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The biggest lie is this nonsense about "double taxation," ie taxing money that's already been taxed is somehow unfair. So stupid. Capital gains tax shouldn't e

The biggest lie is this nonsense about "double taxation," ie taxing money that's already been taxed is somehow unfair. So stupid. Capital gains tax shouldn't exist. It should all be one income tax. You can carve out discounts or exemptions for things like sale of PPOR, sale of family business up to a certain point, if you want.

fooster 9y ago
I don't see it that way. When you invest you risk the capital. You might get a return, you might not and therefore the taxation rules should reflect that. The situation as a worker is different. The only risk you take is that you might select a bad company.
- ashark 9y ago
  > You might get a return, you might not and therefore the taxation rules should reflect that. So... you take a loss on your taxes, probably spreading it out in some way so you don't pay taxes for a few years, if it's a serious enough loss. Right? Why does the rate need to be different?
  - fooster 9y ago
    Probably spreading it out in some way? You must also have a have a future gain to offset that loss. The rate difference is to compensate for the risk that you are taking by investing the money. Again, as a worker you have essentially no risk of capital (only of effort). Furthermore, I think you are misunderstanding the double taxation argument. The double taxation arises because the company has already payed tax on their profits.
- etwigg 9y ago
  "The only risk you take is that you might select a bad company." - that's the same risk an investor takes no? Except the investor can diversify across many companies, while the employee can rely on only one. Yours seems like an argument for investors to pay a higher rate than an employee, because they can diversify their risk. Personally, I don't think taxes should be based on risk assessment.
  - fooster 9y ago
    If there was no capital gains tax it would almost certainly reduce investment in risky industries. For example, high tech.
    - matt4077 9y ago
      The risks should be reflected in the possible return from the investment (pre-tax), and it is. This is most obvious with fixed-income investments (bonds) where the rate is directly derived from the perceived risks. The justification also breaks down when you recognise that capital gains taxes are the same for investments in any sector: If it's supposed to reward risk-taking, why tax investments in retail or insurance stocks the same as early-stage venture capital?
      - fooster 9y ago
        It is recognized to some extent. Thats why interest has a different taxation rate than capital gains on stock investments.
- maxxxxx 9y ago
  Selecting a bad company is a pretty big risk. It may do a lot of damage to your career from which you potentially never can come back. The opportunity cost is pretty high. I don't believe capitalists take more risk or should get preferential tax treatment.
  - vasilipupkin 9y ago
    it's not just capitalists who get a lower tax on investment income - it's everyone.
    - maxxxxx 9y ago
      It's a little skewed towards wealthier people, don't you think?
      - vasilipupkin 9y ago
        Think of it this way. If taxes on investment income are raised, those who aren't wealthy will have an even harder time catching up to those who are
        maxxxxx 9y ago
        I don't think that's accurate. As of now the wealthy are pulling away quickly. This will continue if the majority of of workers' income (salary) is taxed higher than the income of investors.
        vasilipupkin 9y ago
        yes, but those workers will at some point retire and live off their investment income, no?
        maxxxxx 9y ago
        And they would have had much more money to invest if their income tax had been lower. You don't seem to want to understand my point: Low taxes for investment benefits wealthy people disproportionately. Yes, lower income also get some benefit but the vast majority goes to the wealthy. Same for all the Republic "tax reform" proposals: A little tax cut for small incomes, large tax cut for high incomes.
- deleted 9y ago
  [deleted]
- jandrese 9y ago
  Well, what else are you going to do with that capital? Stuff it in a mattress? The Government really doesn't need to encourage people with money to use it to make more money, that happens naturally. You might argue that they'll just "waste" it on goods and services, but that's what keeps the economy moving so it's not really a waste.
crdoconnor 9y ago
If you want to distinguish between the creation of wealth vs. the appropriation of wealth it makes sense to distinguish between earned and unearned income.
menacingly 9y ago
This similar to the logic that used to fuel Adobe's anti-piracy numbers. They claim they lose (number_of_pirated_copies X retail_cost) to piracy, making the huge assumption that everyone who pirated would have bought a copy, and needs photoshop so badly that they will sell a kidney to get it if you could stop piracy. You can't selectively change variables and assume the others stay the same. Your life would be negatively impacted if everyone paying capital gains decided it was advantageous to avoid paying them, so you can't talk about adjusting that tax structure as if all of the same money would stay on the table. If it were less enticing to invest it, fewer would, and that changes the environment in complex ways. It's a big assumption that if you raise taxes, everything else remains pinned down and we can analyze that variable in isolation.
- njarboe 9y ago
  I think I am on the side of Warren Buffet and agree that investment tax rates does not much effect how eager people are to invest. I mean, what else are the rich going to do with their money? If they think, "These tax rates on investments are too high. I'm not going to invest. I'm just going to spend it on yachts, hookers, blow, and black-jack.", then soon they will run out of money and have to start earning it again. Most investors like making successful investments and growing their wealth. What the capital gains tax rate is is not going to change that. Maybe they would not switch investments as much. That might be a good thing. Maybe a better argument would be that successful investors use of money is better for everyone in society in the long run and that having lower taxes on earned income would just let more money be spent on "useless" things: longer vacations or fancy lattes.
jwally 9y ago
Completely agree if you nuke the corporate / business tax as well.
rhino369 9y ago
You would have to start adjusting for inflation. If I bought an asset in 1980 and it just tracked inflation, you'd show a nominal 200% profit. But really, it's worth the same as before.
- cylinder 9y ago
  yes, but that's not really an issue. If it's not a real gain (inflation adjusted), then it's not income, and doesn't need to be taxed.
  - deleted 9y ago
    [deleted]
carradjm 9y ago
Why should we want to tax income? If you tax something, you inherently affect the supply of it. I.e. taxing labor (income tax) will make people want to work less. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax We need to implement a land-value tax, if simply because taxing land does nothing to change the supply of land. Unless America decides to invade Mexico anytime soon, the value of land will not change. I responded to another post in this thread with a link on Georgism as well (https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax). I see Georgism occasionally advocated for on Hacker News but I really wish I would see more discussion on it. IMHO, it is the only sensible tax and the most fair tax that economists have thought up.
- twoquestions 9y ago
  It looks excellent at first blush, but calculating the value of land seems distinctly non-trivial even for honest assessors. For less than perfect people, this highly charged calculation could become a huge political football.

