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I'm not a deep expert in these areas, but one current problem seems to be money slowing down -- what often happens is people buy Amazon stock and sit on it. Ama

I'm not a deep expert in these areas, but one current problem seems to be money slowing down -- what often happens is people buy Amazon stock and sit on it. Amazon makes more sales, their stock price goes up, those with Amazon stock get richer (which they can often leverage into things like loans, without ever selling the stock), and at no point is some of that money taken to help fund general government. When the rules were set up this wasn't the intention, and there might have to be changes. To be fair to Amazon, their problems are not as serious as many other companies which make it look like they make zero profit in some countries by "paying" themselves in another.

prepend 6y ago
I’m not a tax expert either but I think the rules were set up exactly with the intention as you describe. My understanding is that capital gains taxes are intended to grow capital with the goal of a larger payout in the future as capital is reinvested. It’s purposely not intended to be a real-time tax on gains because future taxes will be greater. For example, if there’s $100 in profit today and it’s paid out as a dividend then that’s $15 in tax revenue. But if that $100 is invested in the company, it compounds at some rate (say 5% although this varies by company and Amazon is much more efficient) so in 10 years that $100 becomes $162 (1.05^10*100) and if cashed out then as dividend results in $24.3 in tax revenue. Theoretically if you think the government can invest and get a return greater than within individual companies then capital gains doesn’t make sense, but that’s an argument for economists. But wanted to share that the goal of capital gains is to maximize tax revenue through efficient incentives.
- CJefferson 6y ago
  Exactly how much money the government needs, and how it uses, is I realise a massive issue going back thousands of years, but I feel the government at some level can "invest better", in that they pay for schools, police, roads, (in my case in the UK) a national health service, etc. Of course, it might be they could spend more efficiently, but if all purchases move online, and online companies manage to avoid paying tax to most governments, these basic utilities are in trouble.
  - prepend 6y ago
    You may feel that, but there’s a ton of research on this. But I suppose that’s where you can try convince governments to do away with capital gains and tax very differently. I don’t think you’ll find any countries that do this or do it efficiently. The growth of capital is really important to long term improvement, and even pretty “socialist” countries like the Scandinavian nations encourage capital growth through their tax policy.

prepend 6y ago

I’m not a tax expert either but I think the rules were set up exactly with the intention as you describe. My understanding is that capital gains taxes are intended to grow capital with the goal of a larger payout in the future as capital is reinvested. It’s purposely not intended to be a real-time tax on gains because future taxes will be greater. For example, if there’s $100 in profit today and it’s paid out as a dividend then that’s $15 in tax revenue. But if that $100 is invested in the company, it compounds at some rate (say 5% although this varies by company and Amazon is much more efficient) so in 10 years that $100 becomes $162 (1.05^10*100) and if cashed out then as dividend results in $24.3 in tax revenue. Theoretically if you think the government can invest and get a return greater than within individual companies then capital gains doesn’t make sense, but that’s an argument for economists. But wanted to share that the goal of capital gains is to maximize tax revenue through efficient incentives.

CJefferson 6y ago
Exactly how much money the government needs, and how it uses, is I realise a massive issue going back thousands of years, but I feel the government at some level can "invest better", in that they pay for schools, police, roads, (in my case in the UK) a national health service, etc. Of course, it might be they could spend more efficiently, but if all purchases move online, and online companies manage to avoid paying tax to most governments, these basic utilities are in trouble.
- prepend 6y ago
  You may feel that, but there’s a ton of research on this. But I suppose that’s where you can try convince governments to do away with capital gains and tax very differently. I don’t think you’ll find any countries that do this or do it efficiently. The growth of capital is really important to long term improvement, and even pretty “socialist” countries like the Scandinavian nations encourage capital growth through their tax policy.