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If you're truly wealthy there's a good chance your "personal income" isn't coming from a paycheck you worked for. Your income is in the form of qualified divide

If you're truly wealthy there's a good chance your "personal income" isn't coming from a paycheck you worked for. Your income is in the form of qualified dividends, proceeds from long term capital gains and other investment income. Of which you're likely paying very little (long term capital gain) to no (qualified dividend) tax on. Any tax reform that does not address the fact that investment income is taxed more or less flat compared to labor which is taxed progressively is missing a huge opportunity to tackle income inequality and making the wealthy "pay their fair share". - Lower the corporate tax rate significantly. This creates more value in companies and possibly a larger labor pool. - Install a progressive tax system on capital gains similar (larger standard deduction than labor) to how labor is currently taxed. Investors are making more on companies that pay lower taxes now. If investment is your sole source of income you'll actually be paying your "fair share" now. - Lower taxes on working people who spend most of their income. This creates more consumption and investment which leads to better markets.

snarf21 9y ago
Do you think inheritance tax eventually captures a lot of this passive income?
- HockeyPlayer 9y ago
  Gary Cohn (Trump's chief economic advisor) recently said, "Only ‘Morons’ Pay the Estate Tax" : http://nymag.com/daily/intelligencer/2017/08/gary-cohn-only-morons-pay-the-estate-tax.html" http://nymag.com/daily/intelligencer/2017/08/gary-cohn-only-...
- nemo44x 9y ago
  Federal inheritance tax is levied on 0.2% of the US population. It doesn't apply until you leave behind about $5.45 million dollars. If I was a politician I would leave it alone and let states deal with it. I think most people that are against the "death tax" know it won't affect them but it's the idea that income that was taxed is now being taxed again. The emotional appeal of leaving a better life for those you love, etc. So, I'd get rid of it. It's insignificant. It accounts for about .5% of total Federal revenue. Easy sacrifice.
  - QAPereo 9y ago
    It’s also not that useful at getting revenue, compared to costs of administration.
  - nodamage 9y ago
    Not to mention it is $10.9 million for married couples. How many people are leaving that much money behind?
    - nemo44x 9y ago
      0.2% of the population of the USA.
  - tankerdude 9y ago
    No. 0.5% of a huge number is a still a very large number. $4T in income tax revenue so 0.5% is $20B. That's about the size of NASA. Percentages are horrible at that. Keep the "death" tax, and here's the thing. Due to death, the assets changed hands. That money wasn't yours. It was your parent's money, so this is the first time that you are acknowledging the income. You personally won't get taxed on it again. Same with dividends and other stock related taxes No recognized income from you personally until you get the money. That's when you get taxed, pure and simple.
    - winter_blue 9y ago
      If a person's parents already paid taxes on it when they earned it, why are they required to pay taxes on it again? It's double taxation, and it's utterly unfair.
      - bbatha 9y ago
        > If a business already paid taxes on it when they earned it, why are they required to pay taxes on it again? It's double taxation, and it's utterly unfair. > If the customer already paid taxes on it when they bought it, why business required to pay taxes on it [that income] again? It's double taxation, and it's utterly unfair. Double taxation arguments are like mad libs you can pick any two parties in a taxed transaction and make the same argument. Pretty much every other kind of transaction is taxed. Yet the other places we tax, income and sales, generate healthy economic activity (labor, wealth, and consumption). Unlike inheritance which has little more than net 0 impact on the economy.
QAPereo 9y ago
The turkeys will absolutely never vote for that thanksgiving! And the wealthy turkeys run the show.
WalterBright 9y ago
> This creates more consumption and investment which leads to better markets. This is another variation on the old "rich people hoard cash" trope. Rich people invest the money that they don't spend. They tend to invest well, meaning highly productive investments, because (naturally) wealthy people get wealthy by being good at investing. Productive investments are good for the economy. The notion that wealthy people invest in unproductive things doesn't make any sense.
- nemo44x 9y ago
  Which is why you lower the corporate tax rate. This gives companies more leverage to use the investment money they get. They can purchase assets, fund R&D, buy smaller promising companies, and hire more labor. Right now they will use any savings to buy back stock - that's the rational thing to do and makes the investors happy. But if we tax investment income progressively then buying back stock is great for the US Treasury - someone has to sell that stock to the company buying it back and it's taxed more! It becomes more reasonable to reinvest that money from a corporate perspective. This is what the investors will want done.
  - WalterBright 9y ago
    > Right now they will use any savings to buy back stock It seems you imagine that isn't actual investment. Of course it is, just like anyone else buying stock is investing the money.
    - mdemare 9y ago
      No, actually this is not investment. It’s returning money to shareholders who may decide to invest, or they may not.
      - WalterBright 9y ago
        The money gets spent or invested. Not hoarded. Invested money gets spent as well. After all, companies do not sell shares unless they intend to spend the proceeds. It's the whole point.
influx 9y ago
I don't disagree with you, but I'd like to see a high threshold for this tax to take effect. I'm a small time investor who is trying to take the money I've put in the market and put it towards starting up a business. I've used my personal income which was already taxed at the state and federal level, put it into the market at my own risk, and then gets taxed again when I get gains on it. Now, because Bill Gates and Warren Buffet aren't getting taxed enough, you're hurting the small time folks. You're creating a moat whereby the small time folks can never escape, and the folks who have already made it won't be hurt.
- nemo44x 9y ago
  Indeed and why I said that the "standard deduction" should be higher than labor. This means people who do not use the markets as a primary source of income but rather as a tool to go from no wealth to acquiring wealth aren't paying taxes on it for reasons you've stated. Or a minimal tax. But once you've become a successful investor over the years and have acquired more and more wealth your dividends are starting to get taxed higher and your proceeds which are now comparable to an income or possibly a primary income are becoming taxed. Because of compound interest and appreciation of capital assets you're being taxed on your new wealth.
- Avshalom 9y ago
  Have you considered a small business loan?
- nodamage 9y ago
  > I've used my personal income which was already taxed at the state and federal level, put it into the market at my own risk, and then gets taxed again when I get gains on it. Except the money you originally put in is not taxed again. Only the gains are. I don't see a compelling argument as to why your gains should also be tax free.
  - influx 9y ago
    I never said they should be tax free, only that as a small time investor they should be modestly taxed.

