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Bad idea to tax unrealized capital gains. Proposal; How about we gut our entire tax code and replace it with a single tax that taxes when money moves from one e

Bad idea to tax unrealized capital gains. Proposal; How about we gut our entire tax code and replace it with a single tax that taxes when money moves from one entity to another. Let's call it a Transaction Tax. It would replace Sales Tax, Income Tax, Capital Gains Tax, Inheritance Tax, etc and introduce tax on debt creation (when the bank gives you the money). This would close all loop holes and put the entire tax industry out of business. Given it would be taking a slice of every transaction, the rate could probably be super low. 1-2% would be my guess. What can you see wrong with this proposal?

jasonwatkinspdx 5y ago
It'd net out to a consumption tax which is strongly negative economically to nearly everyone.
- UncleOxidant 5y ago
  If it leads to lower consumption that would be better for the environment and would probably lead to a more sustainable economy with less incentive to go into debt.
sbuttgereit 5y ago
Because it fails to sate the emotional rationalization that sits behind so much of the rhetoric that has been used to justify such measures. The wealthy are evil, duplicitous, exploitative, and in the best cases, merely lucky... regardless of what a wealthy person actually did or didn't do to come to their wealth... and the not wealthy are blameless, innocent, unlucky victims that are unable to change their lot in life in part because of the oppression of the wealthy and in part because their betters in government aren't yet empowered enough to protect their best interests.... again all without regard to how they came to their unfortunate lot in life. Now, of course, I'm exaggerating, but only a little I think. And, of course, this happens on both sides of the debate... but the side in power right now is the one making taxation proposals. Personally, I support your idea by and large. An amount that scales to the degree of the transaction ensures that big transactions pay larger amounts and that everyone has a stake.
- zarkov99 5y ago
  You are not wrong. The only thing I would add to that is the wealthy invariably means simply "much richer than me". In particular it is obscene to see that the people who most hate billionaires and agitate for their punishment are, for the most part, millionaires. The whole movement is rooted in envy, transparently disguised as virtue.
  - SirSourdough 5y ago
    I highly doubt the majority of people agitating against billionaires are millionaires. There aren’t enough millionaires for that to be likely. And I think there are lots of good arguments being made about the detriments of income inequality if you don’t dismiss the people making them as envious out of hand...
    - jurassic 5y ago
      There are millions of millionaires in the US. A lot of fairly normal doctors, lawyers, and engineers will reach this bar by late middle age if they're saving and investing part of their income.
      - SirSourdough 5y ago
        Very cursory search suggests 8% of US adults are millionaires according to CNBC. That means there's something like 300 million non-millionaires compared to 30 million millionaires. The rate of "billionaire hate" would need to be astronomically higher among millionaires than non-millionaires for millionaires to make up any sort of the majority of people complaining about income inequality. On top of that, NPR polling suggest about 45% of top 1% income earners on up to about 65% of low income earners (>$35k household) are concerned about income inequality, which flies in the face of the idea that it's mostly jealous millionaires complaining up. A majority of every income segment in America other than the top 1% believes this is a problem.
        jurassic 5y ago
herval 5y ago
Brazil had such a tax for a long time. It was sub-1%, and was largely agreed as a bad model, since it led to lower liquidity, drying of credit markets, lower consumption, cash hoarding, etc. So not necessarily a great idea. https://www.researchgate.net/publication/249882612_The_Economic_Impacts_of_the_CPMF_Theory_and_Evidence https://www.researchgate.net/publication/249882612_The_Econo...
- UncleOxidant 5y ago
  > cash hoarding That used to be called saving and it was considered a good thing. Lower consumption would be better for the environment as well.
  - herval 5y ago
    No, _saving_ is when you put money aside and hopefully keep its value at least above inflation. Cash hoarding means individuals and businesses stash bills under the mattress, and business will even decline to sell you anything on credit. And of course, that money devalues with inflation, so it’s not useful as a savings mechanism.
  - missedthecue 5y ago
    Saving is when you put your money in the bank, who then loan it out to businesses and homebuyers. Putting cash under your mattress just takes it out of circulation.
    - the_optimist 5y ago
      This conveys a misunderstanding of money creation. The bank specifically does not need your cash to make loans; that is in fact what makes it a bank. However, putting your cash inside your mattress withholds your funds from the investment manager, who would or could invest it in risk assets.
      - Jyaif 5y ago
        > The bank specifically does not need your cash to make loans They do: the more money a bank has, the more they can loan.
CheezeIt 5y ago
So having suppliers instead of being vertically integrated gets taxed repeatedly. This is the whole reason the VAT taxes value added, not the whole transaction. I have to wonder whether you’ve even looked at existing tax systems, or spent any time sketching out what the consequences of yours might be.
- lixtra 5y ago
  > So having suppliers instead of being vertically integrated gets taxed repeatedly. Yes. But maybe having a long chain of suppliers is worth a tax penalty. The vertically integrated company has a stronger incentive to stay solvent. I’m thinking particularly about construction businesses here.
adrr 5y ago
Would it tax loans? If not, how do you tax billionaires who never sell their stock and just get loans with their stock as collateral. How bezos pays minimal taxes without having realize gains by selling his stock.
- missedthecue 5y ago
  The loan eventually must be repaid. If it's repaid after death, a 40% federal estate tax (+16% if you're in NY or CA) takes it's cut. I'm not sure who originated this "loans are an infinite money cheat" narrative, but I've been seeing it all over the internet recently and it's simply not true.
- dragonwriter 5y ago
  > Would it tax loans? “introduce tax on debt creation (when the bank gives you the money).” > If not, how do you tax billionaires who never sell their stock and just get loans with their stock as collateral. Depending on how serious you are about taxing gross transfers, giving a collateral interest is also a transfer of interest in money, so you could tax that, too. Valuing the collateral interest could be tricky, though.
ansible 5y ago
Sales tax is regressive, meaning that it taxes the poor at a much higher relative tax rate than the rich. Any transaction tax would need to take that into account.
deleted 5y ago
[deleted]
pwinnski 5y ago
Does the tax apply when money moves from one entity I control to another entity I control? If so, that's clearly a problem. If not, that's definitely a different set of problems. Everything seems simple at first, and then it isn't. Every change in taxation rewards some behaviors and punishes others. Either your proposal would result in more tax revenue or less, either of which is a problem for someone, Maybe many someones. The most obvious issue with the tax structure you describe--aside from who controls which entities--is that it is one of the most regressive tax policies I can imagine. Those at or near the poverty line would now be paying a percentage of everything they earn, while those earning far more would be paying that percentage on only a small subset of their earnings. Considered another way, while this seems mathematically equal, it's most burdensome on those with the least ability to afford it.

