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Great, what we should be doing is taxing capital gain at a hire rate than physical labor. Why does anyone think it's OK to pay less on money you made with money

Great, what we should be doing is taxing capital gain at a hire rate than physical labor. Why does anyone think it's OK to pay less on money you made with money you have? Especially when the difference can be as great as +25%.

comeonseriously 5y ago
> Why does anyone think it's OK to pay less on money you made with money you have? The venn diagram of people who make the rules overlaps with those who benefit.
dmix 5y ago
You seem to have a lot of research to do on this topic. It’d be a lengthy and at times controversial reply because it hits at a fundamental supply side vs demand side economics. That said I do fully support a far heavier taxation on capital gains if your net worth is in the hundred millionaires. We’ve been talking about taxing billionaires for as long as I’ve been alive and the solution seems so simple to me: income caps. We use income caps all the time for poor people but when talking about capital gains the arguments gets easily neutered because they get propose across the board, critically kneecapping the productive value of capital in capable hands. It’s simple, just cap it at hundreds of millions at not so unreasonable rate. And all the talk on wealth inequality will have a very strong counter argument. Instead every time we get a new tax it seems to hit everyone except the lowest sectors. Even here in Canada.
- hnbad 5y ago
  There was a proposal in Switzerland (not sure what came off it) that essentially worked like this: * income from capital is taxed extremely highly at a progressive rate * the allowance/exempt amount is high enough to cover most investment based retirement plans * the definition of "income from capital" was left open enough to at least cover most trading and rent-seeking but require explicit narrowing before the law could be passed The goal was pretty much explicitly to tax income from actual labor less and income from simply already having capital a lot more.
- avgcorrection 5y ago
  > That said I do fully support a far heavier taxation on capital gains if your net worth is in the hundred millionaires. And his famed slogan was “justice for the tens-of millionaires; never shall we suffer under the yoke of the hundreds-of millionaires again”.
- zionic 5y ago
  > That said I do fully support a far heavier taxation on capital gains if your net worth is in the hundred millionaires. That will be middle class if the gov keeps printing money the way they are. Setting tax rates on net worth is absurd. Taxes should be a flat rate cut of income, and all forms of income should be taxed the same.
wwtrv 5y ago
The reason (or one of) is that it’s easier to avoid paying taxes on capital if you’re rich enough by relocating to another country besides various other schemes which allow to minimize your tax rate. So to a large extent competition between different countries keeps capital gains taxes low.
- xyzzyz 5y ago
  Or even, you can just consume your wealth instead of investing it, thus avoiding the capital gains tax altogether. I believe that the world where the wealthy invest their capital in productive, growing enterprises, is better than the world where they spend it on yachts and mansions — high capital income gains tax incentivizes the latter.
  - mleonhard 5y ago
    > you can just consume your wealth instead of investing it A rich person who does this quickly stops being rich. Few rational rich people will do that. Raising capital gains tax will have the opposite effect: rich peoples' income will go down and they will spend less.
    - xyzzyz 5y ago
      > A rich person who does this quickly stops being rich. No, that depends on how fast you're consuming it. For example, instead of investing most of your excess revenues, you can invest only half of it, and consume the other half. Or, if you are wealthy enough, you can keep consuming without investing for a long time. Lastly, you don't have to stay rich forever, as you can't take your wealth with you to the other side. > Raising capital gains tax will have the opposite effect: rich peoples' income will go down and they will spend less. Unlikely: the rich already spend only rather small fraction of their incomes, and it is the prospects of making more money in future that is keeping them from spending more.
xyzzyz 5y ago
It might do you good to research why in fact most economists believe that, and why most countries’ tax systems reflect that opinion. You will learn a lot about role of incentives, value of investment for general welfare, elasticity of labor supply vs investment, substitution effects for investment vs consumption, and all kinds of interesting topics. Of course, if you’re motivated by punitive instinct, instead of goal of taxing optimally to achieve maximum general welfare (including among low wage earners), you likely won’t find it appealing.
- DarylZero 5y ago
  Economists are pretty dumb here. If you allow superwealthy parasites to exist, they become "host-controlling" parasites and abolish democracy and establish plutocracy. Economists don't model that and it makes their models useless.
konfusinomicon 5y ago
the lower tax rate is an incentive to invest that money, which causes growth, which in turn causes more tax revenue from that growth. ya, there are people that game that system, but there are far more people who benefit from such a tax rate and arent gaming anyone, just trying to live the dream and move up (to a deluxe apartment, in the skyyy). if anything, the tax on labor should be brought down, not the other way around. we are already taxed enough (atleast in the states we are!)
