8 ms·

Raising the Capital Gains Tax Would Be Un-American

20 points by elsewhen 5y ago

elsewhen 5y ago
https://archive.is/pmKuB https://archive.is/pmKuB
sAbakumoff 5y ago
>> First and foremost, any system of taxation is about values. And a much higher rate of capital taxation would undermine some of America’s core values. Is it just me, or taxation is about everyone paying their fair share?
- savanaly 5y ago
  Or is it about raising the funds to provide public goods in a way that minimizes waste and deadweight loss?
- weasel_words 5y ago
  To me that argument about "paying your fair share" never made any sense. Wouldn't "fair share" be defined as how many/much of the government offerings you use? So how is it that someone making $1m/yr in exchanges is somehow using MORE government offerings and therefore has to pay more in order to keep up with their "fair share"? Do they somehow use more roads because they have equities? Perhaps they use the sewage system more? Use more welfare dollars? Use more school? Just makes no sense. It's straight up inequality and classism.
  - achenatx 5y ago
    Personally there is no such thing as fair in taxes or even in life. there is only what "the people" can agree on via their representatives. one way to rationalize it is like insurance. someone protecting a 100K house pays much less than someone protecting a 500K house. It might not be linear with the value of the house. Your share of the military is larger than someone that makes less because the military is creating more value for you by protecting more assets. Your share of the SEC is because you receive more value from the SEC than the poor etc It is value based taxation instead of cost based taxation. Is that really less fair? In the end the only thing that matters is 1) enough taxation to pay for the things "the people" want. 2) minimize the drag that taxation causes on the economy.
  - TheCoelacanth 5y ago
    Why would cost-based pricing be the only "fair" pricing model? I'm pretty sure if a startup tried to use cost-based pricing instead of value-based pricing, they would get told that they were idiots. Jeff Bezos and Elon Musk certainly get a lot more value out of roads existing than most people do. Their entire business is dependent on it.
bigmattystyles 5y ago
:eyeroll: I’ll preface that to define what America is, is dumb; if it’s freedom, then let it mean what it wants to mean to individuals. But in the vein of the article, I thought America valued work, not living off of appreciating assets. Especially when values are inflated by massive buy backs funded via tax cuts and loopholes. I have benefited so much off of capital gains, do I like parting with a lot of it sometimes, no, but I’m happy to pay taxes. It doesn’t mean I don’t scrutinize how they are spent, but this whole article is a prelude to gaslighting.
- mikestew 5y ago
  I thought America valued work As a worker who goes to work a job created by a Job Creator, I'm sure that is exactly what you were told, yes. And if we tax the gains of those Creators of Jobs, there won't be any more jobs. I value work, but that doesn't mean an enjoyer of work can't call propaganda when they see it.
  - bigmattystyles 5y ago
    Does it? Even pre-pandemic, I don’t think the massive Trump tax cut had the effect they claimed it would in employment (or much of anything else really). I could also argue that done right, fuller government coffers yields to more government spending and, if done right, which I grant you is a big stipulation, creates many more jobs, blue collar ones too.
    - mikestew 5y ago
      Guess my post needed sarcasm tags because it seems you're attempting to refute my point, which was that America only says it values work. But as famously pointed out by Warren Buffet that his secretary pays more in tax than he does[0], it is obvious what America really values: asset holders, not workers. [0] Buffet's secretary pays a higher rate on earned income than Buffet does on capital gains.
- deleted 5y ago
  [deleted]
nonameiguess 5y ago
I'm increasingly disappointed in what has become of Tyler Cowen. I guess this is always what he was and I was just blind in the past. Oh well. Discussion of US tax policy is so frustrating. I just wasted 20 minutes trying and failing to even find what Biden's proposal actually is. What are the exact rate brackets? Does this restore the distinction between long term and short term gains or apply to everything? Does this remove the loophole for carried interest? Not a peep. Every single article is just exactly the same choose your talking points that can be predicted to a tee from the pre-existing political lean of the parent publisher. Not a single attempt to actually inform voters. Media is trash.
- elsewhen 5y ago
  https://home.treasury.gov/system/files/136/MadeInAmericaTaxPlan_Report.pdf https://home.treasury.gov/system/files/136/MadeInAmericaTaxP...
  - nonameiguess 5y ago
    Thank you. Let me add my angry indictment of search engines that a search for "Biden tax plan" doesn't surface any links to the actual plan but rather just commentary on it. Sadly, the plan itself doesn't even answer these questions and only mentions capital gains once, saying past reductions are one of many factors responsible for labor share of federal tax revenue increasing relative to corporate share. That just raises the next question of what are pundits even opining about if there isn't actually a plan at all?
chasingthewind 5y ago
I think Cowen has a lot to offer and he frequently challenges me to think about things differently. But this is perhaps the least convincing argument I've ever read from him (and the commenters on Marginal Revolution seem to agree.) It does nothing to convince me that raising the rate on very wealthy individuals is a bad idea. I'd be willing to entertain thoughtful arguments on either side of the debate and I wonder if anyone here can point to more convincing examples.
