing!), albeit not linearly.

zanny 11y ago
Hence the idea of progressive capital gains. In the same way you would not tax normal income up to an approximation of the happiness threshold you would do the same with capital gains. Progressive consumption taxes do nothing to ablate the central problem of the argument, the centralization of wealth as a means to distort society to your whims. The wealthier you are the less you spend on goods and services as a percentage of income and the more you save. Eventually most of your income just goes back into reinvestment to make you more money. The current model basically lets anyone business savvy enough just make perpetually more money, increasing their wealth... just for the sake of having more wealth. The majority of billionaires are not rich with a purpose of how they want to use that money, they just control incredible amounts of capital for the purposes of accumulating more. The Bill Gates are the exception, not the rule, and even then while Bill spends tremendous amounts of money for good he only spends money he is already making off a considerable fortune to begin with. And those kinds of fortunes are what I am talking about. > Oh, and there is no happiness threshold. Or more precisely, more money doesn't necessarily buy more happiness, but it does tend to buy less unhappiness (which is not the same thing!), albeit not linearly. More money buys less unhappiness up to a limit[1]. It is simply the fulfillment of base needs in Maslow's heirarchy, and once you have enough not to worry about starving, homelessness, or sickness ruining you, you have a much better quality of life, less stress, and more importantly, peak productivity. My argument is not that everyone has the same limit, or that it is constant regardless of inflation - it is of course a function of the real cost of needs, and varies from place to place. But that is why I argue to start taxation at a normalized threshold like this, to potentially extract the most revenue in the least harmful way possible. [1]http://www.advisorperspectives.com/dshort/commentaries/Happiness-Benchmark.php http://www.advisorperspectives.com/dshort/commentaries/Happi...
- bzbarsky 11y ago
  The study you cite conflates happiness and unhappiness. More money can buy less unhappiness to a _very_ large limit, much larger than $75K in the US. Most simply, any serious medical treatment you have to go through will quickly blow past the $75k number. And of course even in this study the magic number is very much location-dependent, which makes it even harder to craft policy around it....