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Trying to break the conditioning here but government should always tax in a way that it incentive WORK. The way things are Wealth is no longer being produced, s

Trying to break the conditioning here but government should always tax in a way that it incentive WORK. The way things are Wealth is no longer being produced, so those who have it will be on top because income will never be enough to prop you up. Therefore we should want a Growth market so that more wealth is produced and risk averse people will still be rich but more people will become as rich as them. To resolve Inequality we can't just have the mindset of punish the rich for creating wealth. We need to grease up our economy so that everyone else can be rich as well. Different mindset but this problem is super hard to solve and I don't think anyone has a decent solution for it.

toiletfuneral 6y ago
landlords don't WORK and equity firms don't produce anything, we can start by removing these parasites
rfulop 6y ago
I'm with this argument. Capital gains should at least be taxed as much as earned income.
- creddit 6y ago
  But then if you want to help people build wealth that don’t have it, you make it much harder. I really feel like people need to look into land taxes a la Henry George: https://en.wikipedia.org/wiki/Henry_George https://en.wikipedia.org/wiki/Henry_George Taxing things like capital gains differently or implementing a generic wealth tax can actually hurt those we want to help to build wealth as well as incentivize things like expatriation of wealth. Can’t expatriate land.
  - RNCTX 6y ago
    Taxes are not punishment. Taxes exist because a certain amount of wealth is required to maintain a state. I understand that the financial/business world has been trying to convince people otherwise since the mid 1970s, but they are still as wrong today as they were then. Tax “fairness” is therefore simple. He who earns the most should pay the most. You cannot expatriate dollars. The currency is issued by the state and the state can seize it. Chinese factory? Great, tariff on iPhones at the dock. Baseline tax = difference in currency value between country of origin and country of destination on that day. HQ in Ireland? Super, you owe the US the difference between the tax you paid there and the equivalent rate here. Don’t like it? No security sales in US markets. Sell bonds and stock somewhere else. These aren’t hard problems.
    - suyash 6y ago
      "Tax “fairness” is therefore simple. He who earns the most should pay the most." - I don't like the idea of tax fairness as what is fair to you may not be fair to other person. I would only concur with your second statement on the absolute value (numbers) and not on percentage basis.
    - nostrademons 6y ago
      Land taxes are actually better in those regards than income or capital gains taxes. You can't hide land, and if you want the state to enforce your property rights, you can't alter your behavior in a way that lets you avoid paying the tax. That makes the land tax what economist call a "zero-deadweight" tax: it doesn't decrease economic activity or consumer wellbeing at all. There's also an economic theorem [1] that an LVT results in the optimal size of government: investment in public goods increases the value of land (and hence rent that can be charged for it), but also the tax on that land, so citizens have an incentive to vote in only those public works projects that increase rents more than their cost in taxes. Whereas if you put a tariff on iPhones at the dock, Apple will pass that tariff along to consumers, prices will go up, and fewer people that want an iPhone will be able to afford one. The "HQ in Ireland" trick revolves around avoiding dollars at all: profits from a company's EUs operations are retained as Euros and then used to pay European employees or exchanged directly for RMBs to pay for Chinese goods. [1] https://en.wikipedia.org/wiki/Henry_George_theorem https://en.wikipedia.org/wiki/Henry_George_theorem
    - creddit 6y ago
      > Taxes are not punishment. Taxes exist because a certain amount of wealth is required to maintain a state. Who is saying taxes shouldn’t exist here? I’m advocating for a specific form of wealth tax. I clearly believe taxes are necessary. As for them not being a punishment, this is clearly a silly semantic argument focused on trying to frame this emotionally. People respond to incentives and change their behavior when faced with incentives. Taxes change incentives. If a tax disincentives a behavior, this behavior will be done less. Get your moral policing out of here. > Tax “fairness” is therefore simple. He who earns the most should pay the most. Why earnings? Why should we tax people’s labor? Your definition of fairness is yours, not everyone else’s. > You cannot expatriate dollars. Jesus Christ, yes you can. It’s like you’ve never heard of offshore banks. Where does an idea like this even come up? Go see China’s issues with people expatriating capital and their middling success at preventing it with capital controls. How someone can speak like this and not see the value of a wealth tax in the form of a land tax blows my mind. By the way, concerned with massive disparities in wealth? That’s all from housing which is of course built on what? Land. https://www.brookings.edu/wp-content/uploads/2016/07/2015a_rognlie.pdf https://www.brookings.edu/wp-content/uploads/2016/07/2015a_r... Tax the shit out of land. The marginal value to a piece of land from the actions of its owner is minimal at best. People gaining wealth from land is the definition of rent seeking.
  - Apocryphon 6y ago
    Why not all? Tax land, capital gains, and wealth. Adjust brackets prudently.
    - creddit 6y ago
      Why should we disincentivize saving? It's clear why we should tax land, the value of land is not driven in almost any way by ownership of land so the returns to land are unjustly gained AND it's economically efficient to tax land as it's fixed in supply. However, taxing savings (capital gains, wealth) is unclear in value. What would, for example, be the benefit of shifting investment to consumption? In other news, I could be highly in favor of a consumption tax instead but again, that's very difficult to implement well. A hefty estate tax is something I can get behind. It's definitely distortionary and has a huge amount of difficulty in implementation but I see almost no societal value to generational wealth.