fooster 9y ago

I don't see it that way. When you invest you risk the capital. You might get a return, you might not and therefore the taxation rules should reflect that. The situation as a worker is different. The only risk you take is that you might select a bad company.

ashark 9y ago
> You might get a return, you might not and therefore the taxation rules should reflect that. So... you take a loss on your taxes, probably spreading it out in some way so you don't pay taxes for a few years, if it's a serious enough loss. Right? Why does the rate need to be different?
- fooster 9y ago
  Probably spreading it out in some way? You must also have a have a future gain to offset that loss. The rate difference is to compensate for the risk that you are taking by investing the money. Again, as a worker you have essentially no risk of capital (only of effort). Furthermore, I think you are misunderstanding the double taxation argument. The double taxation arises because the company has already payed tax on their profits.
etwigg 9y ago
"The only risk you take is that you might select a bad company." - that's the same risk an investor takes no? Except the investor can diversify across many companies, while the employee can rely on only one. Yours seems like an argument for investors to pay a higher rate than an employee, because they can diversify their risk. Personally, I don't think taxes should be based on risk assessment.
- fooster 9y ago
  If there was no capital gains tax it would almost certainly reduce investment in risky industries. For example, high tech.
  - matt4077 9y ago
    The risks should be reflected in the possible return from the investment (pre-tax), and it is. This is most obvious with fixed-income investments (bonds) where the rate is directly derived from the perceived risks. The justification also breaks down when you recognise that capital gains taxes are the same for investments in any sector: If it's supposed to reward risk-taking, why tax investments in retail or insurance stocks the same as early-stage venture capital?
    - fooster 9y ago
      It is recognized to some extent. Thats why interest has a different taxation rate than capital gains on stock investments.
maxxxxx 9y ago
Selecting a bad company is a pretty big risk. It may do a lot of damage to your career from which you potentially never can come back. The opportunity cost is pretty high. I don't believe capitalists take more risk or should get preferential tax treatment.
- vasilipupkin 9y ago
  it's not just capitalists who get a lower tax on investment income - it's everyone.
  - maxxxxx 9y ago
    It's a little skewed towards wealthier people, don't you think?
    - vasilipupkin 9y ago
      Think of it this way. If taxes on investment income are raised, those who aren't wealthy will have an even harder time catching up to those who are
      - maxxxxx 9y ago
        I don't think that's accurate. As of now the wealthy are pulling away quickly. This will continue if the majority of of workers' income (salary) is taxed higher than the income of investors.
        vasilipupkin 9y ago
        yes, but those workers will at some point retire and live off their investment income, no?
        maxxxxx 9y ago
        And they would have had much more money to invest if their income tax had been lower. You don't seem to want to understand my point: Low taxes for investment benefits wealthy people disproportionately. Yes, lower income also get some benefit but the vast majority goes to the wealthy. Same for all the Republic "tax reform" proposals: A little tax cut for small incomes, large tax cut for high incomes.
deleted 9y ago
[deleted]
jandrese 9y ago
Well, what else are you going to do with that capital? Stuff it in a mattress? The Government really doesn't need to encourage people with money to use it to make more money, that happens naturally. You might argue that they'll just "waste" it on goods and services, but that's what keeps the economy moving so it's not really a waste.

