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The tax system in the US is commonly used to encourage behaviors the state finds desirable and discourage others. Capital gains are taxed lower because of the p

The tax system in the US is commonly used to encourage behaviors the state finds desirable and discourage others. Capital gains are taxed lower because of the perception that that money will get reinvested and that investments are good for the economy.

C1sc0cat 7y ago
This is pretty common world wide you want to encourage investment in companies and not just Guilts (T-bills in US speak) And also it incentivises things like employee shares which everyone agrees is a good thing, even the SWP Socialist Workers Party Grudgingly accepts this
- afthonos 7y ago
  I wish there was a way to truly be neutral in phrasing. I did not mean to imply this was bad or a lie, but I also didn’t want someone to pop up and say “capitalist lies!” :-)
dannyw 7y ago
The other way to interpret this is that lobbying by wealthy interests have cut their own tax rates by half as compared to the working class, perpetually creating a class of wealth-holders and a class of renters through systematic distortions in the tax system. Is it really fair that a wealthy investor pays 15% tax, while a doctor pays 35%?
- chii 7y ago
  > Is it really fair that a wealthy investor pays 15% tax, while a doctor pays 35%? no. But then the wealthy's capital gains could come from gains in stock or a company, and those gains have already had company tax paid on them, e.g., if a company makes a profit of $100, they'd have to pay $21 in tax, and the company's equity gain is then $79. If you then charge a 35% tax on top of the $79, then that means you've taxed the $100 profit at 56%, which is a lot higher than the normal amount. So by reducing capital gains tax to 15%, you'd end up charging only 36% in total. It makes sense. However, why this doesn't apply to a bank's interest payment is beyond me. So may be it is rigged...
  - kevmo 7y ago
    Many corporations pay 0 tax as well. So in many instances, double taxation is not occurring. This is just another example of the rich getting richer, leading to the massive income inequality that is destabilizing America.
    - topmonk 7y ago
      If your life is also becoming easier and more comfortable as well, how does income inequality affect it?
      - lawlessone 7y ago
        >If your life is also becoming easier and more comfortable as well, how does income inequality affect it? Is his though? only seems to be getting easier for the top.
        topmonk 7y ago
        Then you admit income inequality isn't what is important here. but absolute quality of life.
      - kevmo 7y ago
        Life isn't getting easier for the majority of Americans. Life expectancy is literally going down.
        topmonk 7y ago
        Then you admit income inequality isn't what is important here. but absolute quality of life.
      - lonelappde 7y ago
        A priori, that's a huge if. Income inequality causes auction-priced goods and sevcices (much to most spending, including housing) to be bid up in price, it also creates power imbalance that can lead to more wealth extraction from the poor.
- gok 7y ago
  Long term gains are 23.8% for high earners. To get an effective federal tax rate of 35% in the US today, a single doctor would need to be earning about $2 million per year. There are several arguments for a lower long term gains rate: - It accounts the effect of inflation. Doctors don't receive their paychecks years after they perform the work, and they expect their salaries to keep up with inflation. - Holding assets for long periods of time imposes risk that other forms of income don't have. Doctors don't typically risk having their paycheck cut in half suddenly. - Progressive tax rates can be particularly harsh on investors, because sales typically come in big lump sums. Doctors get nice smooth paychecks that don't suddenly move them up and down income percentiles per year.
  - lonelappde 7y ago
    Investors also have plenty of opportunities for tax loss harvesting and spreading out gains using financial engineering techniques.
    - gok 7y ago
      Yeah and doctors get free vacations from drug reps and that all gets expensed. Everyone finds ways to minimize their tax exposure.
      - chrisco255 7y ago
        Also, doctors often invest their earnings in the stock market and real estate, so let's not pretend "investor" and "doctor" are mutually exclusive entities.
unlinked_dll 7y ago
People already have incentive to invest, inflation. I don't really buy the argument that capital gains taxes encourage investment, because without them, you'd still be stupid not to put your money to work.
- logicchains 7y ago
  Incentive isn't a yes or no thing, it's a scale. The more you tax saving relative to spending, the more you encourage people to spend. Mathematically, if we view save vs spend as a choice between consuming now vs consuming later, with some fixed time discounting function, then for any given save vs spend decision, taxing one increases the relative payoff of the other.
tboyd47 7y ago
Seems strange then, that all politicians talk about is putting people to work, yet working is the most highly taxed activity.