- savanaly 5y ago
  I agree. Love Cowen, thought this article was very meh. Seems like it's always his weakest stuff showing up on HN :/ A better critical take on the capital gains issue is Scott Sumner's short and succinct one: https://www.econlib.org/capital-gains-nonsense/ https://www.econlib.org/capital-gains-nonsense/
- zozbot234 5y ago
  But this is hardly the only argument against high capital-gains taxes. Capital gains taxes share the extreme inefficiency of capital taxation more generally (taxing "capital" just means double taxation of your already-taxed earnings - as long as you don't spend it, that is!), and place an especially unfair burden on risky assets that are linked to the highest economic growth. It's just a terrible idea. Say anything about the federal "FairTax", many people don't like that either but it would be a lot more sensible than this.
data_acquired 5y ago
His arguments aside, I find calling anything to be "un-American" or "un-<insert country name>" to be annoying. Its a random nativist and unhelpfully pot-stirring sentiment to throw into an important debate. Who is Cowen or Bloomberg to be an important arbiter of what is or isn't American?
- scotuswroteus 5y ago
  yes part of the schtick is making certain people react like that -- it makes the piece go viral
adamnemecek 5y ago
Let’s not forget that the marginal tax rate for highest brackets was over 70% until Reagan .
- opo 5y ago
  Let's not forget that the 70% rate brought in less than 1% of total tax revenue. (One reason that democrats suggested lowering the top rate in 1981.) Those high rates encouraged all kinds of unproductive investments to take advantage of loopholes built into the law. Where people couldn't get around the rates, there were deadweight losses from economic activity that didn't occur. Even if someone thinks it is morally ok to take that much of someone's income, those kinds of high rates hurt the economy.
  - adamnemecek 5y ago
    I don’t think it was 1%.
    - gamblor956 5y ago
      It was less than one percent, "Of the $517 billion the Treasury collected in 1980, only $3 billion to $5 billion came from the 70 percent bracket — less than 1 percent of total tax revenue." But that was also because we had many fewer millionaires and billionaires back then. The same rate and thresholds in 2021 would represent a significant fraction of the tax revenue raised by the IRS in 2021. Estimates range between 5 and 15%, depending on the pundit. (And even the notoriously right-wing "Tax Foundation" notes that a 70% rate would raise more than 150 billion in additional tax revenue.)
      - opo 5y ago
        >...The same rate and thresholds in 2021 would represent a significant fraction of the tax revenue raised by the IRS in 2021. Estimates range between 5 and 15%, depending on the pundit. I don't understand what you mean here by 'thresholds'? Are you suggesting a politician is proposing a 70% tax rate starting at 108 thousand? If not what are you saying? And what pundits are claiming 15% tax revenue for such a tax? >...even the notoriously right-wing "Tax Foundation" From looking at their web site, this is not how that organization would describe themselves. Labeling someone 'notorious right wing' is just a shallow low effort attack. These sort of preemptive attacks to poison the well don't really belong here. The guidelines recommend against this kind of behavior: 'When disagreeing, please reply to the argument instead of calling names. ', 'Please don't sneer,' etc If you think, they are misrepresenting facts, argue against that. >..."Tax Foundation" notes that a 70% rate would raise more than 150 billion in additional tax revenue.) I searched their web site to see how they came up with that, and didn't find what you are talking about. I only found this page: https://taxfoundation.org/70-tax-proposal/ https://taxfoundation.org/70-tax-proposal/ They estimate one version of a 70% tax would bring in 189 billion additional revenue over a period of 10 years and the other version would result in a tax loss of 63 billion over 10 years. Where are you seeing them estimating 150 billion in one year?
downrightmike 5y ago
There's no greater place to make a ROI, might as well charge for that privilege. If capital doesn't agree, then more money will flow to places it can be used.
ObserverNeutral 5y ago
The brains of Americans are not some sort of detached entity disconnected from the rest of the world. People have hated rich people since the dawn of time, America is no different . US tax rate is getting more and more in line with Europe, and why wouldn't that be? Hatred for rich people is something known for centuries now. Taxes aren't just a way to raise money for federal and local governments, they are also an elegant way which society has to allocate social hatred. You need a corporate tax because people hate corporations, a wealth tax is being discussed and on the horizon because people hate the wealthy, this capital gain tax is on the table because people hate those who make money via capital investment, that's because it's very far removed from doing any work which is perceived as "real work" by the population.
- akomtu 5y ago