- mleonhard 5y ago
  > the lower tax rate is an incentive to invest that money Why do you think an incentive is needed? If the tax rate on investment gains was higher, do you think rich people would reduce the amount of money they invest? What would they do with their money other than investing it? > the tax on labor should be brought down Which government services would you cut to go along with the reduction in government tax revenue? Or would you put those payments on the next generation by borrowing?
  - konfusinomicon 5y ago
    the incentive is not necessarily needed, but it does make that avenue to grow wealth much more attractive. if none, the richer would seek out other ways to grow that money that aren't as effective at growing the tax base, and in turn the economy. or they could just sit on it and grow their stack, passing it down as generational wealth, something akin to scrooge mcduck, swimming in his piles of money. as far as removing government services, I can't say exactly which ones I would cut, there are most certainly several, but the federal government needs to take a huge step back and allocate the money and power of many of its departments back into the hands of the state and local governments. there is too much nuance that the federal government doesn't understand about local communities that ends up inflating costs by ridiculous amounts because things are generalized across the entire population, and not tailored for the specific needs of a region.
- annoyingnoob 5y ago
  The trickle-down approach of cutting taxes for the rich actually created a trickle-up and we have a huge disparity in wealth inequality. Lower taxes on the rich makes them richer at the expense of everyone else.
SilasX 5y ago
Because the capital gains tax is only a portion of the tax applied to capital income. When you invest in a venture, you pay taxes on the profits. You pay taxes on the dividends it throws off. Whatever accumulated value remains when you sell your share gets hit by capital gains tax. The "tax on money you made with money you have" is the combination of the profit tax, dividend tax, and capital gains tax. That's not to say the total taxation of capital income is or isn't unfair (or is or isn't double/triple taxed), but it's misleading to just look at capital gains as an income source in isolation.
- mleonhard 5y ago
  > When you invest in a venture, you pay taxes on the profits. You pay taxes on the dividends it throws off. Whatever accumulated value remains when you sell your share gets hit by capital gains tax. This is not true. When you invest in a venture, hold its stock for 60 days, and it pays you its profit, this income is considered "qualified dividends" and is subject to capital gains tax. > The "tax on money you made with money you have" is the combination of the profit tax, dividend tax, and capital gains tax. What are "profit tax" and "dividend tax"? These are not terms used in USA. From the IRS rules: > Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates. https://www.irs.gov/taxtopics/tc404 https://www.irs.gov/taxtopics/tc404 > Qualified Dividends > Holding period. You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. https://www.irs.gov/publications/p550#en_US_2020_publink100010075 https://www.irs.gov/publications/p550#en_US_2020_publink1000...
  - SilasX 5y ago
    >This is not true. When you invest in a venture, hold its stock for 60 days, and it pays you its profit, this income is considered "qualified dividends" and is subject to capital gains tax. And? Okay, that's a) a special case, and b) confirmation of the point I was making that you get taxed on dividends (and on capital gains) only as one piece of total "capital income taxation". (The fact that something is taxed at the capital gains rate does not somehow mean that the dividends were not taxed, as you seem to be implying.) >What are "profit tax" and "dividend tax"? These are not terms used in USA. It sounds like you're just trying to be difficult and uncurious at the cost of a productive discussion. I was speaking in the most lay, general terms. Profits are taxed. Dividends are taxed. In normal, ordinary usage of English, one can refer to those taxes as "profit taxes" and "dividend taxes", even if the technical term is different. (Your native language probably does the same.) If I go through you posting history, am I going to find you always using the technical term? Yes, the "profit tax" I referred to would be more technically referred to as the corporate income tax. The dividend tax also might have a more technically accurate term, similarly irrelevant to this context or point. >Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates. I don't know why you think this is relevant to my point. It just means sometimes the rate is different from "the" capital gains tax. In no way does it refute that the events of profit and dividend payment are subject to a separate tax, making the "capital gains tax" an incomplete picture of the tax rate on capital income. If you agree with that latter point, then you agree with my comment, and you're just cluttering the discussion with misdirection and red herrings.
rhino369 5y ago
It's hard to tax them at effectively the same rate. One issue you have to consider is inflation. If you buy a house in 1980 for 100k and sell it for $314k in 2020, you didn't really make any real income. You can adjust for inflation, so it shouldn't stop you from trying to make capital gains the same as ordinary income. But you do need to adjust. Also, some types of assets subject to capital gains are separately taxed. If you own corporate stock, that corp might be paying a lot of income tax. That reduces the value of the stock, which means you are indirectly being taxed. Sometimes that indirect tax is basically a drop in the bucket compared to capital gains (holding Amazon or Uber long term), but for some assets it could be quite significant. But one big reason is that the upper middle class are easier marks and hold much less power than the capital class.
