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The fact that articles like this sloppily conflate income from labor and income from capital, while also citing Piketty's mammoth tome (which is almost entirely

The fact that articles like this sloppily conflate income from labor and income from capital, while also citing Piketty's mammoth tome (which is almost entirely focused on the profound differences between the two) is incredibly disappointing. Taxing somebody who earns $500,000 USD per year laboring is not the same as taxing somebody who earns $500,000 USD per year through ownership of capital. The latter is undoubtedly very rich; the former might be, or might be on their way (assuming they save and sustain the income). The latter is providing economic value (maybe, maybe not) through mere ownership (rent-collection); the former is economic providing value (probably) through selling their labor. These things do not have the same systemic effects. As Piketty makes clear, taxing labor was the preferred form of tax collection in the mid-20th century (when taxation increased most rapidly as a portion of global GDP) because most income was collected from labor after the capital destruction of the two world wars. Now, the proportion of income from capital to income from labor has almost doubled to ~8:1. We do not live in the same world, and taxing wealth makes far, far more sense both morally and economically than taxing labor. They should not be sloppily conflated.

zaroth 8y ago
Did you mean to say taxing wealth or taxing capital gains? Taxing wealth (like real estate taxes) in essence means you never actually own anything, you’re just renting. Taxing capital gains means that everything you ever own will also be taken from you in the form of taxes on inflated dollars. The reason this website exists, and all the startups that have gone through YC, is because the tax on capital gains is low. Preferential tax treatment of capital gains from small business investment is the reason we have venture capital. The risk adjusted returns are far too low otherwise. Note that Section 1202 provides the first $10million in gains entirely tax-free right now. You can’t increase the tax rate and expect people to just make the same choices and end up with less to show for it. The more the government confiscates the upside, the less people will take the risk.
- norswap 8y ago
  > Taxing capital gains means that everything you ever own will also be taken from you in the form of taxes on inflated dollars. How? You're taxing gains so by definition, what you already own cannot be taken. > The reason this website exists, and all the startups that have gone through YC, is because the tax on capital gains is low. [evidence needed] > You can’t increase the tax rate and expect people to just make the same choices and end up with less to show for it. The more the government confiscates the upside, the less people will take the risk. Maybe, maybe not. The relationship between upside and risk is not purely linear. The human mind doesn't work like that. Rather it works in thresholds. Wealthy people can never make as much money by working than by investing. So they have to invest. If the return on all means of investment is similarly increased, the situation doesn't change.
  - berberous 8y ago
    "> Taxing capital gains means that everything you ever own will also be taken from you in the form of taxes on inflated dollars. How? You're taxing gains so by definition, what you already own cannot be taken." His point is that you are taxing nominal gains, not real gains. Let's say you bought a house for $1mm in 2000, and sold it for approx. $1.5mm in 2017, owing $100k in capital gains (20% of the $500k nominal gain). You are now left with $1.4mm. But the inflation calculator I'm looking at says $1mm in 2000 dollars is $1.45mm in 2017 dollars, so even though the government claims they are taxing gains, the real value of your dollars has declined.
- dragonwriter 8y ago
  > Taxing capital gains means that everything you ever own will also be taken from you in the form of taxes on inflated dollars. No, it doesn't. Taxing long-term capital gains as normal income but inflation-correcting basis values so that you are taxing real, rather than nominal, gains is quite easily something that could be done. > The reason this website exists, and all the startups that have gone through YC, is because the tax on capital gains is low. Once you have surplus assets to immediate needs, investing them for returns is natural, preferential tax treatment may increase the propensity to do so somewhat, but it doesn't create it; mostly, it just rewards those who are rich enough that they would be investors in any case.
ykevinator 8y ago
The former and latter are both rich. Your point is fair but the example is weak.
tryptophan 8y ago
>The latter is providing economic value (maybe, maybe not) through mere ownership (rent-collection) I want to point out that "rents" are something else than collecting dividends. People who hold equities are not rent-seekers(for the most part). They are compensated for taking on risk in the economy. This serves a real, very important, function. Rents are when political/other power is used to extract money out of a situation that you do not contribute to in any way. E.g. tax prep companies lobbying to make filing taxes complicated so their business can have a problem to exist for. That sort of behavior does nothing to contribute, it it is zero sum(no net wealth is generated by this behavior for anyone), as rents tend to be. Not to be confused with rent, that you pay for living in a property, which is something completely different.
wpietri 8y ago
One problem is that the two are difficult to separate once people have an incentive to confuse them. Note how much compensation now comes in the form of stock, for example, which is partly driven by lower capital gains taxes. It wouldn't be hard to shift things the other way: create a company for your assets and then pay yourself a healthy salary and bonus plan for managing your assets. So however much they might be separate in theory, I think I'm fine if we just start with a 70% tax on all income over $500k, no matter the source. The more complicated the plan, the more likely people will dodge it.
Armisael16 8y ago
Taxing wealth seems to have enormous practical problems though - does everyone have to have their entire life assessed each year?
- tivert 8y ago
  > Taxing wealth seems to have enormous practical problems though - does everyone have to have their entire life assessed each year? I'd bet people didn't have their entire incomes assessed each year before the advent of the income tax. The practical problems of a wealth tax don't seem like they'd be much greater than those from the income tax. Rather than generating W-2s and 1099s to document income, institutions might generate W-3s and 1100s to document account balances and assets. Capital gains tax could just turn into a capital tax, but remain assessed when the assets are sold.
panarky 8y ago
Yes. A 4% wealth tax in the US could eliminate federal and state income taxes completely, and it would be far less regressive than the current scheme.