  It's a lot simpler than that. Biden has this infrastructure project, an admirable idea to be honest, but he needs funding for it. There aren't many ways to get this much money. I'm sure he proposed to print the money, but was told no, and he has proposed to raise corporate taxes, but the rich have objected, so he is left with cap gains tax on the rich and on the middle class. The rich, well, have objected the first idea, so only one option was left, and the middle class can't object. In practice, this tax will create tiered cap gains for the rich and for everyone else. If you put 1 billion into sp500, it will grow at 10% per year as usual, for there are no taxable events for such capital. If you put 1 million, you'll get only 10% minus the 4% tax. Needless to say that 10% and 6% are very different tracks with wildly different outcomes in 30-50 years.
- skinnymuch 5y ago
  Come around to every day America. Across the country. The number of people. In the tens of millions. Possibly 100M, who in different and varying ways, don’t want to tax the rich or [big] corporations much differently than the 95/99%. Similarly, many, many people do not hate the rich in America. I’m not sure what rich amount you’re referring to. Another way of knowing there is no real hatred of the rich in the country is how few people are leftist or further left than that. Any one to the right of progressives who are to the right of the harder leftists, do not uniformly hate rich people or corporations. Maybe the ones they don’t agree with at best. I’m speaking in generalities and am never saying things are 100% or 0% with any group I bring up. Just largely the case.
dmwallin 5y ago
This is a poorly written op-ed. The author claims to prioritize the valorization of wealth, the encouragement of saving, and the encouragement of children, but fails to make any case for why we should value these. He then completely neglects to make any case for how increasing capital gains might lead to the deterioration of these values. Raising capital gains is not going to discourage the next innovative companies, in fact it's likely to have the opposite effect. When a startup succeeds enough to reach a taxable event it is often at an exponentially large return on investment. In comparison a simple doubling of the tax rate is not going to materially affect the magnitude of that outcome. Capital is always in search of returns. A general tax on net gains is not going to materially change that fact. The primary effect it will have is to further encourage investment into value-generating assets instead of speculative plays, something desperately needed right now in this frothy market.
akomtu 5y ago
In its currently proposed form, a 40% tax on gains at the moment of sale, is effectively a tax on middle class. Those with a million in a brokerage account, i.e. the solid middle class, usually have to sell most of that when buying a house, and so they'll have to pay 40% on their entire gains. In practice, this tax will take back the gains from the last year's bull run of the stock market. If the new tax stays for long time, it'll effectively reduce the sp500 gains from 10% minus inflation to 10% minus 4% minus inflation, so about 3% per year at most. The rich, on the other hand, have 100M in stocks, but they need to sell only 250K per year or 0.25% of their assets and pay 40% only on that miniscule amount, while the 20M gains from the last year will keep sitting tax free. If the WH created an annual capital gains tax regardless of whether assets have been sold, that would tax the rich to the full extent and those rich would be furious and would do anything to change the US administration at the next elections.
- deleted 5y ago
  [deleted]
- gamblor956 5y ago
  Most of the American middle class does not own stocks separately from a 401k or other retirement savings vehicle. Also, the 40% rate wouldn't kick in for incomes below $1 million. Someone making a $1 million a year is not middle class and indeed would be in the top 0.01% of all earners, worldwide.
- dmwallin 5y ago
  I think you need to adjust your internal model as to what constitutes solidly middle class. To quote some more realistic numbers: >> Here, we define the middle class as the middle 60 percent of the income distribution in terms of what a family usually makes in a given year—ranging from $25,300 to $111,400 in 2016 (the latest year for which data is available). The median middle-class family has total liquid assets, defined as checking accounts, savings accounts, money market accounts, call accounts, and prepaid cards, of just $4,000. Unsurprisingly, the top quintile is more secure with a median of $31,300 and the bottom quintile is even less secure, with just $600.[1] [1] https://www.brookings.edu/blog/up-front/2020/03/26/the-middle-class-is-not-ready-for-the-looming-recession/ https://www.brookings.edu/blog/up-front/2020/03/26/the-middl...
MichaelRazum 5y ago
I think regarding immigration: Low tax attracts high skilled people High tax attracts low skilled people Don't get me wrong. Maybe it is untrue. But just the intuition behind it: High tax means high redistribution. Also I don't think US would attract so much talent if you had very high taxes.
- OldTimeCoffee 5y ago
  I don't think taxes are a major factor in US immigration, considering the slightly lower taxes are offset by far higher healthcare costs.
  - MichaelRazum 5y ago
    I don't think healthcare can be solved by taxes, since the US population is already paying more per capita then for example Germany where everyone is insured. By the way, I think healthcare is also kind of a factor, which attracts rather young high skilled workers who can afford an insurance policy.
blacksqr 5y ago
The article is deceptive from the very first sentence. Only the top bracket of the capital gains tax percentage is proposed to be raised, i.e. only applied to people with income over $1,000,000. But the article plays the old shell game of letting the reader assume that the rate is going to be raised for everyone, for every dollar of capital gains.