      - Apocryphon 6y ago
        I'm not advocating any specific plan and I find Georgism to be worth a new look and calls for a LVT to be compelling, I'm just saying that I think those who focus solely on it, some of whom advocate abolishing all taxes and only using an LVT, to be impractically utopian. That said, I see no reason as to why we shouldn't at least experiment with other alternate tax regimen as well, and that may include tax savings at least for the highest earners. To echo others' statements, why shouldn't those at the absolute highest levels of savings endure a little redistribution? It wouldn't matter much to Bezos.
- suyash 6y ago
  That has not worked, capital has moved elsewhere to low tax domiciles.
- bhupy 6y ago
  I completely agree with this in theory, we ought to just make capital gains be taxed at the same progressive tax brackets as income. That being said, how do we prevent people from just selling small amounts of capital every year, so as to stay below bracket thresholds?
  - macd 6y ago
    Why do we want to prevent people from doing that?
    - bhupy 6y ago
      Because it defeats the purpose of a progressive capital gains tax? If the concern is that someone is paying less in tax off $250,000 in capital gains when they realize their wealth than someone who is paid a wage of $250,000, the policy prescription (with which I agree), is to tax $250,000 capital gains like income, I.e. at the top marginal tax rate. What happens if I liquidate $50,000 at a time over the course of 5 years, and continue to pay a net effective tax of around ~20%, which is what the long term capital gains tax is, today?
      - leetcrew 6y ago
        I don't think it makes sense to tax the appreciation of an asset over twenty years as if it were a single year of outsized income. if you want to treat it similarly to income, you should divide the realized gain by the number of years the asset was held and assess taxes as if the person made that quotient in income for each of those years (under the rules/brackets for each year, possibly with some adjustments for inflation). this would make it harder for average joe to estimate his tax liability when he sells, but it prevents the tax optimization you mentioned and is (imo) pretty fair.
      - macd 6y ago
        I guess that's a question of what the purpose actually is. If you only take out $50k, then you're living on $50k that year and you pay the same amount of tax as if you had worked a regular job for the same amount. If you want to live a more extravagant lifestyle, you take more out and are taxed more. This could mean that they have $1 million of unrealized gains that year. You're not really able to tax unrealized gains most of the time because they could disappear or go negative. That would go untaxed until they sell, but it would eventually be taxed. At the same time, they're not going to be able to enjoy their wealth only taking out a small amount every year, so I'm not entirely convinced that this behavior of living frugally to pay less tax is something we need to 'prevent'.
- gnicholas 6y ago
  Should social security and medicare taxes apply to capital gains? Should these taxes apply beyond the current caps, which are a bit over $100k? If not, there would be very little impact since most investment income is earned by people who also have six figures of wage income. And if so, then we'd have to levy these 'taxes' (they're not quite taxes, to the extent that these are paid in exchange for later services/payments that the taxpayer receive) on all wage income.
  - s1artibartfast 6y ago
    Why do taxes besides social security and medicare have very little impact? Taxing capital gains like income would have a significant impact. Federal income tax caps out 37% and california income tax caps out out 13%.
    - gnicholas 6y ago
      Because the amount you pay into social security and Medicare are quite large in terms of percent of income, if you make less than $100k. Of course, you later get paid SS or receive Medicare services, which makes it less clear that these items should be considered taxes.
      - s1artibartfast 6y ago
        Sorry, but I genuinely am missing the point you are making. I agree that SS and medicare are large taxes for those making less than 100K. Are you saying that this is a reason we should not increase capital gains and should instead increase SS and MC?
        gnicholas 6y ago
        I was pointing out that you would have to increase CG rates by a lot if you wanted them to be higher than OI rates (and you count SS and Medicare in the OI tax rate). If you do that, you would want to increase the rate on OI as well, otherwise people would play games because of the rate differential (take money out of a business as salary instead of CG, for example). And lurking in the background you have the timing/inflation issue, which is that OI is taxed every year and CG is taxed in nominal terms upon sale. So you end up potentially paying lots of tax on nominal increases in value that are actually just inflation. The fact that CG is not inflation-adjusted is one of the rationale for having a lower CG rate.
Signez 6y ago
> To resolve inequality we can't just have the mindset of punish the rich for creating wealth. I would argue that millions (if not billions) are injected into corr^Wlobbying to make sure that we never fully have this mindset, indeed. Meanwhile, the rich are way less taxed (proportionally) than the middle class, and in my opinion, that's a problem that stifle Western economies.
- strbean 6y ago
  Let's not gloss over the hilarious assumption that wealth is fairly apportioned based on who "creates" it.
- gpanders 6y ago
  > Meanwhile, the rich are way less taxed (proportionally) than the middle class, and in my opinion, that's a problem that stifle Western economies. Is this actually true? According to the IRS, in 2018 the top 10% of income earners paid 69.47% of total income tax collected. Source: https://taxfoundation.org/summary-latest-federal-income-tax-data-2018-update/ https://taxfoundation.org/summary-latest-federal-income-tax-...
  - Leherenn 6y ago