zaroth 8y ago

Did you mean to say taxing wealth or taxing capital gains? Taxing wealth (like real estate taxes) in essence means you never actually own anything, you’re just renting. Taxing capital gains means that everything you ever own will also be taken from you in the form of taxes on inflated dollars. The reason this website exists, and all the startups that have gone through YC, is because the tax on capital gains is low. Preferential tax treatment of capital gains from small business investment is the reason we have venture capital. The risk adjusted returns are far too low otherwise. Note that Section 1202 provides the first $10million in gains entirely tax-free right now. You can’t increase the tax rate and expect people to just make the same choices and end up with less to show for it. The more the government confiscates the upside, the less people will take the risk.

norswap 8y ago
> Taxing capital gains means that everything you ever own will also be taken from you in the form of taxes on inflated dollars. How? You're taxing gains so by definition, what you already own cannot be taken. > The reason this website exists, and all the startups that have gone through YC, is because the tax on capital gains is low. [evidence needed] > You can’t increase the tax rate and expect people to just make the same choices and end up with less to show for it. The more the government confiscates the upside, the less people will take the risk. Maybe, maybe not. The relationship between upside and risk is not purely linear. The human mind doesn't work like that. Rather it works in thresholds. Wealthy people can never make as much money by working than by investing. So they have to invest. If the return on all means of investment is similarly increased, the situation doesn't change.
- berberous 8y ago
  "> Taxing capital gains means that everything you ever own will also be taken from you in the form of taxes on inflated dollars. How? You're taxing gains so by definition, what you already own cannot be taken." His point is that you are taxing nominal gains, not real gains. Let's say you bought a house for $1mm in 2000, and sold it for approx. $1.5mm in 2017, owing $100k in capital gains (20% of the $500k nominal gain). You are now left with $1.4mm. But the inflation calculator I'm looking at says $1mm in 2000 dollars is $1.45mm in 2017 dollars, so even though the government claims they are taxing gains, the real value of your dollars has declined.
dragonwriter 8y ago
> Taxing capital gains means that everything you ever own will also be taken from you in the form of taxes on inflated dollars. No, it doesn't. Taxing long-term capital gains as normal income but inflation-correcting basis values so that you are taxing real, rather than nominal, gains is quite easily something that could be done. > The reason this website exists, and all the startups that have gone through YC, is because the tax on capital gains is low. Once you have surplus assets to immediate needs, investing them for returns is natural, preferential tax treatment may increase the propensity to do so somewhat, but it doesn't create it; mostly, it just rewards those who are rich enough that they would be investors in any case.

ykevinator 8y ago

The former and latter are both rich. Your point is fair but the example is weak.

tryptophan 8y ago

>The latter is providing economic value (maybe, maybe not) through mere ownership (rent-collection) I want to point out that "rents" are something else than collecting dividends. People who hold equities are not rent-seekers(for the most part). They are compensated for taking on risk in the economy. This serves a real, very important, function. Rents are when political/other power is used to extract money out of a situation that you do not contribute to in any way. E.g. tax prep companies lobbying to make filing taxes complicated so their business can have a problem to exist for. That sort of behavior does nothing to contribute, it it is zero sum(no net wealth is generated by this behavior for anyone), as rents tend to be. Not to be confused with rent, that you pay for living in a property, which is something completely different.

wpietri 8y ago

One problem is that the two are difficult to separate once people have an incentive to confuse them. Note how much compensation now comes in the form of stock, for example, which is partly driven by lower capital gains taxes. It wouldn't be hard to shift things the other way: create a company for your assets and then pay yourself a healthy salary and bonus plan for managing your assets. So however much they might be separate in theory, I think I'm fine if we just start with a 70% tax on all income over $500k, no matter the source. The more complicated the plan, the more likely people will dodge it.

Armisael16 8y ago

Taxing wealth seems to have enormous practical problems though - does everyone have to have their entire life assessed each year?

tivert 8y ago
> Taxing wealth seems to have enormous practical problems though - does everyone have to have their entire life assessed each year? I'd bet people didn't have their entire incomes assessed each year before the advent of the income tax. The practical problems of a wealth tax don't seem like they'd be much greater than those from the income tax. Rather than generating W-2s and 1099s to document income, institutions might generate W-3s and 1100s to document account balances and assets. Capital gains tax could just turn into a capital tax, but remain assessed when the assets are sold.

panarky 8y ago

Yes. A 4% wealth tax in the US could eliminate federal and state income taxes completely, and it would be far less regressive than the current scheme.