20 points by elsewhen 5y ago

https://archive.is/pmKuB https://archive.is/pmKuB

>> First and foremost, any system of taxation is about values. And a much higher rate of capital taxation would undermine some of America’s core values. Is it just me, or taxation is about everyone paying their fair share?

savanaly 5y ago
Or is it about raising the funds to provide public goods in a way that minimizes waste and deadweight loss?
weasel_words 5y ago
To me that argument about "paying your fair share" never made any sense. Wouldn't "fair share" be defined as how many/much of the government offerings you use? So how is it that someone making $1m/yr in exchanges is somehow using MORE government offerings and therefore has to pay more in order to keep up with their "fair share"? Do they somehow use more roads because they have equities? Perhaps they use the sewage system more? Use more welfare dollars? Use more school? Just makes no sense. It's straight up inequality and classism.
- achenatx 5y ago
  Personally there is no such thing as fair in taxes or even in life. there is only what "the people" can agree on via their representatives. one way to rationalize it is like insurance. someone protecting a 100K house pays much less than someone protecting a 500K house. It might not be linear with the value of the house. Your share of the military is larger than someone that makes less because the military is creating more value for you by protecting more assets. Your share of the SEC is because you receive more value from the SEC than the poor etc It is value based taxation instead of cost based taxation. Is that really less fair? In the end the only thing that matters is 1) enough taxation to pay for the things "the people" want. 2) minimize the drag that taxation causes on the economy.
- TheCoelacanth 5y ago
  Why would cost-based pricing be the only "fair" pricing model? I'm pretty sure if a startup tried to use cost-based pricing instead of value-based pricing, they would get told that they were idiots. Jeff Bezos and Elon Musk certainly get a lot more value out of roads existing than most people do. Their entire business is dependent on it.