crdoconnor 9y ago

If you want to distinguish between the creation of wealth vs. the appropriation of wealth it makes sense to distinguish between earned and unearned income.

menacingly 9y ago

This similar to the logic that used to fuel Adobe's anti-piracy numbers. They claim they lose (number_of_pirated_copies X retail_cost) to piracy, making the huge assumption that everyone who pirated would have bought a copy, and needs photoshop so badly that they will sell a kidney to get it if you could stop piracy. You can't selectively change variables and assume the others stay the same. Your life would be negatively impacted if everyone paying capital gains decided it was advantageous to avoid paying them, so you can't talk about adjusting that tax structure as if all of the same money would stay on the table. If it were less enticing to invest it, fewer would, and that changes the environment in complex ways. It's a big assumption that if you raise taxes, everything else remains pinned down and we can analyze that variable in isolation.

njarboe 9y ago
I think I am on the side of Warren Buffet and agree that investment tax rates does not much effect how eager people are to invest. I mean, what else are the rich going to do with their money? If they think, "These tax rates on investments are too high. I'm not going to invest. I'm just going to spend it on yachts, hookers, blow, and black-jack.", then soon they will run out of money and have to start earning it again. Most investors like making successful investments and growing their wealth. What the capital gains tax rate is is not going to change that. Maybe they would not switch investments as much. That might be a good thing. Maybe a better argument would be that successful investors use of money is better for everyone in society in the long run and that having lower taxes on earned income would just let more money be spent on "useless" things: longer vacations or fancy lattes.

jwally 9y ago

Completely agree if you nuke the corporate / business tax as well.

rhino369 9y ago

You would have to start adjusting for inflation. If I bought an asset in 1980 and it just tracked inflation, you'd show a nominal 200% profit. But really, it's worth the same as before.

cylinder 9y ago
yes, but that's not really an issue. If it's not a real gain (inflation adjusted), then it's not income, and doesn't need to be taxed.
- deleted 9y ago
  [deleted]

carradjm 9y ago

Why should we want to tax income? If you tax something, you inherently affect the supply of it. I.e. taxing labor (income tax) will make people want to work less. https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax We need to implement a land-value tax, if simply because taxing land does nothing to change the supply of land. Unless America decides to invade Mexico anytime soon, the value of land will not change. I responded to another post in this thread with a link on Georgism as well (https://en.wikipedia.org/wiki/Land_value_tax https://en.wikipedia.org/wiki/Land_value_tax). I see Georgism occasionally advocated for on Hacker News but I really wish I would see more discussion on it. IMHO, it is the only sensible tax and the most fair tax that economists have thought up.

twoquestions 9y ago
It looks excellent at first blush, but calculating the value of land seems distinctly non-trivial even for honest assessors. For less than perfect people, this highly charged calculation could become a huge political football.