snarf21 9y ago

Do you think inheritance tax eventually captures a lot of this passive income?

HockeyPlayer 9y ago
Gary Cohn (Trump's chief economic advisor) recently said, "Only ‘Morons’ Pay the Estate Tax" : http://nymag.com/daily/intelligencer/2017/08/gary-cohn-only-morons-pay-the-estate-tax.html" http://nymag.com/daily/intelligencer/2017/08/gary-cohn-only-...
nemo44x 9y ago
Federal inheritance tax is levied on 0.2% of the US population. It doesn't apply until you leave behind about $5.45 million dollars. If I was a politician I would leave it alone and let states deal with it. I think most people that are against the "death tax" know it won't affect them but it's the idea that income that was taxed is now being taxed again. The emotional appeal of leaving a better life for those you love, etc. So, I'd get rid of it. It's insignificant. It accounts for about .5% of total Federal revenue. Easy sacrifice.
- QAPereo 9y ago
  It’s also not that useful at getting revenue, compared to costs of administration.
- nodamage 9y ago
  Not to mention it is $10.9 million for married couples. How many people are leaving that much money behind?
  - nemo44x 9y ago
    0.2% of the population of the USA.
- tankerdude 9y ago
  No. 0.5% of a huge number is a still a very large number. $4T in income tax revenue so 0.5% is $20B. That's about the size of NASA. Percentages are horrible at that. Keep the "death" tax, and here's the thing. Due to death, the assets changed hands. That money wasn't yours. It was your parent's money, so this is the first time that you are acknowledging the income. You personally won't get taxed on it again. Same with dividends and other stock related taxes No recognized income from you personally until you get the money. That's when you get taxed, pure and simple.
  - winter_blue 9y ago
    If a person's parents already paid taxes on it when they earned it, why are they required to pay taxes on it again? It's double taxation, and it's utterly unfair.
    - bbatha 9y ago
      > If a business already paid taxes on it when they earned it, why are they required to pay taxes on it again? It's double taxation, and it's utterly unfair. > If the customer already paid taxes on it when they bought it, why business required to pay taxes on it [that income] again? It's double taxation, and it's utterly unfair. Double taxation arguments are like mad libs you can pick any two parties in a taxed transaction and make the same argument. Pretty much every other kind of transaction is taxed. Yet the other places we tax, income and sales, generate healthy economic activity (labor, wealth, and consumption). Unlike inheritance which has little more than net 0 impact on the economy.

