2 ms·

That’s what happens when people believe that “the market” is some kind of weird hybrid of a cornucopia and a perpetual motion machine.. Hopefully we’ll remembe

That’s what happens when people believe that “the market” is some kind of weird hybrid of a cornucopia and a perpetual motion machine.. Hopefully we’ll remember that we actually have the remedy for this in the form of redistributive tax policies (as opposed to the current inefficient tax policies that drives wealth concentration and stagnation)

imtringued 6y ago
Well, if you want a redistributive tax policy then the biggest change would be to make sure dividend taxes are lower than capital gains taxes. The problem with capital gains is that they can be driven by bubbles. During bubbles investors buy a stock because the stock went up instead of looking at how the company is performing. It's a self reinforcing feedback loop because foolish investors attract even more foolish investors. A lot of those foolish investors are retail investors who are often behind when it comes to information and they often just follow the news. Think of shoeshine boys giving stock tips. They are not only late to buy but also late to sell so they buy during the peak and sell after the crash. The easy fix is to increase capital gains taxes because it significantly decreases the gains from bubbles. At the same time dividend taxes should be decreased because you cannot "fake" dividend payments. Paying out a dividend reduces the market cap of the stock by the total dividend payments because it is merely distributing its income to investors. Even if the company borrows money to pay dividends its balance sheet will show X million debt and thereby reduce the value of the company by the value of the total dividend payment. This is equivalent to not borrowing money in the first place. It also encourages companies to actually invest into improving their income rather than playing stock market games with short sighted policies to boost their value. This is something central banks are currently struggling with because they hand out money like crazy but don't see anyone do anything with the money.
- cannabis_sam 6y ago
  Thanks for the response! (I’m trying to avoid rushing into heated arguments over the internet atm, so I’m gonna give myself some time to digest your response. I would like to say that my main point was more about political rhetoric than economic arguments.)

imtringued 6y ago

Well, if you want a redistributive tax policy then the biggest change would be to make sure dividend taxes are lower than capital gains taxes. The problem with capital gains is that they can be driven by bubbles. During bubbles investors buy a stock because the stock went up instead of looking at how the company is performing. It's a self reinforcing feedback loop because foolish investors attract even more foolish investors. A lot of those foolish investors are retail investors who are often behind when it comes to information and they often just follow the news. Think of shoeshine boys giving stock tips. They are not only late to buy but also late to sell so they buy during the peak and sell after the crash. The easy fix is to increase capital gains taxes because it significantly decreases the gains from bubbles. At the same time dividend taxes should be decreased because you cannot "fake" dividend payments. Paying out a dividend reduces the market cap of the stock by the total dividend payments because it is merely distributing its income to investors. Even if the company borrows money to pay dividends its balance sheet will show X million debt and thereby reduce the value of the company by the value of the total dividend payment. This is equivalent to not borrowing money in the first place. It also encourages companies to actually invest into improving their income rather than playing stock market games with short sighted policies to boost their value. This is something central banks are currently struggling with because they hand out money like crazy but don't see anyone do anything with the money.

cannabis_sam 6y ago
Thanks for the response! (I’m trying to avoid rushing into heated arguments over the internet atm, so I’m gonna give myself some time to digest your response. I would like to say that my main point was more about political rhetoric than economic arguments.)