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It seems to me that that argument could be made for any appreciating asset class. Real estate (especially in Prop 13 California) would go up in value and could

It seems to me that that argument could be made for any appreciating asset class. Real estate (especially in Prop 13 California) would go up in value and could be borrowed against. Same with collectibles. I hear what you are saying in that the gaming on a simplification begins on Day 2. With tax law, I'd say that the West is covering new ground in the last 100 years. Multiple mitts in the pie of legislation who all want something different (money, partial control of the taxee, veering of social goals) resulting in increasingly arcane rule sets, edge conditions resulting in tax court decisions with yet more fuzziness on the outlines. The death of self employment and economy of scale of the modern corporation leads you to some weird places.

PeterisP 6y ago
No, the argument is about revenue generating asset class, and the thing is is that such a deferred taxation enables, and motivates (perhaps even forces) one to effectively convert any revenue generating asset class to an appreciating asset through a corporate wrapper. And the deferral of taxes breaks the process of governance, as there's no income now to pay for the common expenses now. Real estate is a good example - assume non-appreciating real estate, which is the historically main example of a revenue generating asset (i.e. the rentier landlord class historically). If you defer taxation of profits until they're removed from the company, then any rent-earning landlord can instead of earning rent, getting taxed, and investing that after-tax money in more real estate would establish a corp for that, and use the rental profits (untaxed) to buy more real estate within that corporation. It gives a tax advantage (ability to arbitrarily defer) to everyone who can put their earnings under a corporation, and punishes those who can't. The key problem with such taxation is essentially the same as moving to a consumption-only tax - it means that you disproportionally tax the people who (have to) spend all their income to buying things for consumption (i.e. the poor), and don't tax the people who use their income to buy revenue-generating assets and control (i.e. capitalists); it's a rich-get-richer, poor-get-poorer form of taxation.
- kingsuper20 6y ago
  "rich-get-richer, poor-get-poorer form of taxation." Is poor-get-richer, rich-get-poorer the purpose of taxation? Why?

PeterisP 6y ago

No, the argument is about revenue generating asset class, and the thing is is that such a deferred taxation enables, and motivates (perhaps even forces) one to effectively convert any revenue generating asset class to an appreciating asset through a corporate wrapper. And the deferral of taxes breaks the process of governance, as there's no income now to pay for the common expenses now. Real estate is a good example - assume non-appreciating real estate, which is the historically main example of a revenue generating asset (i.e. the rentier landlord class historically). If you defer taxation of profits until they're removed from the company, then any rent-earning landlord can instead of earning rent, getting taxed, and investing that after-tax money in more real estate would establish a corp for that, and use the rental profits (untaxed) to buy more real estate within that corporation. It gives a tax advantage (ability to arbitrarily defer) to everyone who can put their earnings under a corporation, and punishes those who can't. The key problem with such taxation is essentially the same as moving to a consumption-only tax - it means that you disproportionally tax the people who (have to) spend all their income to buying things for consumption (i.e. the poor), and don't tax the people who use their income to buy revenue-generating assets and control (i.e. capitalists); it's a rich-get-richer, poor-get-poorer form of taxation.

kingsuper20 6y ago
"rich-get-richer, poor-get-poorer form of taxation." Is poor-get-richer, rich-get-poorer the purpose of taxation? Why?