bigmattystyles 5y ago

:eyeroll: I’ll preface that to define what America is, is dumb; if it’s freedom, then let it mean what it wants to mean to individuals. But in the vein of the article, I thought America valued work, not living off of appreciating assets. Especially when values are inflated by massive buy backs funded via tax cuts and loopholes. I have benefited so much off of capital gains, do I like parting with a lot of it sometimes, no, but I’m happy to pay taxes. It doesn’t mean I don’t scrutinize how they are spent, but this whole article is a prelude to gaslighting.

mikestew 5y ago
I thought America valued work As a worker who goes to work a job created by a Job Creator, I'm sure that is exactly what you were told, yes. And if we tax the gains of those Creators of Jobs, there won't be any more jobs. I value work, but that doesn't mean an enjoyer of work can't call propaganda when they see it.
- bigmattystyles 5y ago
  Does it? Even pre-pandemic, I don’t think the massive Trump tax cut had the effect they claimed it would in employment (or much of anything else really). I could also argue that done right, fuller government coffers yields to more government spending and, if done right, which I grant you is a big stipulation, creates many more jobs, blue collar ones too.
  - mikestew 5y ago
    Guess my post needed sarcasm tags because it seems you're attempting to refute my point, which was that America only says it values work. But as famously pointed out by Warren Buffet that his secretary pays more in tax than he does[0], it is obvious what America really values: asset holders, not workers. [0] Buffet's secretary pays a higher rate on earned income than Buffet does on capital gains.
deleted 5y ago
[deleted]

nonameiguess 5y ago

I'm increasingly disappointed in what has become of Tyler Cowen. I guess this is always what he was and I was just blind in the past. Oh well. Discussion of US tax policy is so frustrating. I just wasted 20 minutes trying and failing to even find what Biden's proposal actually is. What are the exact rate brackets? Does this restore the distinction between long term and short term gains or apply to everything? Does this remove the loophole for carried interest? Not a peep. Every single article is just exactly the same choose your talking points that can be predicted to a tee from the pre-existing political lean of the parent publisher. Not a single attempt to actually inform voters. Media is trash.

elsewhen 5y ago
https://home.treasury.gov/system/files/136/MadeInAmericaTaxPlan_Report.pdf https://home.treasury.gov/system/files/136/MadeInAmericaTaxP...
- nonameiguess 5y ago
  Thank you. Let me add my angry indictment of search engines that a search for "Biden tax plan" doesn't surface any links to the actual plan but rather just commentary on it. Sadly, the plan itself doesn't even answer these questions and only mentions capital gains once, saying past reductions are one of many factors responsible for labor share of federal tax revenue increasing relative to corporate share. That just raises the next question of what are pundits even opining about if there isn't actually a plan at all?

chasingthewind 5y ago

I think Cowen has a lot to offer and he frequently challenges me to think about things differently. But this is perhaps the least convincing argument I've ever read from him (and the commenters on Marginal Revolution seem to agree.) It does nothing to convince me that raising the rate on very wealthy individuals is a bad idea. I'd be willing to entertain thoughtful arguments on either side of the debate and I wonder if anyone here can point to more convincing examples.

savanaly 5y ago
I agree. Love Cowen, thought this article was very meh. Seems like it's always his weakest stuff showing up on HN :/ A better critical take on the capital gains issue is Scott Sumner's short and succinct one: https://www.econlib.org/capital-gains-nonsense/ https://www.econlib.org/capital-gains-nonsense/
zozbot234 5y ago
But this is hardly the only argument against high capital-gains taxes. Capital gains taxes share the extreme inefficiency of capital taxation more generally (taxing "capital" just means double taxation of your already-taxed earnings - as long as you don't spend it, that is!), and place an especially unfair burden on risky assets that are linked to the highest economic growth. It's just a terrible idea. Say anything about the federal "FairTax", many people don't like that either but it would be a lot more sensible than this.

data_acquired 5y ago

His arguments aside, I find calling anything to be "un-American" or "un-<insert country name>" to be annoying. Its a random nativist and unhelpfully pot-stirring sentiment to throw into an important debate. Who is Cowen or Bloomberg to be an important arbiter of what is or isn't American?

scotuswroteus 5y ago
yes part of the schtick is making certain people react like that -- it makes the piece go viral

adamnemecek 5y ago

Let’s not forget that the marginal tax rate for highest brackets was over 70% until Reagan .