jasonwatkinspdx 5y ago

It'd net out to a consumption tax which is strongly negative economically to nearly everyone.

UncleOxidant 5y ago
If it leads to lower consumption that would be better for the environment and would probably lead to a more sustainable economy with less incentive to go into debt.

sbuttgereit 5y ago

Because it fails to sate the emotional rationalization that sits behind so much of the rhetoric that has been used to justify such measures. The wealthy are evil, duplicitous, exploitative, and in the best cases, merely lucky... regardless of what a wealthy person actually did or didn't do to come to their wealth... and the not wealthy are blameless, innocent, unlucky victims that are unable to change their lot in life in part because of the oppression of the wealthy and in part because their betters in government aren't yet empowered enough to protect their best interests.... again all without regard to how they came to their unfortunate lot in life. Now, of course, I'm exaggerating, but only a little I think. And, of course, this happens on both sides of the debate... but the side in power right now is the one making taxation proposals. Personally, I support your idea by and large. An amount that scales to the degree of the transaction ensures that big transactions pay larger amounts and that everyone has a stake.

zarkov99 5y ago
You are not wrong. The only thing I would add to that is the wealthy invariably means simply "much richer than me". In particular it is obscene to see that the people who most hate billionaires and agitate for their punishment are, for the most part, millionaires. The whole movement is rooted in envy, transparently disguised as virtue.
- SirSourdough 5y ago
  I highly doubt the majority of people agitating against billionaires are millionaires. There aren’t enough millionaires for that to be likely. And I think there are lots of good arguments being made about the detriments of income inequality if you don’t dismiss the people making them as envious out of hand...
  - jurassic 5y ago
    There are millions of millionaires in the US. A lot of fairly normal doctors, lawyers, and engineers will reach this bar by late middle age if they're saving and investing part of their income.
    - SirSourdough 5y ago
      Very cursory search suggests 8% of US adults are millionaires according to CNBC. That means there's something like 300 million non-millionaires compared to 30 million millionaires. The rate of "billionaire hate" would need to be astronomically higher among millionaires than non-millionaires for millionaires to make up any sort of the majority of people complaining about income inequality. On top of that, NPR polling suggest about 45% of top 1% income earners on up to about 65% of low income earners (>$35k household) are concerned about income inequality, which flies in the face of the idea that it's mostly jealous millionaires complaining up. A majority of every income segment in America other than the top 1% believes this is a problem.
      - jurassic 5y ago

