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While I agree that being taxed on inflation is unfair, it would not be that hard to discount inflation when assessing taxes. Surely a tax system could accommoda

by vslira 9y ago

While I agree that being taxed on inflation is unfair, it would not be that hard to discount inflation when assessing taxes. Surely a tax system could accommodate that.

matte_black 9y ago
But the fact is, it doesn’t and that’s the world we live in. We need to lower capital gains taxes sometime in these next few years.
- randomdata 9y ago
  The fact also remains that the world we live in doesn’t have a lower capital gains tax rate. If we’re going to propose tax changes for the future, all proposals are as good as any other.
  - skybrian 9y ago
    I didn't know what part of the world you mean, but in the US the capital gains rate maxes out at 20% for people earning over $425,000 a year and that's pretty darn low. The question to ask is why capital gains tax should be lower than taxes on wages? If encouraging work is the priority, it should be the other way round.
    - hanklazard 9y ago
      Not exactly. Long-term capital gains in the US max out at 20%. Short-term capital gains (those investments held < 1 yr) are taxed at your marginal tax rate, which can be significantly higher than 20%. https://www.nerdwallet.com/blog/taxes/capital-gains-tax-rates/ https://www.nerdwallet.com/blog/taxes/capital-gains-tax-rate...
    - tensor_rank_0 9y ago
      perhaps the priority is encouraging investment into capital.
- marvin 9y ago
  Norwegian capital gains tax (no distinction between short and long term) is 30.5% for 2018, with an additional 0.85% of total net worth (mostly minus value of primary residence). I wish lowering capital gains tax was on the radar; if inflation starts increasing then this will be an excellent system for punishing people who have saved money rather than spending it immediately.
- brandmeyer 9y ago
  Income is income. Why should unearned income get taxed lower than earned income?
  - innagadadavida 9y ago
    I’d go a step further and classify income as: 1. Earned income 2. Investment income 3. Gambling/lottery/short term income Tax rate should increase as you go down that list.
    - matte_black 9y ago
      Why?
  - matte_black 9y ago
    Because unearned income is a lot harder to make. At a 6% return, you need around $800k+ to get the equivalent of a $50k salary before taxes from the interest earned on your savings. When you factor in having to reinvest some of your returns to beat inflation and make up for some years of low or negative returns, you might only draw maybe $20-25k out of that $800k portfolio. Then you get taxed on it at 20% capital gains along with any state taxes, and it all adds up to a lot less money to live off of. Most people who want higher capital gains do not have a portfolio of this size nor have they explored the reality of living off a portfolio of this size. Work to the grave I guess.
    - throwaway2048 9y ago
      I don't see people passively living off their investments (that is taking a rake while contributing nothing productive to the economy) as a thing to be encouraged, beyond perhaps a retirement age (which has tax shelter status for a significant amount). As a thought experiment imagine if everyone did this, or it was everyones goal.
      - matte_black 9y ago
        If everyone was doing it, there would be no returns or even negative returns, and thus people wouldn’t invest. The problem fixes itself.
- curun1r 9y ago
  It's one thing to lower tax on investment income. But the problem with capital gains taxes is that they don't just cover investment income, they also cover lots of earned income. Stock options, IMHO, should never be taxed as capital gains since they were "purchased" largely with an employees time. And they're not the only form of capital gains that derive from selling your work product. If we are to cut capital gains, we also need to restrict capital gains to pure financial investments and ensure that every form of compensation for work is taxed as normal income.

by vslira 9y ago

While I agree that being taxed on inflation is unfair, it would not be that hard to discount inflation when assessing taxes. Surely a tax system could accommodate that.

matte_black 9y ago

But the fact is, it doesn’t and that’s the world we live in. We need to lower capital gains taxes sometime in these next few years.

randomdata 9y ago
The fact also remains that the world we live in doesn’t have a lower capital gains tax rate. If we’re going to propose tax changes for the future, all proposals are as good as any other.
- skybrian 9y ago
  I didn't know what part of the world you mean, but in the US the capital gains rate maxes out at 20% for people earning over $425,000 a year and that's pretty darn low. The question to ask is why capital gains tax should be lower than taxes on wages? If encouraging work is the priority, it should be the other way round.
  - hanklazard 9y ago
    Not exactly. Long-term capital gains in the US max out at 20%. Short-term capital gains (those investments held < 1 yr) are taxed at your marginal tax rate, which can be significantly higher than 20%. https://www.nerdwallet.com/blog/taxes/capital-gains-tax-rates/ https://www.nerdwallet.com/blog/taxes/capital-gains-tax-rate...
  - tensor_rank_0 9y ago
    perhaps the priority is encouraging investment into capital.
marvin 9y ago
Norwegian capital gains tax (no distinction between short and long term) is 30.5% for 2018, with an additional 0.85% of total net worth (mostly minus value of primary residence). I wish lowering capital gains tax was on the radar; if inflation starts increasing then this will be an excellent system for punishing people who have saved money rather than spending it immediately.
brandmeyer 9y ago
Income is income. Why should unearned income get taxed lower than earned income?
- innagadadavida 9y ago
  I’d go a step further and classify income as: 1. Earned income 2. Investment income 3. Gambling/lottery/short term income Tax rate should increase as you go down that list.
  - matte_black 9y ago
    Why?
- matte_black 9y ago
  Because unearned income is a lot harder to make. At a 6% return, you need around $800k+ to get the equivalent of a $50k salary before taxes from the interest earned on your savings. When you factor in having to reinvest some of your returns to beat inflation and make up for some years of low or negative returns, you might only draw maybe $20-25k out of that $800k portfolio. Then you get taxed on it at 20% capital gains along with any state taxes, and it all adds up to a lot less money to live off of. Most people who want higher capital gains do not have a portfolio of this size nor have they explored the reality of living off a portfolio of this size. Work to the grave I guess.
  - throwaway2048 9y ago
    I don't see people passively living off their investments (that is taking a rake while contributing nothing productive to the economy) as a thing to be encouraged, beyond perhaps a retirement age (which has tax shelter status for a significant amount). As a thought experiment imagine if everyone did this, or it was everyones goal.
    - matte_black 9y ago
      If everyone was doing it, there would be no returns or even negative returns, and thus people wouldn’t invest. The problem fixes itself.
curun1r 9y ago
It's one thing to lower tax on investment income. But the problem with capital gains taxes is that they don't just cover investment income, they also cover lots of earned income. Stock options, IMHO, should never be taxed as capital gains since they were "purchased" largely with an employees time. And they're not the only form of capital gains that derive from selling your work product. If we are to cut capital gains, we also need to restrict capital gains to pure financial investments and ensure that every form of compensation for work is taxed as normal income.