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The economics of taxation are fairly well understood, and they make it clear that not all taxes are equal. In particular, some taxes have higher "deadweight lo
by Lazare 10y ago
The economics of taxation are fairly well understood, and they make it clear that not all taxes are equal. In particular, some taxes have higher "deadweight losses" than others, which mean it is much less efficient and more damaging to the economy and to society to rely on them for revenue generation.
And listing commonly discusses taxes from lowest to highest deadweight losses, it goes: Land value tax, property taxes, consumption taxes, income taxes, capital taxes.
> I don't see why the tax code should incentivize passive investment over actual work.
Because to do otherwise causes real harm to all of us, because while even a large tax on, eg, land doesn't notably change the supply of land, a small tax on investment income does reduce the supply of investment. And reduced investment lowers productivity across the industry, reducing worker compensation and making us all as a society poorer.
In short: You get less of what you tax. That makes taxing eg, CO2 production a great idea (we want less of that!), and taxing investment a pretty bad one.
(More generally: The tax code is the worst possible way to do income redistribution, and the American obsession with trying leads to really poor outcomes. If you want to help the poor, try giving them actual money. Regressive taxes funding a progressive welfare state works; the reverse does not.)
- semi-extrinsic 10y ago> The tax code is the worst possible way to do income redistribution, and the American obsession with trying leads to really poor outcomes. Northern Europe would like to disagree, and to point out that Americans are far from obsessed with this. Take Mitt Romney: in 2012 he disclosed paying 15% taxes on his around $15 mill./year income. In a reasonable country he'd be paying at least 35%! Actual progressive taxation without loopholes, together with a properly implemented public health service, ending the health insurance industry, government-funded parental leave for the first year of a child's life, and otherwise socially responsible policies (ending the prison industry that disproportionally targets the poor and non-whites, ending the war on drugs etc) is a great way of doing income redistribution and society improvements.
- deleted 10y ago[deleted]
- Lazare 10y ago> Northern Europe would like to disagree, and to point out that Americans are far from obsessed with this. Take Mitt Romney: in 2012 he disclosed paying 15% taxes on his around $15 mill./year income. In a reasonable country he'd be paying at least 35%! The overwhelming majority of Northern European countries have a lower top marginal tax rate than that that on dividends and capital gains. So apparently Sweden, France, Germany, Finland, Norway, etc. aren't "reasonable countries"?
- rayiner 10y agoThere are exceptions like Romney, but they don't really add up to much. The US has a more progressive tax system than Western Europe: https://www.washingtonpost.com/news/wonk/wp/2013/04/05/americas-taxes-are-the-most-progressive-in-the-world-its-government-is-among-the-least/ https://www.washingtonpost.com/news/wonk/wp/2013/04/05/ameri... The top 10% in the US pay a substantially larger share of taxes than their share of income. In Sweden they pay the same share of taxes as their share of income.
- Retric 10y agoWe have an oversupply of capital which is causing a wide range of problems. Taxing capital gains at a higher rate than income is likely a good idea. Remember companies don't become more profitable if there stock price increases. PS: ROI directly relates to the supply of capital.
- Lazare 10y ago> We have an oversupply of capital which is causing a wide range of problems. Citation very, very much needed.
- deleted 10y ago[deleted]
- Retric 10y agoMortgage backed securities. I could go on, but as ever lower ROI becomes competitive money gets sloshed around the financial system, creating economic distortions such as housing booms backed by investors. Most clearly building a house that's sitting vacant is a waste of resources and caused by similar forces as the infamous Pets.com etc etc.