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> I don't see why the tax code should incentivize passive investment over actual work. Well it doesn't. It incentivises savings over spending, and working ove

by geocar 10y ago

> I don't see why the tax code should incentivize passive investment over actual work. Well it doesn't. It incentivises savings over spending, and working over not-working. For example of the latter, I receive an income: What should I do with the money I do not spend on rent, food, transport, and education? Should I just work less because I don't need that money? Why don't I just invest it? If I work more, then I will have more money to invest! However because of inflation, any money I put into savings evaporates if I have to pay both income tax on the new earnings and have to suffer the loss in buying power due to inflation. The difference must be at least what the actual inflation turns out to be over however many years we want people saving. Darn. If we work backwards, we can see the reasons: If we give up gold, we can control inflation with maths instead drilling, and with a lower capital gains tax then people can spend and work more. See, this isn't as simple as you want it to be, but it makes more sense than you might think. Our tax code is based around thousands of little tests and questions like this that, and a big part of why it is so complicated has to do with the sheer amount of time we have spent arguing about how much tax is fair. > I'd love to see an explanation of why it makes any sense to continue treating capital gains income (i.e. "return on invested capital") any differently than ordinary income You can use Google to search for exactly that. You will get a lot of results because there are a lot of different reasons.

pdkl95 10y ago
> Why don't I just invest it? You're assuming that investment actually happens. The widening wealth gap refutes that assumption; wealth is accumulating at the high end and not being re-invested back in the rest of the economy. The poor recovery from the last few financial crisis is more evidence, "You can lead a bank to liquidity, but you can't make it lend." > If we give up gold, we can control inflation with maths Giving up the gold standard is orthogonal to the tax rate for capital gains. This is completely off topic. > See, this isn't as simple as you want it to be The economy is fantastically complex. It's also very unpredictable due to the inter-dependencies, even if some people like to pretend otherwise. Hubris doesn't make inherently unstable models[1] into a useful result. [1] "Understanding economics well impedes an understanding the economy." -- Yanis Varoufakis[2] [2] https://www.youtube.com/watch?v=L5AUAIzciLE#t=1355 https://www.youtube.com/watch?v=L5AUAIzciLE#t=1355
- geocar 10y ago
  > You're assuming that investment actually happens. Of course! I am assuming that investment actually happens because I put money in my savings account and I receive interest.
  - Dylan16807 10y ago
    > I put money in my savings account and I receive interest. You do? I think you're an outlier there. Is that rate beating inflation? I count the .15% rate on my savings account as a joke, rather than any sort of meaningful interest.
    - geocar 10y ago
      You should talk to your bank: Mine offers a savings account that just beats inflation if I don't take a withdrawal that I can use for an emergency fund, and once you have an emergency fund set up you can put further savings into fixed-term accounts which actually generate "meaningful interest".
      - pdkl95 10y ago
        As a HN member, there is a high probability that you receive a comfortable salary. Please realize that this probably puts you in a position of (some) privilege when you interact with banks. For much of the country that lives paycheck-to-paycheck, paying rent and buying food/gas take priority over maintaining the minimum balance that is usually required in accounts that pay interest.
- yummyfajitas 10y ago
  The widening wealth gap refutes that assumption; wealth is accumulating at the high end and not being re-invested back in the rest of the economy. A widening wealth gap can only occur if the wealthy are investing their money and getting good returns on it. If the wealthy were hoarding their money, then it would not be growing and the wealth gap would shrink (since worker's wealth would increase, and the wealthy would consume some of their wealth).

by geocar 10y ago

pdkl95 10y ago

> Why don't I just invest it? You're assuming that investment actually happens. The widening wealth gap refutes that assumption; wealth is accumulating at the high end and not being re-invested back in the rest of the economy. The poor recovery from the last few financial crisis is more evidence, "You can lead a bank to liquidity, but you can't make it lend." > If we give up gold, we can control inflation with maths Giving up the gold standard is orthogonal to the tax rate for capital gains. This is completely off topic. > See, this isn't as simple as you want it to be The economy is fantastically complex. It's also very unpredictable due to the inter-dependencies, even if some people like to pretend otherwise. Hubris doesn't make inherently unstable models[1] into a useful result. [1] "Understanding economics well impedes an understanding the economy." -- Yanis Varoufakis[2] [2] https://www.youtube.com/watch?v=L5AUAIzciLE#t=1355 https://www.youtube.com/watch?v=L5AUAIzciLE#t=1355

geocar 10y ago
> You're assuming that investment actually happens. Of course! I am assuming that investment actually happens because I put money in my savings account and I receive interest.
- Dylan16807 10y ago
  > I put money in my savings account and I receive interest. You do? I think you're an outlier there. Is that rate beating inflation? I count the .15% rate on my savings account as a joke, rather than any sort of meaningful interest.
  - geocar 10y ago
    You should talk to your bank: Mine offers a savings account that just beats inflation if I don't take a withdrawal that I can use for an emergency fund, and once you have an emergency fund set up you can put further savings into fixed-term accounts which actually generate "meaningful interest".
    - pdkl95 10y ago
      As a HN member, there is a high probability that you receive a comfortable salary. Please realize that this probably puts you in a position of (some) privilege when you interact with banks. For much of the country that lives paycheck-to-paycheck, paying rent and buying food/gas take priority over maintaining the minimum balance that is usually required in accounts that pay interest.
yummyfajitas 10y ago
The widening wealth gap refutes that assumption; wealth is accumulating at the high end and not being re-invested back in the rest of the economy. A widening wealth gap can only occur if the wealthy are investing their money and getting good returns on it. If the wealthy were hoarding their money, then it would not be growing and the wealth gap would shrink (since worker's wealth would increase, and the wealthy would consume some of their wealth).