4 ms·

Assuming wealth is earned, why would you want to tax it? It already was taxed when the individual was working. Inherited wealth is another matter.

dredmorbius 9y ago
Check your assuption.
barrkel 9y ago
Are returns to capital earned? Certainly it's not easy getting outsize returns reliably, but the idea that the return is earned in a way that scales with the amount invested sounds very dubious to me.
- banned1 9y ago
  The original capital was. The returns are already taxed. Are you proposing that returns are taxed at some other different rate? At some point the market won't be attractive enough.
  - barrkel 9y ago
    The returns to capital (capital gains specifically) are taxed at a much lower rate than income, and they're not taxed at all until they're realized, which means they can be timed to offset losses. Then the government is effectively handing out a subsidy to people with lots of capital, even more so than the lower tax rate. "The market" not attractive enough - there's nowhere to put your money other than "the market" (including bonds, commodities, real estate etc.) unless you keep it in currency, and that's even more susceptible to government takings.
    - banned1 9y ago
      https://taxfoundation.org/why-capital-gains-are-taxed-lower-rate/ https://taxfoundation.org/why-capital-gains-are-taxed-lower-... Is there a limit you see in taxes? Do you have investments yourself? Maybe you donated all of your investments to the government after realizing how little you were being taxed?
      - barrkel 9y ago
        I most recently converted my investments into a house deposit. In effect, I propped up inflated house prices. It'll take a while before I have a significant investment position again. Your last question is silly. The reason why I can simultaneously support higher taxes, yet not voluntarily donate money to the government, is because advocacy of higher taxes can raise far more money for government than my personal donations. Raising money to fund government is a collective action problem; if government relied on donations to run, it would fail because of freeloaders - in essence, a tragedy of the commons. But by collectively enforcing mandatory taxes we can make government work.
        TheSpiceIsLife 9y ago
        > But by collectively enforcing mandatory taxes we can make government work. It's arguable whether giving government more money results in government working better. By some accounts government is a demonstration of waist and an exercise in excess. Government departments are always chronically underfunded, primarily because no government department PR employee ever got promoted by saying "we have enough money".
  - albinofrenchy 9y ago
    > At some point the market won't be attractive enough. We are _nowhere_ near that point. And no one is saying tax capital gains at 100%; but I've never seen a convincing argument that it shouldn't be at _least_ the same as income tax.
    - banned1 9y ago
      I think the main argument is previous taxation. https://taxfoundation.org/why-capital-gains-are-taxed-lower-rate/ https://taxfoundation.org/why-capital-gains-are-taxed-lower-...
      - albinofrenchy 9y ago
        That is an argument; I just don't think it is a particularly good one. In particular, I think it muddies the water a bit between various forms of things that are taxed as capital gains. That article goes out of its way to paint a picture of someone purchasing stock in a C corp with money earned from earned income and then eventually sold. And yes, the corporation would pay a corporate tax rate (although almost certainly south of 30%), and then when that stock is sold, there is likely a 15% hit on the gains. It is an unconvincing argument though; since salaries from a c corp are taxed too; if previous taxation was a deal breaker c corps wouldn't exist at all. It is also unconvincing since capital gains are only taxed at the time of realization, it is an entirely different mechanism. As taxes goes, I can't choose to hold off paying taxes on income for a decade and invest that money; essentially compounding that money. But that is exactly how long-held unrealized capital gains work. And insult to injury -- the entire idea of 'carried interest' is a give away to hedge funders. Even if you kept a low capital gains rate, carried interest as a concept should just be removed from the tax code.
albinofrenchy 9y ago
You can have a tax system by applying it to earned, applying it to accumulated, or by doing a little bit of both. Inherited wealth was already taxed at one point too. All money is taxed multiple times as it moves throughout the economy. That by itself isn't a good reason to dismiss any tax plan. Theoretically there are good economic arguments to back up a 'wealth' tax as a replacement of income tax or an adjustment to it. In theory, it could discourage keeping enormous reserves and keep money flowing through the economy -- it'd essentially incentive corporations hiring and building out operations rather than sitting on a rainy day fund or paying dividends. As I said though, in practice it just isn't entirely feasible even if you decided it was a policy worth pursuing.