hnbad 5y ago
> Why does anyone think it's OK to pay less on money you made with money you have? If you know this you may think everybody knows this but a lot of people don't and find it highly unintuitive, so I'm going to spell it out: In a very broad sense there are two definitions of "justice" and people will think of one or the other as obviously correct. On the one hand you have people who think justice means that everyone can take what they need and give what they can. These people usually think that humans are cooperative by nature and are intrinsically motivated to do good by others as long as they aren't taken advantage of, i.e. as long as everyone else also gives as much as they can and only takes what they need. On the other hand you have people who think justice means that everyone gets what they deserve. These people usually think that humans are competitive by nature and are intrinsically motivated to take advantage of others and need to be kept in their place as defined by the hierarchy they view as natural and self-evident. You seem to be part of the former group. The people who think "it's OK to pay less on money you made with money you have" are part of the latter. Neither of the two views is "wrong" in a meaningful way, they are just fundamentally incompatible when it comes to pushing for what they see as "good" or "just".
- DarylZero 5y ago
  Not a very useful framework at all, more of a caricature. Big problem with the economy is that it rewards zero-sum leeches rather than compensate the sacrifice of labor. And the superwealthy are always people who figured out or inherited a way to be parasites.
  - hnbad 5y ago
    > Not a very useful framework at all, more of a caricature. What an odd sentence to be followed by describing the extremely rich as "leeches" and "parasites". Sarcasm aside, I think the problem with your analysis is that it doesn't account for people who don't benefit from the system being extremely invested in maintaining it, especially those who understand that they have no realistic chances of coming out on top. There are a lot of hierarchical mindsets that can be deconstructed given the right exposure and sufficient time, but the belief in the necessity, inevitability and moral good of hierarchies themselves is extremely difficult to unlearn and can be found in most parts of the political spectrum (though of course being overrepresented in some groups, e.g. Evangelical Christian conservatives). Most people therefore take some hierarchies for granted while being in disbelief that anyone could take the ones they reject seriously. You can believe in absolute meritocracy without believing in "race realism" for example.
Symmetry 5y ago
One clever plan to do that I've heard is the idea of a progressive consumption tax. That is, you have the existing income tax structure but you make all savings in banks or brokerages or whatever tax deductible but tax anything you withdraw from them as regular income. This would tend to have some nice properties with letting people smooth consumption, getting rid of special items in our tax code for particular sorts of savings, and solve the problem of billionaires borrowing against their stock to live without having to pay taxes. You do have to keep having a special case for housing which is both a form of consumption and a savings vehicle and a few others but it looks like it would be a bit simpler and fairer.
ratboy666 5y ago
1 - I have already paid tax on the money. 2 - In making the investment, I stand to lose (or gain) 3 - The lost money is not an expense Given all of this, I expect that the capital gain rate is specified as lower to encourage me to invest. If the capital gain rate were higher than the income rate, I would not make risky investments. I could use my money to invest in my own business -- where I have expenses available. And, take an income. Any loss would then be an expense. I just wouldn't invest in other business. How would you encourage investment behavior?
- ryandrake 5y ago
  > 1 - I have already paid tax on the money. Money is taxed over and over all the time. Your income gets taxed, then it's taxed again when you spend it, then it's taxed again when the store owner reports it as earnings, and on and on. There's no rule that once a dollar is taxed it shouldn't be taxed again. But, for some reason, it's only shareholders who complain about how unfair "double taxation" is [1]. 1: https://www.thepatriotaxe.com/spot-the-double-taxation/ https://www.thepatriotaxe.com/spot-the-double-taxation/
  - ratboy666 5y ago
    I like your cartoon. The difference with the dividend flow is that the payment was made... not for a good or service (which all the other flows have in common) but tax on a repayment. Not a fixed, negotiated payment either... A repayment that is, interestingly, not in the control of the shareholder. Thus differing from a loan. I would no longer purchase stocks -- I would then prefer bonds (loans). Which means I would take risk into account, and this would stifle (some) innovation. I don't mind taxation at all!
mortehu 5y ago
Lower capital gains and qualified dividend rates are tied to entities that pay corporate taxes. As an example, REITs do not pay corporate taxes, so their dividends are treated mostly as ordinary income.

