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> The only thing that does create jobs is consumer demand for products and services that people can make and provide, not my investment dollars. And what is be

> The only thing that does create jobs is consumer demand for products and services that people can make and provide, not my investment dollars. And what is being “demanded”? Products and services that are the result of investments made earlier in time. Consumer demand is the inherent PAYOFF of successful investment. Consumers demand more, faster, cheaper, better. None of that comes without investment first. This guy sees investment as leeching off the productive economy. Probably because he has only ever been on the “money-shuffling” side of things, rather than standing in the shoes of a business owner who needs to raise capital to create something new. That capital comes from either loans or equity, both of which require 1) substantial sums of latent savings in the economy, and 2) money-shufflers to find allocation opportunities (capital does not yet, alas, allocate itself). Investment is the LAST thing we should tax. Consumption (especially of positional and rivalrous goods) is the first.

Joeri 8y ago
That’s one way of looking at it. Here’s another way. Consumption is what drives the economy, not investment. You can invest all you want in a giant rubber duck factory, if nobody wants to buy giant rubber ducks your investment will be worthless. Investors either gamble where demand will occur or create it artificially through marketing, but in neither of those circumstances is consumption the direct result of investment. The last thing you should tax is consumption, since it is the fuel for all other economic activity. Less consumption, less everything else. Also, taxing consumption tends to be a regressive tax policy in practice, which leads to economic inequality and reduced quality of life. IMHO what should be taxed is income in all forms, whether out of labor or out of investment, since that’s the most fair. Consumption should not be taxed. Additionally tax rates should be progressive since there are many engines of inequality in the economy and we need a bit of counterbalance to that.
- vkou 8y ago
  Mind you, taxing consumption is also the only way that we can avoid a runaway environmental disaster. 3% growth year over year is not sustainable in perpetuity. We need to figure out how to transition to a steady state, or a shrinking economy.
- lordnacho 8y ago
  Surely it it chicken and egg? Even if everyone wants to have rubber ducks in their lives, if everyone is hunting-gathering (thus no saving or investment) there won't be a way to finance the factory.
- Aunche 8y ago
  > Consumption is what drives the economy, not investment. That's true, but it's missing the point. Investment allows people to fund projects that drive up consumption. It may not be "as important" as labor, but it still helps the economy. If the capital gains tax is too high, rent seekers will just find a safer alternative to way to park their money that is even less economically productive, like renting out real estate.
  - Joeri 8y ago
    I’m not convinced investment ever drives up consumption, except for the investment in marketing. I see investment tailing consumption mostly, with investors preferring safe bets on goods and services that already have a market. Anyway, it’s just two ways of looking at the same economic relationship. In practice it’s more a sort of ouroboros. I’ve also never been convinced by the “big money will flee if we tax it more” argument. Nobody has ever tried leaving no ground to flee to by leveling the taxation system so there’s no loopholes. The only way to flee would be to leave the country entirely, but as long as it remains profitable to stay (taxes do not exceed profits) it would be foolish to do so.

Joeri 8y ago

That’s one way of looking at it. Here’s another way. Consumption is what drives the economy, not investment. You can invest all you want in a giant rubber duck factory, if nobody wants to buy giant rubber ducks your investment will be worthless. Investors either gamble where demand will occur or create it artificially through marketing, but in neither of those circumstances is consumption the direct result of investment. The last thing you should tax is consumption, since it is the fuel for all other economic activity. Less consumption, less everything else. Also, taxing consumption tends to be a regressive tax policy in practice, which leads to economic inequality and reduced quality of life. IMHO what should be taxed is income in all forms, whether out of labor or out of investment, since that’s the most fair. Consumption should not be taxed. Additionally tax rates should be progressive since there are many engines of inequality in the economy and we need a bit of counterbalance to that.

vkou 8y ago
Mind you, taxing consumption is also the only way that we can avoid a runaway environmental disaster. 3% growth year over year is not sustainable in perpetuity. We need to figure out how to transition to a steady state, or a shrinking economy.
lordnacho 8y ago
Surely it it chicken and egg? Even if everyone wants to have rubber ducks in their lives, if everyone is hunting-gathering (thus no saving or investment) there won't be a way to finance the factory.
Aunche 8y ago
> Consumption is what drives the economy, not investment. That's true, but it's missing the point. Investment allows people to fund projects that drive up consumption. It may not be "as important" as labor, but it still helps the economy. If the capital gains tax is too high, rent seekers will just find a safer alternative to way to park their money that is even less economically productive, like renting out real estate.
- Joeri 8y ago
  I’m not convinced investment ever drives up consumption, except for the investment in marketing. I see investment tailing consumption mostly, with investors preferring safe bets on goods and services that already have a market. Anyway, it’s just two ways of looking at the same economic relationship. In practice it’s more a sort of ouroboros. I’ve also never been convinced by the “big money will flee if we tax it more” argument. Nobody has ever tried leaving no ground to flee to by leveling the taxation system so there’s no loopholes. The only way to flee would be to leave the country entirely, but as long as it remains profitable to stay (taxes do not exceed profits) it would be foolish to do so.