    Apparently, they own 69.4% of the wealth as well, so it would seem to be proportional. That number feels wrong, given it's exactly the same as the tax one, but I couldn't find another source. https://www.statista.com/chart/amp/19635/wealth-distribution-percentiles-in-the-us/ https://www.statista.com/chart/amp/19635/wealth-distribution...
PeterStuer 6y ago
The 80's called. They want their 'trickle down' back.
danmaz74 6y ago
It's impossible for everyone to be rich. This doesn't mean we should punish the rich for being rich, but you aren't going to reduce inequality by increasing the number of rich people - you need to increase the income of low and average earners compared to the rich.
- suyash 6y ago
  It's not impossible, anyone and everyone can become rich, it's just that we don't have a common definition of rich.
deegles 6y ago
Why should everyone have to work? We are 100% capable of creating a society where everyone's basic needs are met with the automation and technology we have today. The idea that a person is only worth something if they work needs to be deeply reexamined.
- kebman 6y ago
  Because if you cannot offer anything of value, someone else will offer that value on your behalf, making you an extraneous cost which anyone in their right mind would want to remove. And then you are but a slave to whomever you are useful to, meaning whoever controls you, and whoever has the power, and who grants you the means to get those basic needs. If someone is giving you bread for free, you can be sure it's because they don't want you to rebell. But then that is also your only value to them, which is a very dangerous proposal, because it means you're expendable, and that the guy giving you that bread might not want to continue such a fruitless endavour. That is why an economy must rely on the basis of voluntarily offering something of value. Because the alternative is literal enslavement.
  - deegles 6y ago
    > If someone is giving you bread for free, you can be sure it's because they don't want you to rebell. There's no other reason you could think of to feed a hungry person? > That is why an economy must rely on the basis of voluntarily offering something of value. Because the alternative is literal enslavement. You don't see the irony in saying that a person must volunteer their value or be enslaved?
    - kebman 6y ago
      > There's no other reason you could think of to feed a hungry person? Free individuals might give something out of benevolence. But a state institution is not a free individual. It can only represent the collective, and you cannot ensure that all individuals in such a collective would agree to such an exchange, or feel benevolent about it. As such, there is no such thing as a benevolent state. Instead, you can employ game theory on such entities, to the extent of making them look completely self-serving and even psychopatic, as proven by Nash. This is why it is so important to curtail the development of big and monolithic bureaucratic organisations, and instead use such principles as those given by Montesquieu, to make natural powers compete for authority. > You don't see the irony in saying that a person must volunteer their value or be enslaved? Do you think the person giving you bread should be forced to give you that bread? Nay, it would be far better if there was some kind of mutual exchange. There is none to be had, when the exchange is merely giving out a resource for "free." Except we know that it's not for free, but in return for your good behaviour. Then the exchange isn't free, but depending on an exchange anyway, except you have little to no say in it. Then the one in power of that resource in turn also have absolute power over you. So there should be a way for you to gain that power for yourself, or in the least make sure the one giving you bread does not have monopoly in doing so, because it will inevitably devolve into abuse of power.
bedhead 6y ago
I've long argued for massive estate taxes on the very rich that forces a partial reset on wealth and avoid medieval times when land ownership was just passed down generation to generation. It's the only fair and practical wealth tax I can think of. I have no problem at all with Bezos being filthy rich, however, I have a giant problem with his kids and all descendants being billionaires. A huge estate tax would also massively incentivize charitable giving as wealthy people donated money to avoid the government taking it all. I'm sure consumption would rise some also, but the more money you have the harder it gets to spend on consumption, hence many of today's problems. The point is, knowing it will mostly go to the government upon death, the extremely wealthy would be motivated to do stuff with the capital. I'm still baffled why no one has seriously floated this idea though.
- Sargos 6y ago
  >I'm still baffled why no one has seriously floated this idea though. It's not even a fringe idea that government policy is dictated by the wealthy class. What incentive do they have to do this? The only way that it will happen is by regular people making it policy, and our current system doesn't give us a voice on what happens.
- markus_zhang 6y ago
  There are tons of loop holes. In the end, if said legislation passes both floors the only ones got hit are the middle class people who don't have the knowledge and means to use those loopholes.
  - dlp211 6y ago
    Estate taxes on the Federal level have never even come close to being applicable to middle-class estates.
- milesvp 6y ago
  The bigger problem with estate taxes (and btw estate taxes often imply death taxes in US law) that you may not see is how they effect smaller players. One of the things fueling corporate consolidation is asset liquidation upon death. If I start and own a small company that’s worth $10million, when I die, there is likely a strong desire to liquidate that company in order to allow for some inheritance to multiple people. This likely means selling the business to another player. If there’s an estate tax, then you must sell. My understanding is this has been a very real problem for farmers for many generations, and they have been the largest opponents for estate taxes. I suspect the bigger problem isn’t the Bezos’s of the world consolidating money and power generationally, it’s the big corporations getting bigger, with corporate taxation disproportionately hurting the smaller players rather than the bigger players. We would have a much healthier economy if the incentive structures hurt companies more the bigger they get to discourage things like vertical integration. A company doesn’t have to pay taxes on the intermediary steps of production but might have to (sales or B&O tax) if they were to purchase the same goods from a third party. This tends to distort markets away from lots of smaller players to a few big players.
