4 ms·

Eh, it's a fuzzy topic, because wealth is essentially income at the top end. But yes, you're correct.

gremlinsinc 5y ago
Investment interest accrual should be considered "income" at the end of the year. If I earned 20 and invested in stocks, I'm still taxed on the 20... if that 20 was earned from interest in stocks and re-invested, I'm not taxed on it.... That's where the change needs to happen.
- gruez 5y ago
  >if that 20 was earned from interest in stocks and re-invested, I'm not taxed on it.... By "interest" do you mean dividends? If so they're most certainly taxed.
  - nevinera 5y ago
    He's just being imprecise - he must really mean asset appreciation. (Reinvested dividends are still taxed, but lots of people aren't aware of that)
- nevinera 5y ago
  Exactly - right now investments function as a tax-deferred account with no maximum, which allows billionaires to accumulate wealth without any taxation. They also strongly incentivize the wealthy to push for policy changes that reduce gains and estate taxes, because the payoff for even a short-lived reduction in gains taxes is massive when you have $500M in yet-to-be-taxed assets accumulated. If net-asset-gains in a year were treated as income, the actual tax rate could be cut by 80% and we'd still have increased tax revenue.
  - gruez 5y ago
    >If net-asset-gains in a year were treated as income, the actual tax rate could be cut by 80% and we'd still have increased tax revenue. But wouldn't that only be the case because we're collecting the tax upfront rather than allowing people to defer it? Therefore the tax revenue might be higher in the short term because we're collecting everything upfront plus whatever was deferred in the previous years, but decades into the future the deferred taxes would dry up (because everyone's immediately realizing their gains), taking us back to square one?
    - nevinera 5y ago
      No, I was assuming we didn't treat all of the already-deferred tax as immediately due. There would be some large long-term effects on investment behavior though, for sure. The topic is much more complicated than my napkin math suggests, and an appropriate policy to actually implement it would be huge and complex. I'd guess there'd need to be some kind of asset class to represent those prior gains, so they can still be properly taxed at realization, and also some kind of risk-averaging system so that volatile investments don't end up taxed every time they appreciate through the same range of value (you can't tax a wave on every rise).

Investment interest accrual should be considered "income" at the end of the year. If I earned 20 and invested in stocks, I'm still taxed on the 20... if that 20 was earned from interest in stocks and re-invested, I'm not taxed on it.... That's where the change needs to happen.

gruez 5y ago
>if that 20 was earned from interest in stocks and re-invested, I'm not taxed on it.... By "interest" do you mean dividends? If so they're most certainly taxed.
- nevinera 5y ago
  He's just being imprecise - he must really mean asset appreciation. (Reinvested dividends are still taxed, but lots of people aren't aware of that)
nevinera 5y ago
Exactly - right now investments function as a tax-deferred account with no maximum, which allows billionaires to accumulate wealth without any taxation. They also strongly incentivize the wealthy to push for policy changes that reduce gains and estate taxes, because the payoff for even a short-lived reduction in gains taxes is massive when you have $500M in yet-to-be-taxed assets accumulated. If net-asset-gains in a year were treated as income, the actual tax rate could be cut by 80% and we'd still have increased tax revenue.
- gruez 5y ago
  >If net-asset-gains in a year were treated as income, the actual tax rate could be cut by 80% and we'd still have increased tax revenue. But wouldn't that only be the case because we're collecting the tax upfront rather than allowing people to defer it? Therefore the tax revenue might be higher in the short term because we're collecting everything upfront plus whatever was deferred in the previous years, but decades into the future the deferred taxes would dry up (because everyone's immediately realizing their gains), taking us back to square one?
  - nevinera 5y ago
    No, I was assuming we didn't treat all of the already-deferred tax as immediately due. There would be some large long-term effects on investment behavior though, for sure. The topic is much more complicated than my napkin math suggests, and an appropriate policy to actually implement it would be huge and complex. I'd guess there'd need to be some kind of asset class to represent those prior gains, so they can still be properly taxed at realization, and also some kind of risk-averaging system so that volatile investments don't end up taxed every time they appreciate through the same range of value (you can't tax a wave on every rise).