comeonseriously 5y ago

> Why does anyone think it's OK to pay less on money you made with money you have? The venn diagram of people who make the rules overlaps with those who benefit.

dmix 5y ago

You seem to have a lot of research to do on this topic. It’d be a lengthy and at times controversial reply because it hits at a fundamental supply side vs demand side economics. That said I do fully support a far heavier taxation on capital gains if your net worth is in the hundred millionaires. We’ve been talking about taxing billionaires for as long as I’ve been alive and the solution seems so simple to me: income caps. We use income caps all the time for poor people but when talking about capital gains the arguments gets easily neutered because they get propose across the board, critically kneecapping the productive value of capital in capable hands. It’s simple, just cap it at hundreds of millions at not so unreasonable rate. And all the talk on wealth inequality will have a very strong counter argument. Instead every time we get a new tax it seems to hit everyone except the lowest sectors. Even here in Canada.

hnbad 5y ago
There was a proposal in Switzerland (not sure what came off it) that essentially worked like this: * income from capital is taxed extremely highly at a progressive rate * the allowance/exempt amount is high enough to cover most investment based retirement plans * the definition of "income from capital" was left open enough to at least cover most trading and rent-seeking but require explicit narrowing before the law could be passed The goal was pretty much explicitly to tax income from actual labor less and income from simply already having capital a lot more.
avgcorrection 5y ago
> That said I do fully support a far heavier taxation on capital gains if your net worth is in the hundred millionaires. And his famed slogan was “justice for the tens-of millionaires; never shall we suffer under the yoke of the hundreds-of millionaires again”.
zionic 5y ago
> That said I do fully support a far heavier taxation on capital gains if your net worth is in the hundred millionaires. That will be middle class if the gov keeps printing money the way they are. Setting tax rates on net worth is absurd. Taxes should be a flat rate cut of income, and all forms of income should be taxed the same.

wwtrv 5y ago

The reason (or one of) is that it’s easier to avoid paying taxes on capital if you’re rich enough by relocating to another country besides various other schemes which allow to minimize your tax rate. So to a large extent competition between different countries keeps capital gains taxes low.

