4 ms·

That's to encourage money to be invested and also to compensate for the risks.

inthewoods 9y ago
Yes 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 ago
  And 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 ago
    I 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 ago
  If 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 ago
      The 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 ago
    You lost me as soon as you said "trust me."
    - walshemj 9y ago
      so how many share holder meetings have you chaired trying to save a company from going bust?
      - inthewoods 9y ago
        You'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 ago
If 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 ago
  Are not homes exempt for CGT where you are?
- e12e 9y ago
  Maybe 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 ago
  That'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 ago
No, that's a post-facto justification trotted out whenever someone questions the capital gains rate.
rat_1234 9y ago
I'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 ago
  Taxes 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 ago
    What 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 ago
      There was a ton of risk (they lost their pants) but they just didn't recognize it.
  - robrenaud 9y ago
    If 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 ago
    Ok 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 ago
As the article points out we don't need to encourage money to be invested.
adamlett 9y ago
Ostensibly, 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.

Yes 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 ago
And 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 ago
  I 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 ago
If 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 ago
    The 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 ago
  You lost me as soon as you said "trust me."
  - walshemj 9y ago
    so how many share holder meetings have you chaired trying to save a company from going bust?
    - inthewoods 9y ago
      You'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 ago

If 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 ago
Are not homes exempt for CGT where you are?
e12e 9y ago
Maybe 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 ago
That'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 ago

No, that's a post-facto justification trotted out whenever someone questions the capital gains rate.

rat_1234 9y ago

I'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 ago
Taxes 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 ago
  What 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 ago
    There was a ton of risk (they lost their pants) but they just didn't recognize it.
- robrenaud 9y ago
  If 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 ago
  Ok 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 ago

As the article points out we don't need to encourage money to be invested.

adamlett 9y ago

Ostensibly, 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.