QAPereo 9y ago

The turkeys will absolutely never vote for that thanksgiving! And the wealthy turkeys run the show.

WalterBright 9y ago

> This creates more consumption and investment which leads to better markets. This is another variation on the old "rich people hoard cash" trope. Rich people invest the money that they don't spend. They tend to invest well, meaning highly productive investments, because (naturally) wealthy people get wealthy by being good at investing. Productive investments are good for the economy. The notion that wealthy people invest in unproductive things doesn't make any sense.

nemo44x 9y ago
Which is why you lower the corporate tax rate. This gives companies more leverage to use the investment money they get. They can purchase assets, fund R&D, buy smaller promising companies, and hire more labor. Right now they will use any savings to buy back stock - that's the rational thing to do and makes the investors happy. But if we tax investment income progressively then buying back stock is great for the US Treasury - someone has to sell that stock to the company buying it back and it's taxed more! It becomes more reasonable to reinvest that money from a corporate perspective. This is what the investors will want done.
- WalterBright 9y ago
  > Right now they will use any savings to buy back stock It seems you imagine that isn't actual investment. Of course it is, just like anyone else buying stock is investing the money.
  - mdemare 9y ago
    No, actually this is not investment. It’s returning money to shareholders who may decide to invest, or they may not.
    - WalterBright 9y ago
      The money gets spent or invested. Not hoarded. Invested money gets spent as well. After all, companies do not sell shares unless they intend to spend the proceeds. It's the whole point.

influx 9y ago

I don't disagree with you, but I'd like to see a high threshold for this tax to take effect. I'm a small time investor who is trying to take the money I've put in the market and put it towards starting up a business. I've used my personal income which was already taxed at the state and federal level, put it into the market at my own risk, and then gets taxed again when I get gains on it. Now, because Bill Gates and Warren Buffet aren't getting taxed enough, you're hurting the small time folks. You're creating a moat whereby the small time folks can never escape, and the folks who have already made it won't be hurt.

nemo44x 9y ago
Indeed and why I said that the "standard deduction" should be higher than labor. This means people who do not use the markets as a primary source of income but rather as a tool to go from no wealth to acquiring wealth aren't paying taxes on it for reasons you've stated. Or a minimal tax. But once you've become a successful investor over the years and have acquired more and more wealth your dividends are starting to get taxed higher and your proceeds which are now comparable to an income or possibly a primary income are becoming taxed. Because of compound interest and appreciation of capital assets you're being taxed on your new wealth.
Avshalom 9y ago
Have you considered a small business loan?
nodamage 9y ago
> I've used my personal income which was already taxed at the state and federal level, put it into the market at my own risk, and then gets taxed again when I get gains on it. Except the money you originally put in is not taxed again. Only the gains are. I don't see a compelling argument as to why your gains should also be tax free.
- influx 9y ago
  I never said they should be tax free, only that as a small time investor they should be modestly taxed.