markus_zhang 6y ago
You can't solve the problem in conventional ways because rich people as well as large funds and corporations control legislation. You can vote 100 tines and be guaranteed that the outcome won't be different in that perspective. I'm not sure if ycombinators like the alternative way. BTW I agree to your idea in general, just want to say that I'd substitute WORK with anything that benefits human being.
- TheOtherHobbes 6y ago
  The underlying problem is that money buys policy. That's not how democracy is supposed to work. But as long as that's true, you're going to get increasing disparities of both wealth and power - because you have a nice tight political and economic engine that cycles by turning one into the other, and back again. Redefining value as "social value" - of some kind - won't change this on its own, because that process is just the on-ramp to the main cycle. And unfortunately it's not the only on-ramp - it's just the most obvious one.
  - markus_zhang 6y ago
    As long as the state, or whoever manage and control the state machine, utilize "money" to purchase man power (to get whatever tasks they need to accomplish or whatever goods they need to build), it's impossible to bar money from the system. It is part of the system. Democracy has always been like this, or worse, when it is not judged by money, but by your ancestors. Capitalism smashes Feudalism by bringing power to a lot of people than the Feudal lords agreed with, and then it's pretty much "money buys everything" mode.
chillacy 6y ago
I'm with you but substitute WORK for Value Creation. It's way to easy to "create jobs" which are essentially busy-work with 0 to negative productivity. In the coming decades, economic productivity will become more and more important as gains from elsewhere start to taper out.
- markus_zhang 6y ago
  Agreed. Value Creation is a better word. Idea world is to have everyone getting rid off the necessary of repetitive work (of course he can still do it if he wants) and everyone is motivated to create value, in one way or another, and people generally don't say things like "Hey because I build rockets/control banks I should have a much more lucrative life than the rest of you guys". If we look at history, most of the stuffs that improve human civilization were indeed funded by "VC" of the time, but the core motive is not to earn profit, but to solve problems and satisfy personal interest. Now if you can remove VC from the picture, you pretty much get a society in which everyone is automatically doing things that are beneficial to the collective. Anyone who wants to just be super lazy will get bored easily and will start doing things sooner or later, especially when all of his friends are creating value. Sounds familiar somehow.
  - ip26 6y ago
    Isn't "Value Creation" just another one of those buzzwords used to bamboozle investors? It's not that it doesn't exist, but it's so abstract & academic as to be impossible to measure.
- burrows 6y ago
  > It's way to easy to "create jobs" which are essentially busy-work with 0 to negative productivity. If firms have workers with negative productivity, aren't executives incentivized to fire them? And if so, why are there negative-productivity workers?
  - Super_Jambo 6y ago
    Lots of executives aren't judged on their final contribution to the bottom line but the size of their 'empire' or project 'successes' they can point to. There are also plenty of examples of work that is profitable to a company but that doesn't create value to consumers: * Campaign Donations / Lobbying for favourable regulations. * Softbank style monopoly creation (it's just moving investor money to consumers). * Patent Trolls and lots of semi-patent trolling games. (Think Amazon buying Kiva) * Misleading / Emotive advertising. (Which I'd argue is the majority of it.) If you're hell bent on thinking markets are inherently fair you can contort yourself to show these things _can_ be productive but to think they're always productive?
Dumblydorr 6y ago
I think your point mirrors Scott Galloway's and Warren Buffet's philosophies. Why is sweat, regular labor, taxed much more than capital gains? Why do CEOs who are fantastically rich need lower taxation rates than the 100s of laborers their lifestyle relies upon? We tax sweat, we let riches run free.
- tathougies 6y ago
  Capital gains -- gains from dividends or retained earnings -- are taxed at the corporate tax level before being distributed. I don't think we should retax them at all. I think dividends should be untaxed, and so should the retained earnings portion when selling a stock, but all capital gains attributed purely to increase in speculative valuation can be taxed more, sure. Just a small nitpick.
  - s1artibartfast 6y ago
    I think the exact opposite. Taxing capital gains and eliminating corporate taxes would incentivise value creation. Low tax dividends and capital gains benifit individuals without active participation in the value creation.
    - tathougies 6y ago
      > Low tax dividends and capital gains benifit individuals without active participation in the value creation. Presumably, actively working (like with a job) to generate wealth to invest in other enterprises is 'active participation in the value creation'. I mean, sure, if you want to introduce steep capital gains on invested capital that was inherited, or won, or whatever, that's fine.
      - s1artibartfast 6y ago
        >Presumably, actively working (like with a job) to generate wealth to invest in other enterprises is 'active participation in the value creation'. This is my exact point. Working (like with a job) creates value. Investing money in a secondary market for stocks generates no value whatsoever. Perhaps it keeps some stock brokers emplayed

