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In my books, money that you get from dividend or rent payments is not 'earned income'. I don't think it should be classified as income; it should get its own c

In my books, money that you get from dividend or rent payments is not 'earned income'. I don't think it should be classified as income; it should get its own category and be taxed much higher. We don't want to encourage people to sit around and do nothing just because they happened to decide to buy a few Apple or Amazon shares 20 years ago. Maybe the tax rate would be correlated to happiness, but that's OK; maybe it will average out the human experience... That seems fair.

troydavis 9y ago
> We don't want to encourage people to sit around and do nothing just because they happened to decide to buy a few Apple or Amazon shares 20 years ago. That’s an inaccurate summary of the current consensus about capital gains tax policy. The logic for a lower capital gains rate is: * people with capital should be incentivized to do something with it (other than put it in a mattress, ie, in cash/money markets) * the person with capital probably has relatively limited ways to deploy it themselves. Someone with a retirement account probably can’t, and usually shouldn’t, take that $50,000 and start a business with it (even though that income would generate compensation for them, which you’d propose taxing at a lower rate). At the other extreme, someone with a huge business would have reinvested the profits into the huge business (instead of taking a distribution and trying to invest it) if they thought that was the most productive use of the capital * given that not all holders of capital can deploy it productively themselves, and that we don’t want them to sit on it (or deploy it poorly because they’d pay higher taxes if they didn’t), the next best thing is to encourage them to provide that capital to others. Experts argue how much lower the capital gains rate should be, or even that capital gains and income should be taxed equally, but basically no experts[1] argue for a higher rate, nor that a lower or equal rate encourages “people to sit around.” Of course, there’s a chance that you and, say, 1% of mainstream economists are on to something. [1]: Don’t trust me; form your own opinion: https://www.google.com/search?q=does+anyone+argue+that+capital+gains+tax+should+be+higher+than+income https://www.google.com/search?q=does+anyone+argue+that+capit...
- dragonwriter 9y ago
  > The logic for a lower capital gains rate is We don't actually have a lower capital gains rate, we have a lower long term capital gains rate, which, insofar as it has logic beyond “its the kind of income that predominates among the superrich”, seems to be loosely grounded in the fact that income earned over a period greater than one year would be overtaxed if treated as simole current-year income in a progressive tax system. Of course, a simple solution to this is simply to tax long-term gains as income but allow either advanced or deferred (or both) recognition of income, regardless of source, with some defined quantitative limits.

troydavis 9y ago

> We don't want to encourage people to sit around and do nothing just because they happened to decide to buy a few Apple or Amazon shares 20 years ago. That’s an inaccurate summary of the current consensus about capital gains tax policy. The logic for a lower capital gains rate is: * people with capital should be incentivized to do something with it (other than put it in a mattress, ie, in cash/money markets) * the person with capital probably has relatively limited ways to deploy it themselves. Someone with a retirement account probably can’t, and usually shouldn’t, take that $50,000 and start a business with it (even though that income would generate compensation for them, which you’d propose taxing at a lower rate). At the other extreme, someone with a huge business would have reinvested the profits into the huge business (instead of taking a distribution and trying to invest it) if they thought that was the most productive use of the capital * given that not all holders of capital can deploy it productively themselves, and that we don’t want them to sit on it (or deploy it poorly because they’d pay higher taxes if they didn’t), the next best thing is to encourage them to provide that capital to others. Experts argue how much lower the capital gains rate should be, or even that capital gains and income should be taxed equally, but basically no experts[1] argue for a higher rate, nor that a lower or equal rate encourages “people to sit around.” Of course, there’s a chance that you and, say, 1% of mainstream economists are on to something. [1]: Don’t trust me; form your own opinion: https://www.google.com/search?q=does+anyone+argue+that+capital+gains+tax+should+be+higher+than+income https://www.google.com/search?q=does+anyone+argue+that+capit...

dragonwriter 9y ago
> The logic for a lower capital gains rate is We don't actually have a lower capital gains rate, we have a lower long term capital gains rate, which, insofar as it has logic beyond “its the kind of income that predominates among the superrich”, seems to be loosely grounded in the fact that income earned over a period greater than one year would be overtaxed if treated as simole current-year income in a progressive tax system. Of course, a simple solution to this is simply to tax long-term gains as income but allow either advanced or deferred (or both) recognition of income, regardless of source, with some defined quantitative limits.