opo 5y ago
Let's not forget that the 70% rate brought in less than 1% of total tax revenue. (One reason that democrats suggested lowering the top rate in 1981.) Those high rates encouraged all kinds of unproductive investments to take advantage of loopholes built into the law. Where people couldn't get around the rates, there were deadweight losses from economic activity that didn't occur. Even if someone thinks it is morally ok to take that much of someone's income, those kinds of high rates hurt the economy.
- adamnemecek 5y ago
  I don’t think it was 1%.
  - gamblor956 5y ago
    It was less than one percent, "Of the $517 billion the Treasury collected in 1980, only $3 billion to $5 billion came from the 70 percent bracket — less than 1 percent of total tax revenue." But that was also because we had many fewer millionaires and billionaires back then. The same rate and thresholds in 2021 would represent a significant fraction of the tax revenue raised by the IRS in 2021. Estimates range between 5 and 15%, depending on the pundit. (And even the notoriously right-wing "Tax Foundation" notes that a 70% rate would raise more than 150 billion in additional tax revenue.)
    - opo 5y ago
      >...The same rate and thresholds in 2021 would represent a significant fraction of the tax revenue raised by the IRS in 2021. Estimates range between 5 and 15%, depending on the pundit. I don't understand what you mean here by 'thresholds'? Are you suggesting a politician is proposing a 70% tax rate starting at 108 thousand? If not what are you saying? And what pundits are claiming 15% tax revenue for such a tax? >...even the notoriously right-wing "Tax Foundation" From looking at their web site, this is not how that organization would describe themselves. Labeling someone 'notorious right wing' is just a shallow low effort attack. These sort of preemptive attacks to poison the well don't really belong here. The guidelines recommend against this kind of behavior: 'When disagreeing, please reply to the argument instead of calling names. ', 'Please don't sneer,' etc If you think, they are misrepresenting facts, argue against that. >..."Tax Foundation" notes that a 70% rate would raise more than 150 billion in additional tax revenue.) I searched their web site to see how they came up with that, and didn't find what you are talking about. I only found this page: https://taxfoundation.org/70-tax-proposal/ https://taxfoundation.org/70-tax-proposal/ They estimate one version of a 70% tax would bring in 189 billion additional revenue over a period of 10 years and the other version would result in a tax loss of 63 billion over 10 years. Where are you seeing them estimating 150 billion in one year?

downrightmike 5y ago

There's no greater place to make a ROI, might as well charge for that privilege. If capital doesn't agree, then more money will flow to places it can be used.

ObserverNeutral 5y ago

The brains of Americans are not some sort of detached entity disconnected from the rest of the world. People have hated rich people since the dawn of time, America is no different . US tax rate is getting more and more in line with Europe, and why wouldn't that be? Hatred for rich people is something known for centuries now. Taxes aren't just a way to raise money for federal and local governments, they are also an elegant way which society has to allocate social hatred. You need a corporate tax because people hate corporations, a wealth tax is being discussed and on the horizon because people hate the wealthy, this capital gain tax is on the table because people hate those who make money via capital investment, that's because it's very far removed from doing any work which is perceived as "real work" by the population.

akomtu 5y ago
It's a lot simpler than that. Biden has this infrastructure project, an admirable idea to be honest, but he needs funding for it. There aren't many ways to get this much money. I'm sure he proposed to print the money, but was told no, and he has proposed to raise corporate taxes, but the rich have objected, so he is left with cap gains tax on the rich and on the middle class. The rich, well, have objected the first idea, so only one option was left, and the middle class can't object. In practice, this tax will create tiered cap gains for the rich and for everyone else. If you put 1 billion into sp500, it will grow at 10% per year as usual, for there are no taxable events for such capital. If you put 1 million, you'll get only 10% minus the 4% tax. Needless to say that 10% and 6% are very different tracks with wildly different outcomes in 30-50 years.
skinnymuch 5y ago
Come around to every day America. Across the country. The number of people. In the tens of millions. Possibly 100M, who in different and varying ways, don’t want to tax the rich or [big] corporations much differently than the 95/99%. Similarly, many, many people do not hate the rich in America. I’m not sure what rich amount you’re referring to. Another way of knowing there is no real hatred of the rich in the country is how few people are leftist or further left than that. Any one to the right of progressives who are to the right of the harder leftists, do not uniformly hate rich people or corporations. Maybe the ones they don’t agree with at best. I’m speaking in generalities and am never saying things are 100% or 0% with any group I bring up. Just largely the case.

