4 ms·

> In the US, we do not tax wealth, we tax income, because wealth is not money. There is also the reason that income is easier to manipulate, and the rich-of-th

> In the US, we do not tax wealth, we tax income, because wealth is not money. There is also the reason that income is easier to manipulate, and the rich-of-the-rich do not, for the most part, have "income". The top marginal income tax rate is 37%. The top capital gains (income for wealthy people) tax rate is 20%. Why does someone actively working for an income pay a higher tax rate than that paid on someone's passive income?

bhupy 6y ago
Agree! IMO the solution isn't a wealth tax, it's to just tie the capital gains tax to the income tax bracket. That, or adding a top marginal capital gains bracket for any gain above (say) $100 million. This also has the built-in advantage of not requiring a Constitutional amendment.
ojbyrne 6y ago
To encourage investment. In order to incur capital gains, you have to invest, which is entirely voluntary.
jandrewrogers 6y ago
The combined long-term capital gains rate in places like California is >37%. The 20% is just the base federal rate, it can almost double when other investment taxes are accounted for. You missed a major reason long-term capital gains rates are lower than income tax rates: they are not indexed for inflation in the US and inflation on income is negligible. As a matter of tax policy, it is much simpler to reduce the rate than to compute a very large inflation deduction, but you can find countries that go both ways.
- bhupy 6y ago
  > You missed a major reason long-term capital gains rates are lower than income tax rates: they are not indexed for inflation in the US and inflation on income is negligible. As a matter of tax policy, it is much simpler to reduce the rate than to compute a very large inflation deduction, but you can find countries that go both ways. Very interesting point.
- nrmitchi 6y ago
  I will give you the point about a lack of inflation indexing. I stuck entirely with federal numbers when comparing capital-gains to income taxes to make it a more apples-to-apples comparison. It looks like you took that in order to compare california-specific state+federal capital gains tax, and compared it to federal-only income tax? The other issue of high-cost states being more often included in high-rate brackets (due to federal tax brackets not being adjusted for cost-of-living) is a different, and also complex, issue.

bhupy 6y ago

Agree! IMO the solution isn't a wealth tax, it's to just tie the capital gains tax to the income tax bracket. That, or adding a top marginal capital gains bracket for any gain above (say) $100 million. This also has the built-in advantage of not requiring a Constitutional amendment.

ojbyrne 6y ago

To encourage investment. In order to incur capital gains, you have to invest, which is entirely voluntary.

jandrewrogers 6y ago

The combined long-term capital gains rate in places like California is >37%. The 20% is just the base federal rate, it can almost double when other investment taxes are accounted for. You missed a major reason long-term capital gains rates are lower than income tax rates: they are not indexed for inflation in the US and inflation on income is negligible. As a matter of tax policy, it is much simpler to reduce the rate than to compute a very large inflation deduction, but you can find countries that go both ways.

bhupy 6y ago
> You missed a major reason long-term capital gains rates are lower than income tax rates: they are not indexed for inflation in the US and inflation on income is negligible. As a matter of tax policy, it is much simpler to reduce the rate than to compute a very large inflation deduction, but you can find countries that go both ways. Very interesting point.
nrmitchi 6y ago
I will give you the point about a lack of inflation indexing. I stuck entirely with federal numbers when comparing capital-gains to income taxes to make it a more apples-to-apples comparison. It looks like you took that in order to compare california-specific state+federal capital gains tax, and compared it to federal-only income tax? The other issue of high-cost states being more often included in high-rate brackets (due to federal tax brackets not being adjusted for cost-of-living) is a different, and also complex, issue.