xyzzyz 5y ago
Or even, you can just consume your wealth instead of investing it, thus avoiding the capital gains tax altogether. I believe that the world where the wealthy invest their capital in productive, growing enterprises, is better than the world where they spend it on yachts and mansions — high capital income gains tax incentivizes the latter.
- mleonhard 5y ago
  > you can just consume your wealth instead of investing it A rich person who does this quickly stops being rich. Few rational rich people will do that. Raising capital gains tax will have the opposite effect: rich peoples' income will go down and they will spend less.
  - xyzzyz 5y ago
    > A rich person who does this quickly stops being rich. No, that depends on how fast you're consuming it. For example, instead of investing most of your excess revenues, you can invest only half of it, and consume the other half. Or, if you are wealthy enough, you can keep consuming without investing for a long time. Lastly, you don't have to stay rich forever, as you can't take your wealth with you to the other side. > Raising capital gains tax will have the opposite effect: rich peoples' income will go down and they will spend less. Unlikely: the rich already spend only rather small fraction of their incomes, and it is the prospects of making more money in future that is keeping them from spending more.

xyzzyz 5y ago

It might do you good to research why in fact most economists believe that, and why most countries’ tax systems reflect that opinion. You will learn a lot about role of incentives, value of investment for general welfare, elasticity of labor supply vs investment, substitution effects for investment vs consumption, and all kinds of interesting topics. Of course, if you’re motivated by punitive instinct, instead of goal of taxing optimally to achieve maximum general welfare (including among low wage earners), you likely won’t find it appealing.

DarylZero 5y ago
Economists are pretty dumb here. If you allow superwealthy parasites to exist, they become "host-controlling" parasites and abolish democracy and establish plutocracy. Economists don't model that and it makes their models useless.

konfusinomicon 5y ago

the lower tax rate is an incentive to invest that money, which causes growth, which in turn causes more tax revenue from that growth. ya, there are people that game that system, but there are far more people who benefit from such a tax rate and arent gaming anyone, just trying to live the dream and move up (to a deluxe apartment, in the skyyy). if anything, the tax on labor should be brought down, not the other way around. we are already taxed enough (atleast in the states we are!)

mleonhard 5y ago
> the lower tax rate is an incentive to invest that money Why do you think an incentive is needed? If the tax rate on investment gains was higher, do you think rich people would reduce the amount of money they invest? What would they do with their money other than investing it? > the tax on labor should be brought down Which government services would you cut to go along with the reduction in government tax revenue? Or would you put those payments on the next generation by borrowing?
- konfusinomicon 5y ago
  the incentive is not necessarily needed, but it does make that avenue to grow wealth much more attractive. if none, the richer would seek out other ways to grow that money that aren't as effective at growing the tax base, and in turn the economy. or they could just sit on it and grow their stack, passing it down as generational wealth, something akin to scrooge mcduck, swimming in his piles of money. as far as removing government services, I can't say exactly which ones I would cut, there are most certainly several, but the federal government needs to take a huge step back and allocate the money and power of many of its departments back into the hands of the state and local governments. there is too much nuance that the federal government doesn't understand about local communities that ends up inflating costs by ridiculous amounts because things are generalized across the entire population, and not tailored for the specific needs of a region.
annoyingnoob 5y ago
The trickle-down approach of cutting taxes for the rich actually created a trickle-up and we have a huge disparity in wealth inequality. Lower taxes on the rich makes them richer at the expense of everyone else.

SilasX 5y ago

Because the capital gains tax is only a portion of the tax applied to capital income. When you invest in a venture, you pay taxes on the profits. You pay taxes on the dividends it throws off. Whatever accumulated value remains when you sell your share gets hit by capital gains tax. The "tax on money you made with money you have" is the combination of the profit tax, dividend tax, and capital gains tax. That's not to say the total taxation of capital income is or isn't unfair (or is or isn't double/triple taxed), but it's misleading to just look at capital gains as an income source in isolation.

