8 ms·
It's not the progressive tax structure that's the problem, it's the fact that cap gains are taxed at a much lower rate than other forms of income.
by URSpider94 9y ago
It's not the progressive tax structure that's the problem, it's the fact that cap gains are taxed at a much lower rate than other forms of income.
- walshemj 9y agoThat's to encourage money to be invested and also to compensate for the risks.
- inthewoods 9y agoYes and we've seen the outcome - top 1% benefits too much, and results in too much concentration of wealth (along with other structural issues).
- theodorton 9y agoAnd the problem with raising taxes on capital gains will be investors moving their holdings to other countries to reduce their taxes. So long as the taxes on capital gains are kept at a comparable rate across countries, this isn't a problem.
- inthewoods 9y agoI don't think that's a given - there are plenty of countries with lower capital gain taxes, yet we don't see mass money moving to these countries. Source: https://taxfoundation.org/capital-gains-rate-country-2011-oecd/ https://taxfoundation.org/capital-gains-rate-country-2011-oe...
- walshemj 9y agoIf there is no difference between income and capital taxation people wont invest in companies. And companies wont last with out access to capital trust me I have chaired share holder meetings caused by lack of capital
- mrb 9y ago«If there is no difference between income and capital taxation people wont invest in companies.» Nonsense. What alternatives do people have? Putting money in a lousy US savings account with a 1% annual interest rate? By comparison the US stock market's average annual return has been 7%. Hence even if income tax rate were the same as capital gains tax rate, the stock market would still give you returns 7× higher.
- chibg10 9y agoThe problem (started by GP, tbf) is that "investing in companies" is not a binary choice. A given amount of capital is economically more productive in riskier bets in most real-world cases (i.e. bets on tech advances drive the economy forward but are risky). However, higher investment taxes tilts the investment decision towards less risky (and less productive) investments. Think of investing in 1997 Amazon vs 1997 Walgreens: the more your upside is taxed, the more attractive Walgreens is going to look (in 1997)
- inthewoods 9y agoYou lost me as soon as you said "trust me."
- walshemj 9y agoso how many share holder meetings have you chaired trying to save a company from going bust?
- inthewoods 9y agoYou've got a large number of logical fallacies in your comment. Comparing your experience chairing shareholder meetings to tax policy is apples and oranges. Specifically, that because you've chaired a shareholder meeting, this somehow makes you an expert on the efficacy and outcome of changes to the tax code. The theory of "investment fleeing" due to capital gain tax increases is, frankly, not proven by the data. We've had an increase in the capital gains taxes under Obama (2014) - yet investment continued across private equity, venture and general investment.
- Robotbeat 9y agoIf I had the money, I'd renovate my roof, get a solar roof with battery backup, etc. It's an investment just as much as in any business; why am I discriminated against as an individual?
- walshemj 9y agoAre not homes exempt for CGT where you are?
- e12e 9y agoMaybe you can form a corporation and lease the roof area from your house, and deduct the investment? I'm not really serious, but perhaps something along those lines is an option?
- URSpider94 9y agoThat's a tax-neutral investment. You would pay for the equipment with after-tax dollars, and your returns would be in lower utility bills, which you pay with after-tax dollars. So, your returns are effectively tax-free!
- eggs_and_avo 9y agoNo, that's a post-facto justification trotted out whenever someone questions the capital gains rate.
- rat_1234 9y agoI've heard the former but I have never heard the latter unless it's been one of my friends in PE trying to justify it. It's the investor's job to make sure their investments are producing an adequate risk-adjusted return, not the government's job to help you get there.
- rhino369 9y agoTaxes change the expected value of an investment. Thus, it changes the amount of risk v reward. If I have you 51% odds on a coin flip, that's a good bet. But if you only get paid out 60% when you win, it's a bad bet.
- aylmao 9y agoWhat I gather from the 2000 dot-com bubble, the 2008 financial crisis and a slew of startups I've been seeing lately (cue, Juicero) is that _perhaps_ there should be a little more risk to investment. Idk, my own opinion here.
- rhino369 9y agoThere was a ton of risk (they lost their pants) but they just didn't recognize it.
- robrenaud 9y agoIf you made a thousand of those 51% bets, you could deduct the losses from the wins, and you'd be back to profitable.
- rat_1234 9y agoOk yes that's definitely a fair point. To be clear I like the idea of the tax code being simpler and rates lower since it unlocks more NPV positive projects by removing an important cost. But I do think that's a different argument by a few degrees than the idea that capital gains taxes should be lower to somehow compensate investors for their risk.
- guelo 9y agoAs the article points out we don't need to encourage money to be invested.
- adamlett 9y agoOstensibly, but really it's hard to look at it and not conclude that it's simply to ensure the rich don't have to pay taxes. What do people imagine rich people would do with their money instead, if capital gains were taxed like income? Stuff it their madrasses, and be at the mercy of inflation? Probably not.
- dogruck 9y agoWe should tax consumption, not income.
- euroclydon 9y agoI don't agree with that at all. Consumption taxes can be quite regressive. I guess you picture the rich guy getting a huge tax bill when he buy's his yacht, but what if he just keeps saving, investing, and then, I don't know, buys a senator? We should be trying to discourage the accumulation of power as well.
- aknosis 9y agoWhat's the average Senator cost? He'll have to pay taxes on it. /s
- URSpider94 9y agoIf you think about it, the poorest 10 percent of society consume 100% (or more) of their income, and would pay tax on all of it. The wealthiest 1 percent might only consume 20% of their income, and would therefore be taxed at a much lower rate vs. their income.
- belovedeagle 9y agoAnd? This is only "unfair" if you assume that people should be taxed as a percentage of their income, but by moving to consumption taxes we discard that assumption.
- dogruck 9y agoAlso assumes that we would heavily tax the consumption of basic goods, like groceries. More likely, we would heavily tax goods that poor people cannot afford. Things like dining out, travel, fashion, electronics, cars, and housing in excess of basic sq footage.
- baursak 9y agoConsumption tax is very regressive. We should tax wealth, not income. Eliminate income tax and extend property tax system to all assets, not just real estate.
- princeb 9y agocapital gains is the leftover of profit after tax. taxing capital gains is taxing profit twice. in my opinion, for a clean treatment of value taxation, either corporate tax or capital gains tax must go.
- aaronblohowiak 9y agoNo, I don't see it that way -- Taxing dividends is taxing profit twice, not capital gains. Capital gains is taxing asset appreciation.
- dasil003 9y agoNo it's not, the corporation is taxed once, and the dividend recipient is taxed once. If a corporation is to have rights of personhood it needs to pay taxes as well. Also capital gains can come from many sources that aren't taxable.