dmwallin 5y ago

This is a poorly written op-ed. The author claims to prioritize the valorization of wealth, the encouragement of saving, and the encouragement of children, but fails to make any case for why we should value these. He then completely neglects to make any case for how increasing capital gains might lead to the deterioration of these values. Raising capital gains is not going to discourage the next innovative companies, in fact it's likely to have the opposite effect. When a startup succeeds enough to reach a taxable event it is often at an exponentially large return on investment. In comparison a simple doubling of the tax rate is not going to materially affect the magnitude of that outcome. Capital is always in search of returns. A general tax on net gains is not going to materially change that fact. The primary effect it will have is to further encourage investment into value-generating assets instead of speculative plays, something desperately needed right now in this frothy market.

akomtu 5y ago

In its currently proposed form, a 40% tax on gains at the moment of sale, is effectively a tax on middle class. Those with a million in a brokerage account, i.e. the solid middle class, usually have to sell most of that when buying a house, and so they'll have to pay 40% on their entire gains. In practice, this tax will take back the gains from the last year's bull run of the stock market. If the new tax stays for long time, it'll effectively reduce the sp500 gains from 10% minus inflation to 10% minus 4% minus inflation, so about 3% per year at most. The rich, on the other hand, have 100M in stocks, but they need to sell only 250K per year or 0.25% of their assets and pay 40% only on that miniscule amount, while the 20M gains from the last year will keep sitting tax free. If the WH created an annual capital gains tax regardless of whether assets have been sold, that would tax the rich to the full extent and those rich would be furious and would do anything to change the US administration at the next elections.

deleted 5y ago
[deleted]
gamblor956 5y ago
Most of the American middle class does not own stocks separately from a 401k or other retirement savings vehicle. Also, the 40% rate wouldn't kick in for incomes below $1 million. Someone making a $1 million a year is not middle class and indeed would be in the top 0.01% of all earners, worldwide.
dmwallin 5y ago
I think you need to adjust your internal model as to what constitutes solidly middle class. To quote some more realistic numbers: >> Here, we define the middle class as the middle 60 percent of the income distribution in terms of what a family usually makes in a given year—ranging from $25,300 to $111,400 in 2016 (the latest year for which data is available). The median middle-class family has total liquid assets, defined as checking accounts, savings accounts, money market accounts, call accounts, and prepaid cards, of just $4,000. Unsurprisingly, the top quintile is more secure with a median of $31,300 and the bottom quintile is even less secure, with just $600.[1] [1] https://www.brookings.edu/blog/up-front/2020/03/26/the-middle-class-is-not-ready-for-the-looming-recession/ https://www.brookings.edu/blog/up-front/2020/03/26/the-middl...

MichaelRazum 5y ago

I think regarding immigration: Low tax attracts high skilled people High tax attracts low skilled people Don't get me wrong. Maybe it is untrue. But just the intuition behind it: High tax means high redistribution. Also I don't think US would attract so much talent if you had very high taxes.

OldTimeCoffee 5y ago
I don't think taxes are a major factor in US immigration, considering the slightly lower taxes are offset by far higher healthcare costs.
- MichaelRazum 5y ago
  I don't think healthcare can be solved by taxes, since the US population is already paying more per capita then for example Germany where everyone is insured. By the way, I think healthcare is also kind of a factor, which attracts rather young high skilled workers who can afford an insurance policy.

blacksqr 5y ago

The article is deceptive from the very first sentence. Only the top bracket of the capital gains tax percentage is proposed to be raised, i.e. only applied to people with income over $1,000,000. But the article plays the old shell game of letting the reader assume that the rate is going to be raised for everyone, for every dollar of capital gains.