toiletfuneral 6y ago

landlords don't WORK and equity firms don't produce anything, we can start by removing these parasites

rfulop 6y ago

I'm with this argument. Capital gains should at least be taxed as much as earned income.

creddit 6y ago
But then if you want to help people build wealth that don’t have it, you make it much harder. I really feel like people need to look into land taxes a la Henry George: https://en.wikipedia.org/wiki/Henry_George https://en.wikipedia.org/wiki/Henry_George Taxing things like capital gains differently or implementing a generic wealth tax can actually hurt those we want to help to build wealth as well as incentivize things like expatriation of wealth. Can’t expatriate land.
- RNCTX 6y ago
  Taxes are not punishment. Taxes exist because a certain amount of wealth is required to maintain a state. I understand that the financial/business world has been trying to convince people otherwise since the mid 1970s, but they are still as wrong today as they were then. Tax “fairness” is therefore simple. He who earns the most should pay the most. You cannot expatriate dollars. The currency is issued by the state and the state can seize it. Chinese factory? Great, tariff on iPhones at the dock. Baseline tax = difference in currency value between country of origin and country of destination on that day. HQ in Ireland? Super, you owe the US the difference between the tax you paid there and the equivalent rate here. Don’t like it? No security sales in US markets. Sell bonds and stock somewhere else. These aren’t hard problems.
  - suyash 6y ago
    "Tax “fairness” is therefore simple. He who earns the most should pay the most." - I don't like the idea of tax fairness as what is fair to you may not be fair to other person. I would only concur with your second statement on the absolute value (numbers) and not on percentage basis.
  - nostrademons 6y ago
    Land taxes are actually better in those regards than income or capital gains taxes. You can't hide land, and if you want the state to enforce your property rights, you can't alter your behavior in a way that lets you avoid paying the tax. That makes the land tax what economist call a "zero-deadweight" tax: it doesn't decrease economic activity or consumer wellbeing at all. There's also an economic theorem [1] that an LVT results in the optimal size of government: investment in public goods increases the value of land (and hence rent that can be charged for it), but also the tax on that land, so citizens have an incentive to vote in only those public works projects that increase rents more than their cost in taxes. Whereas if you put a tariff on iPhones at the dock, Apple will pass that tariff along to consumers, prices will go up, and fewer people that want an iPhone will be able to afford one. The "HQ in Ireland" trick revolves around avoiding dollars at all: profits from a company's EUs operations are retained as Euros and then used to pay European employees or exchanged directly for RMBs to pay for Chinese goods. [1] https://en.wikipedia.org/wiki/Henry_George_theorem https://en.wikipedia.org/wiki/Henry_George_theorem
  - creddit 6y ago
    > Taxes are not punishment. Taxes exist because a certain amount of wealth is required to maintain a state. Who is saying taxes shouldn’t exist here? I’m advocating for a specific form of wealth tax. I clearly believe taxes are necessary. As for them not being a punishment, this is clearly a silly semantic argument focused on trying to frame this emotionally. People respond to incentives and change their behavior when faced with incentives. Taxes change incentives. If a tax disincentives a behavior, this behavior will be done less. Get your moral policing out of here. > Tax “fairness” is therefore simple. He who earns the most should pay the most. Why earnings? Why should we tax people’s labor? Your definition of fairness is yours, not everyone else’s. > You cannot expatriate dollars. Jesus Christ, yes you can. It’s like you’ve never heard of offshore banks. Where does an idea like this even come up? Go see China’s issues with people expatriating capital and their middling success at preventing it with capital controls. How someone can speak like this and not see the value of a wealth tax in the form of a land tax blows my mind. By the way, concerned with massive disparities in wealth? That’s all from housing which is of course built on what? Land. https://www.brookings.edu/wp-content/uploads/2016/07/2015a_rognlie.pdf https://www.brookings.edu/wp-content/uploads/2016/07/2015a_r... Tax the shit out of land. The marginal value to a piece of land from the actions of its owner is minimal at best. People gaining wealth from land is the definition of rent seeking.
- Apocryphon 6y ago
  Why not all? Tax land, capital gains, and wealth. Adjust brackets prudently.
  - creddit 6y ago
    Why should we disincentivize saving? It's clear why we should tax land, the value of land is not driven in almost any way by ownership of land so the returns to land are unjustly gained AND it's economically efficient to tax land as it's fixed in supply. However, taxing savings (capital gains, wealth) is unclear in value. What would, for example, be the benefit of shifting investment to consumption? In other news, I could be highly in favor of a consumption tax instead but again, that's very difficult to implement well. A hefty estate tax is something I can get behind. It's definitely distortionary and has a huge amount of difficulty in implementation but I see almost no societal value to generational wealth.