herval 5y ago

Brazil had such a tax for a long time. It was sub-1%, and was largely agreed as a bad model, since it led to lower liquidity, drying of credit markets, lower consumption, cash hoarding, etc. So not necessarily a great idea. https://www.researchgate.net/publication/249882612_The_Economic_Impacts_of_the_CPMF_Theory_and_Evidence https://www.researchgate.net/publication/249882612_The_Econo...

UncleOxidant 5y ago
> cash hoarding That used to be called saving and it was considered a good thing. Lower consumption would be better for the environment as well.
- herval 5y ago
  No, _saving_ is when you put money aside and hopefully keep its value at least above inflation. Cash hoarding means individuals and businesses stash bills under the mattress, and business will even decline to sell you anything on credit. And of course, that money devalues with inflation, so it’s not useful as a savings mechanism.
- missedthecue 5y ago
  Saving is when you put your money in the bank, who then loan it out to businesses and homebuyers. Putting cash under your mattress just takes it out of circulation.
  - the_optimist 5y ago
    This conveys a misunderstanding of money creation. The bank specifically does not need your cash to make loans; that is in fact what makes it a bank. However, putting your cash inside your mattress withholds your funds from the investment manager, who would or could invest it in risk assets.
    - Jyaif 5y ago
      > The bank specifically does not need your cash to make loans They do: the more money a bank has, the more they can loan.

CheezeIt 5y ago

So having suppliers instead of being vertically integrated gets taxed repeatedly. This is the whole reason the VAT taxes value added, not the whole transaction. I have to wonder whether you’ve even looked at existing tax systems, or spent any time sketching out what the consequences of yours might be.

lixtra 5y ago
> So having suppliers instead of being vertically integrated gets taxed repeatedly. Yes. But maybe having a long chain of suppliers is worth a tax penalty. The vertically integrated company has a stronger incentive to stay solvent. I’m thinking particularly about construction businesses here.

adrr 5y ago

Would it tax loans? If not, how do you tax billionaires who never sell their stock and just get loans with their stock as collateral. How bezos pays minimal taxes without having realize gains by selling his stock.

missedthecue 5y ago
The loan eventually must be repaid. If it's repaid after death, a 40% federal estate tax (+16% if you're in NY or CA) takes it's cut. I'm not sure who originated this "loans are an infinite money cheat" narrative, but I've been seeing it all over the internet recently and it's simply not true.
dragonwriter 5y ago
> Would it tax loans? “introduce tax on debt creation (when the bank gives you the money).” > If not, how do you tax billionaires who never sell their stock and just get loans with their stock as collateral. Depending on how serious you are about taxing gross transfers, giving a collateral interest is also a transfer of interest in money, so you could tax that, too. Valuing the collateral interest could be tricky, though.

ansible 5y ago

Sales tax is regressive, meaning that it taxes the poor at a much higher relative tax rate than the rich. Any transaction tax would need to take that into account.

deleted 5y ago

[deleted]

pwinnski 5y ago

Does the tax apply when money moves from one entity I control to another entity I control? If so, that's clearly a problem. If not, that's definitely a different set of problems. Everything seems simple at first, and then it isn't. Every change in taxation rewards some behaviors and punishes others. Either your proposal would result in more tax revenue or less, either of which is a problem for someone, Maybe many someones. The most obvious issue with the tax structure you describe--aside from who controls which entities--is that it is one of the most regressive tax policies I can imagine. Those at or near the poverty line would now be paying a percentage of everything they earn, while those earning far more would be paying that percentage on only a small subset of their earnings. Considered another way, while this seems mathematically equal, it's most burdensome on those with the least ability to afford it.