dredmorbius 9y ago

Check your assuption.

barrkel 9y ago

Are returns to capital earned? Certainly it's not easy getting outsize returns reliably, but the idea that the return is earned in a way that scales with the amount invested sounds very dubious to me.

banned1 9y ago
The original capital was. The returns are already taxed. Are you proposing that returns are taxed at some other different rate? At some point the market won't be attractive enough.
- barrkel 9y ago
  The returns to capital (capital gains specifically) are taxed at a much lower rate than income, and they're not taxed at all until they're realized, which means they can be timed to offset losses. Then the government is effectively handing out a subsidy to people with lots of capital, even more so than the lower tax rate. "The market" not attractive enough - there's nowhere to put your money other than "the market" (including bonds, commodities, real estate etc.) unless you keep it in currency, and that's even more susceptible to government takings.
  - banned1 9y ago
    https://taxfoundation.org/why-capital-gains-are-taxed-lower-rate/ https://taxfoundation.org/why-capital-gains-are-taxed-lower-... Is there a limit you see in taxes? Do you have investments yourself? Maybe you donated all of your investments to the government after realizing how little you were being taxed?
    - barrkel 9y ago
      I most recently converted my investments into a house deposit. In effect, I propped up inflated house prices. It'll take a while before I have a significant investment position again. Your last question is silly. The reason why I can simultaneously support higher taxes, yet not voluntarily donate money to the government, is because advocacy of higher taxes can raise far more money for government than my personal donations. Raising money to fund government is a collective action problem; if government relied on donations to run, it would fail because of freeloaders - in essence, a tragedy of the commons. But by collectively enforcing mandatory taxes we can make government work.
      - TheSpiceIsLife 9y ago
        > But by collectively enforcing mandatory taxes we can make government work. It's arguable whether giving government more money results in government working better. By some accounts government is a demonstration of waist and an exercise in excess. Government departments are always chronically underfunded, primarily because no government department PR employee ever got promoted by saying "we have enough money".
- albinofrenchy 9y ago
  > At some point the market won't be attractive enough. We are _nowhere_ near that point. And no one is saying tax capital gains at 100%; but I've never seen a convincing argument that it shouldn't be at _least_ the same as income tax.
  - banned1 9y ago
    I think the main argument is previous taxation. https://taxfoundation.org/why-capital-gains-are-taxed-lower-rate/ https://taxfoundation.org/why-capital-gains-are-taxed-lower-...
    - albinofrenchy 9y ago
      That is an argument; I just don't think it is a particularly good one. In particular, I think it muddies the water a bit between various forms of things that are taxed as capital gains. That article goes out of its way to paint a picture of someone purchasing stock in a C corp with money earned from earned income and then eventually sold. And yes, the corporation would pay a corporate tax rate (although almost certainly south of 30%), and then when that stock is sold, there is likely a 15% hit on the gains. It is an unconvincing argument though; since salaries from a c corp are taxed too; if previous taxation was a deal breaker c corps wouldn't exist at all. It is also unconvincing since capital gains are only taxed at the time of realization, it is an entirely different mechanism. As taxes goes, I can't choose to hold off paying taxes on income for a decade and invest that money; essentially compounding that money. But that is exactly how long-held unrealized capital gains work. And insult to injury -- the entire idea of 'carried interest' is a give away to hedge funders. Even if you kept a low capital gains rate, carried interest as a concept should just be removed from the tax code.

albinofrenchy 9y ago

You can have a tax system by applying it to earned, applying it to accumulated, or by doing a little bit of both. Inherited wealth was already taxed at one point too. All money is taxed multiple times as it moves throughout the economy. That by itself isn't a good reason to dismiss any tax plan. Theoretically there are good economic arguments to back up a 'wealth' tax as a replacement of income tax or an adjustment to it. In theory, it could discourage keeping enormous reserves and keep money flowing through the economy -- it'd essentially incentive corporations hiring and building out operations rather than sitting on a rainy day fund or paying dividends. As I said though, in practice it just isn't entirely feasible even if you decided it was a policy worth pursuing.