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«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
by 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)