    - Apocryphon 6y ago
      I'm not advocating any specific plan and I find Georgism to be worth a new look and calls for a LVT to be compelling, I'm just saying that I think those who focus solely on it, some of whom advocate abolishing all taxes and only using an LVT, to be impractically utopian. That said, I see no reason as to why we shouldn't at least experiment with other alternate tax regimen as well, and that may include tax savings at least for the highest earners. To echo others' statements, why shouldn't those at the absolute highest levels of savings endure a little redistribution? It wouldn't matter much to Bezos.
suyash 6y ago
That has not worked, capital has moved elsewhere to low tax domiciles.
bhupy 6y ago
I completely agree with this in theory, we ought to just make capital gains be taxed at the same progressive tax brackets as income. That being said, how do we prevent people from just selling small amounts of capital every year, so as to stay below bracket thresholds?
- macd 6y ago
  Why do we want to prevent people from doing that?
  - bhupy 6y ago
    Because it defeats the purpose of a progressive capital gains tax? If the concern is that someone is paying less in tax off $250,000 in capital gains when they realize their wealth than someone who is paid a wage of $250,000, the policy prescription (with which I agree), is to tax $250,000 capital gains like income, I.e. at the top marginal tax rate. What happens if I liquidate $50,000 at a time over the course of 5 years, and continue to pay a net effective tax of around ~20%, which is what the long term capital gains tax is, today?
    - leetcrew 6y ago
      I don't think it makes sense to tax the appreciation of an asset over twenty years as if it were a single year of outsized income. if you want to treat it similarly to income, you should divide the realized gain by the number of years the asset was held and assess taxes as if the person made that quotient in income for each of those years (under the rules/brackets for each year, possibly with some adjustments for inflation). this would make it harder for average joe to estimate his tax liability when he sells, but it prevents the tax optimization you mentioned and is (imo) pretty fair.
    - macd 6y ago
      I guess that's a question of what the purpose actually is. If you only take out $50k, then you're living on $50k that year and you pay the same amount of tax as if you had worked a regular job for the same amount. If you want to live a more extravagant lifestyle, you take more out and are taxed more. This could mean that they have $1 million of unrealized gains that year. You're not really able to tax unrealized gains most of the time because they could disappear or go negative. That would go untaxed until they sell, but it would eventually be taxed. At the same time, they're not going to be able to enjoy their wealth only taking out a small amount every year, so I'm not entirely convinced that this behavior of living frugally to pay less tax is something we need to 'prevent'.
gnicholas 6y ago
Should social security and medicare taxes apply to capital gains? Should these taxes apply beyond the current caps, which are a bit over $100k? If not, there would be very little impact since most investment income is earned by people who also have six figures of wage income. And if so, then we'd have to levy these 'taxes' (they're not quite taxes, to the extent that these are paid in exchange for later services/payments that the taxpayer receive) on all wage income.
- s1artibartfast 6y ago
  Why do taxes besides social security and medicare have very little impact? Taxing capital gains like income would have a significant impact. Federal income tax caps out 37% and california income tax caps out out 13%.
  - gnicholas 6y ago
    Because the amount you pay into social security and Medicare are quite large in terms of percent of income, if you make less than $100k. Of course, you later get paid SS or receive Medicare services, which makes it less clear that these items should be considered taxes.
    - s1artibartfast 6y ago
      Sorry, but I genuinely am missing the point you are making. I agree that SS and medicare are large taxes for those making less than 100K. Are you saying that this is a reason we should not increase capital gains and should instead increase SS and MC?
      - gnicholas 6y ago
        I was pointing out that you would have to increase CG rates by a lot if you wanted them to be higher than OI rates (and you count SS and Medicare in the OI tax rate). If you do that, you would want to increase the rate on OI as well, otherwise people would play games because of the rate differential (take money out of a business as salary instead of CG, for example). And lurking in the background you have the timing/inflation issue, which is that OI is taxed every year and CG is taxed in nominal terms upon sale. So you end up potentially paying lots of tax on nominal increases in value that are actually just inflation. The fact that CG is not inflation-adjusted is one of the rationale for having a lower CG rate.