C1sc0cat 7y ago

This is pretty common world wide you want to encourage investment in companies and not just Guilts (T-bills in US speak) And also it incentivises things like employee shares which everyone agrees is a good thing, even the SWP Socialist Workers Party Grudgingly accepts this

afthonos 7y ago
I wish there was a way to truly be neutral in phrasing. I did not mean to imply this was bad or a lie, but I also didn’t want someone to pop up and say “capitalist lies!” :-)

dannyw 7y ago

The other way to interpret this is that lobbying by wealthy interests have cut their own tax rates by half as compared to the working class, perpetually creating a class of wealth-holders and a class of renters through systematic distortions in the tax system. Is it really fair that a wealthy investor pays 15% tax, while a doctor pays 35%?

chii 7y ago
> Is it really fair that a wealthy investor pays 15% tax, while a doctor pays 35%? no. But then the wealthy's capital gains could come from gains in stock or a company, and those gains have already had company tax paid on them, e.g., if a company makes a profit of $100, they'd have to pay $21 in tax, and the company's equity gain is then $79. If you then charge a 35% tax on top of the $79, then that means you've taxed the $100 profit at 56%, which is a lot higher than the normal amount. So by reducing capital gains tax to 15%, you'd end up charging only 36% in total. It makes sense. However, why this doesn't apply to a bank's interest payment is beyond me. So may be it is rigged...
- kevmo 7y ago
  Many corporations pay 0 tax as well. So in many instances, double taxation is not occurring. This is just another example of the rich getting richer, leading to the massive income inequality that is destabilizing America.
  - topmonk 7y ago
    If your life is also becoming easier and more comfortable as well, how does income inequality affect it?
    - lawlessone 7y ago
      >If your life is also becoming easier and more comfortable as well, how does income inequality affect it? Is his though? only seems to be getting easier for the top.
      - topmonk 7y ago
        Then you admit income inequality isn't what is important here. but absolute quality of life.
    - kevmo 7y ago
      Life isn't getting easier for the majority of Americans. Life expectancy is literally going down.
      - topmonk 7y ago
        Then you admit income inequality isn't what is important here. but absolute quality of life.
    - lonelappde 7y ago
      A priori, that's a huge if. Income inequality causes auction-priced goods and sevcices (much to most spending, including housing) to be bid up in price, it also creates power imbalance that can lead to more wealth extraction from the poor.
gok 7y ago
Long term gains are 23.8% for high earners. To get an effective federal tax rate of 35% in the US today, a single doctor would need to be earning about $2 million per year. There are several arguments for a lower long term gains rate: - It accounts the effect of inflation. Doctors don't receive their paychecks years after they perform the work, and they expect their salaries to keep up with inflation. - Holding assets for long periods of time imposes risk that other forms of income don't have. Doctors don't typically risk having their paycheck cut in half suddenly. - Progressive tax rates can be particularly harsh on investors, because sales typically come in big lump sums. Doctors get nice smooth paychecks that don't suddenly move them up and down income percentiles per year.
- lonelappde 7y ago
  Investors also have plenty of opportunities for tax loss harvesting and spreading out gains using financial engineering techniques.
  - gok 7y ago
    Yeah and doctors get free vacations from drug reps and that all gets expensed. Everyone finds ways to minimize their tax exposure.
    - chrisco255 7y ago
      Also, doctors often invest their earnings in the stock market and real estate, so let's not pretend "investor" and "doctor" are mutually exclusive entities.

unlinked_dll 7y ago

People already have incentive to invest, inflation. I don't really buy the argument that capital gains taxes encourage investment, because without them, you'd still be stupid not to put your money to work.

logicchains 7y ago
Incentive isn't a yes or no thing, it's a scale. The more you tax saving relative to spending, the more you encourage people to spend. Mathematically, if we view save vs spend as a choice between consuming now vs consuming later, with some fixed time discounting function, then for any given save vs spend decision, taxing one increases the relative payoff of the other.

tboyd47 7y ago

Seems strange then, that all politicians talk about is putting people to work, yet working is the most highly taxed activity.