Signez 6y ago

> To resolve inequality we can't just have the mindset of punish the rich for creating wealth. I would argue that millions (if not billions) are injected into corr^Wlobbying to make sure that we never fully have this mindset, indeed. Meanwhile, the rich are way less taxed (proportionally) than the middle class, and in my opinion, that's a problem that stifle Western economies.

strbean 6y ago
Let's not gloss over the hilarious assumption that wealth is fairly apportioned based on who "creates" it.
gpanders 6y ago
> Meanwhile, the rich are way less taxed (proportionally) than the middle class, and in my opinion, that's a problem that stifle Western economies. Is this actually true? According to the IRS, in 2018 the top 10% of income earners paid 69.47% of total income tax collected. Source: https://taxfoundation.org/summary-latest-federal-income-tax-data-2018-update/ https://taxfoundation.org/summary-latest-federal-income-tax-...
- Leherenn 6y ago
  Apparently, they own 69.4% of the wealth as well, so it would seem to be proportional. That number feels wrong, given it's exactly the same as the tax one, but I couldn't find another source. https://www.statista.com/chart/amp/19635/wealth-distribution-percentiles-in-the-us/ https://www.statista.com/chart/amp/19635/wealth-distribution...

PeterStuer 6y ago

The 80's called. They want their 'trickle down' back.

danmaz74 6y ago

It's impossible for everyone to be rich. This doesn't mean we should punish the rich for being rich, but you aren't going to reduce inequality by increasing the number of rich people - you need to increase the income of low and average earners compared to the rich.

suyash 6y ago
It's not impossible, anyone and everyone can become rich, it's just that we don't have a common definition of rich.

deegles 6y ago

Why should everyone have to work? We are 100% capable of creating a society where everyone's basic needs are met with the automation and technology we have today. The idea that a person is only worth something if they work needs to be deeply reexamined.

kebman 6y ago
Because if you cannot offer anything of value, someone else will offer that value on your behalf, making you an extraneous cost which anyone in their right mind would want to remove. And then you are but a slave to whomever you are useful to, meaning whoever controls you, and whoever has the power, and who grants you the means to get those basic needs. If someone is giving you bread for free, you can be sure it's because they don't want you to rebell. But then that is also your only value to them, which is a very dangerous proposal, because it means you're expendable, and that the guy giving you that bread might not want to continue such a fruitless endavour. That is why an economy must rely on the basis of voluntarily offering something of value. Because the alternative is literal enslavement.
- deegles 6y ago
  > If someone is giving you bread for free, you can be sure it's because they don't want you to rebell. There's no other reason you could think of to feed a hungry person? > That is why an economy must rely on the basis of voluntarily offering something of value. Because the alternative is literal enslavement. You don't see the irony in saying that a person must volunteer their value or be enslaved?
  - kebman 6y ago
    > There's no other reason you could think of to feed a hungry person? Free individuals might give something out of benevolence. But a state institution is not a free individual. It can only represent the collective, and you cannot ensure that all individuals in such a collective would agree to such an exchange, or feel benevolent about it. As such, there is no such thing as a benevolent state. Instead, you can employ game theory on such entities, to the extent of making them look completely self-serving and even psychopatic, as proven by Nash. This is why it is so important to curtail the development of big and monolithic bureaucratic organisations, and instead use such principles as those given by Montesquieu, to make natural powers compete for authority. > You don't see the irony in saying that a person must volunteer their value or be enslaved? Do you think the person giving you bread should be forced to give you that bread? Nay, it would be far better if there was some kind of mutual exchange. There is none to be had, when the exchange is merely giving out a resource for "free." Except we know that it's not for free, but in return for your good behaviour. Then the exchange isn't free, but depending on an exchange anyway, except you have little to no say in it. Then the one in power of that resource in turn also have absolute power over you. So there should be a way for you to gain that power for yourself, or in the least make sure the one giving you bread does not have monopoly in doing so, because it will inevitably devolve into abuse of power.

bedhead 6y ago

I've long argued for massive estate taxes on the very rich that forces a partial reset on wealth and avoid medieval times when land ownership was just passed down generation to generation. It's the only fair and practical wealth tax I can think of. I have no problem at all with Bezos being filthy rich, however, I have a giant problem with his kids and all descendants being billionaires. A huge estate tax would also massively incentivize charitable giving as wealthy people donated money to avoid the government taking it all. I'm sure consumption would rise some also, but the more money you have the harder it gets to spend on consumption, hence many of today's problems. The point is, knowing it will mostly go to the government upon death, the extremely wealthy would be motivated to do stuff with the capital. I'm still baffled why no one has seriously floated this idea though.

Sargos 6y ago
>I'm still baffled why no one has seriously floated this idea though. It's not even a fringe idea that government policy is dictated by the wealthy class. What incentive do they have to do this? The only way that it will happen is by regular people making it policy, and our current system doesn't give us a voice on what happens.
markus_zhang 6y ago
There are tons of loop holes. In the end, if said legislation passes both floors the only ones got hit are the middle class people who don't have the knowledge and means to use those loopholes.
- dlp211 6y ago
  Estate taxes on the Federal level have never even come close to being applicable to middle-class estates.
milesvp 6y ago
The bigger problem with estate taxes (and btw estate taxes often imply death taxes in US law) that you may not see is how they effect smaller players. One of the things fueling corporate consolidation is asset liquidation upon death. If I start and own a small company that’s worth $10million, when I die, there is likely a strong desire to liquidate that company in order to allow for some inheritance to multiple people. This likely means selling the business to another player. If there’s an estate tax, then you must sell. My understanding is this has been a very real problem for farmers for many generations, and they have been the largest opponents for estate taxes. I suspect the bigger problem isn’t the Bezos’s of the world consolidating money and power generationally, it’s the big corporations getting bigger, with corporate taxation disproportionately hurting the smaller players rather than the bigger players. We would have a much healthier economy if the incentive structures hurt companies more the bigger they get to discourage things like vertical integration. A company doesn’t have to pay taxes on the intermediary steps of production but might have to (sales or B&O tax) if they were to purchase the same goods from a third party. This tends to distort markets away from lots of smaller players to a few big players.

markus_zhang 6y ago

You can't solve the problem in conventional ways because rich people as well as large funds and corporations control legislation. You can vote 100 tines and be guaranteed that the outcome won't be different in that perspective. I'm not sure if ycombinators like the alternative way. BTW I agree to your idea in general, just want to say that I'd substitute WORK with anything that benefits human being.

TheOtherHobbes 6y ago
The underlying problem is that money buys policy. That's not how democracy is supposed to work. But as long as that's true, you're going to get increasing disparities of both wealth and power - because you have a nice tight political and economic engine that cycles by turning one into the other, and back again. Redefining value as "social value" - of some kind - won't change this on its own, because that process is just the on-ramp to the main cycle. And unfortunately it's not the only on-ramp - it's just the most obvious one.
- markus_zhang 6y ago
  As long as the state, or whoever manage and control the state machine, utilize "money" to purchase man power (to get whatever tasks they need to accomplish or whatever goods they need to build), it's impossible to bar money from the system. It is part of the system. Democracy has always been like this, or worse, when it is not judged by money, but by your ancestors. Capitalism smashes Feudalism by bringing power to a lot of people than the Feudal lords agreed with, and then it's pretty much "money buys everything" mode.

chillacy 6y ago

I'm with you but substitute WORK for Value Creation. It's way to easy to "create jobs" which are essentially busy-work with 0 to negative productivity. In the coming decades, economic productivity will become more and more important as gains from elsewhere start to taper out.

markus_zhang 6y ago
Agreed. Value Creation is a better word. Idea world is to have everyone getting rid off the necessary of repetitive work (of course he can still do it if he wants) and everyone is motivated to create value, in one way or another, and people generally don't say things like "Hey because I build rockets/control banks I should have a much more lucrative life than the rest of you guys". If we look at history, most of the stuffs that improve human civilization were indeed funded by "VC" of the time, but the core motive is not to earn profit, but to solve problems and satisfy personal interest. Now if you can remove VC from the picture, you pretty much get a society in which everyone is automatically doing things that are beneficial to the collective. Anyone who wants to just be super lazy will get bored easily and will start doing things sooner or later, especially when all of his friends are creating value. Sounds familiar somehow.
- ip26 6y ago
  Isn't "Value Creation" just another one of those buzzwords used to bamboozle investors? It's not that it doesn't exist, but it's so abstract & academic as to be impossible to measure.
burrows 6y ago
> It's way to easy to "create jobs" which are essentially busy-work with 0 to negative productivity. If firms have workers with negative productivity, aren't executives incentivized to fire them? And if so, why are there negative-productivity workers?
- Super_Jambo 6y ago
  Lots of executives aren't judged on their final contribution to the bottom line but the size of their 'empire' or project 'successes' they can point to. There are also plenty of examples of work that is profitable to a company but that doesn't create value to consumers: * Campaign Donations / Lobbying for favourable regulations. * Softbank style monopoly creation (it's just moving investor money to consumers). * Patent Trolls and lots of semi-patent trolling games. (Think Amazon buying Kiva) * Misleading / Emotive advertising. (Which I'd argue is the majority of it.) If you're hell bent on thinking markets are inherently fair you can contort yourself to show these things _can_ be productive but to think they're always productive?

Dumblydorr 6y ago

I think your point mirrors Scott Galloway's and Warren Buffet's philosophies. Why is sweat, regular labor, taxed much more than capital gains? Why do CEOs who are fantastically rich need lower taxation rates than the 100s of laborers their lifestyle relies upon? We tax sweat, we let riches run free.

tathougies 6y ago
Capital gains -- gains from dividends or retained earnings -- are taxed at the corporate tax level before being distributed. I don't think we should retax them at all. I think dividends should be untaxed, and so should the retained earnings portion when selling a stock, but all capital gains attributed purely to increase in speculative valuation can be taxed more, sure. Just a small nitpick.
- s1artibartfast 6y ago
  I think the exact opposite. Taxing capital gains and eliminating corporate taxes would incentivise value creation. Low tax dividends and capital gains benifit individuals without active participation in the value creation.
  - tathougies 6y ago
    > Low tax dividends and capital gains benifit individuals without active participation in the value creation. Presumably, actively working (like with a job) to generate wealth to invest in other enterprises is 'active participation in the value creation'. I mean, sure, if you want to introduce steep capital gains on invested capital that was inherited, or won, or whatever, that's fine.
    - s1artibartfast 6y ago
      >Presumably, actively working (like with a job) to generate wealth to invest in other enterprises is 'active participation in the value creation'. This is my exact point. Working (like with a job) creates value. Investing money in a secondary market for stocks generates no value whatsoever. Perhaps it keeps some stock brokers emplayed