mleonhard 5y ago
> When you invest in a venture, you pay taxes on the profits. You pay taxes on the dividends it throws off. Whatever accumulated value remains when you sell your share gets hit by capital gains tax. This is not true. When you invest in a venture, hold its stock for 60 days, and it pays you its profit, this income is considered "qualified dividends" and is subject to capital gains tax. > The "tax on money you made with money you have" is the combination of the profit tax, dividend tax, and capital gains tax. What are "profit tax" and "dividend tax"? These are not terms used in USA. From the IRS rules: > Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates. https://www.irs.gov/taxtopics/tc404 https://www.irs.gov/taxtopics/tc404 > Qualified Dividends > Holding period. You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. https://www.irs.gov/publications/p550#en_US_2020_publink100010075 https://www.irs.gov/publications/p550#en_US_2020_publink1000...
- SilasX 5y ago
  >This is not true. When you invest in a venture, hold its stock for 60 days, and it pays you its profit, this income is considered "qualified dividends" and is subject to capital gains tax. And? Okay, that's a) a special case, and b) confirmation of the point I was making that you get taxed on dividends (and on capital gains) only as one piece of total "capital income taxation". (The fact that something is taxed at the capital gains rate does not somehow mean that the dividends were not taxed, as you seem to be implying.) >What are "profit tax" and "dividend tax"? These are not terms used in USA. It sounds like you're just trying to be difficult and uncurious at the cost of a productive discussion. I was speaking in the most lay, general terms. Profits are taxed. Dividends are taxed. In normal, ordinary usage of English, one can refer to those taxes as "profit taxes" and "dividend taxes", even if the technical term is different. (Your native language probably does the same.) If I go through you posting history, am I going to find you always using the technical term? Yes, the "profit tax" I referred to would be more technically referred to as the corporate income tax. The dividend tax also might have a more technically accurate term, similarly irrelevant to this context or point. >Whereas ordinary dividends are taxable as ordinary income, qualified dividends that meet certain requirements are taxed at lower capital gain rates. I don't know why you think this is relevant to my point. It just means sometimes the rate is different from "the" capital gains tax. In no way does it refute that the events of profit and dividend payment are subject to a separate tax, making the "capital gains tax" an incomplete picture of the tax rate on capital income. If you agree with that latter point, then you agree with my comment, and you're just cluttering the discussion with misdirection and red herrings.

rhino369 5y ago

It's hard to tax them at effectively the same rate. One issue you have to consider is inflation. If you buy a house in 1980 for 100k and sell it for $314k in 2020, you didn't really make any real income. You can adjust for inflation, so it shouldn't stop you from trying to make capital gains the same as ordinary income. But you do need to adjust. Also, some types of assets subject to capital gains are separately taxed. If you own corporate stock, that corp might be paying a lot of income tax. That reduces the value of the stock, which means you are indirectly being taxed. Sometimes that indirect tax is basically a drop in the bucket compared to capital gains (holding Amazon or Uber long term), but for some assets it could be quite significant. But one big reason is that the upper middle class are easier marks and hold much less power than the capital class.

hnbad 5y ago

> Why does anyone think it's OK to pay less on money you made with money you have? If you know this you may think everybody knows this but a lot of people don't and find it highly unintuitive, so I'm going to spell it out: In a very broad sense there are two definitions of "justice" and people will think of one or the other as obviously correct. On the one hand you have people who think justice means that everyone can take what they need and give what they can. These people usually think that humans are cooperative by nature and are intrinsically motivated to do good by others as long as they aren't taken advantage of, i.e. as long as everyone else also gives as much as they can and only takes what they need. On the other hand you have people who think justice means that everyone gets what they deserve. These people usually think that humans are competitive by nature and are intrinsically motivated to take advantage of others and need to be kept in their place as defined by the hierarchy they view as natural and self-evident. You seem to be part of the former group. The people who think "it's OK to pay less on money you made with money you have" are part of the latter. Neither of the two views is "wrong" in a meaningful way, they are just fundamentally incompatible when it comes to pushing for what they see as "good" or "just".

DarylZero 5y ago
Not a very useful framework at all, more of a caricature. Big problem with the economy is that it rewards zero-sum leeches rather than compensate the sacrifice of labor. And the superwealthy are always people who figured out or inherited a way to be parasites.
- hnbad 5y ago
  > Not a very useful framework at all, more of a caricature. What an odd sentence to be followed by describing the extremely rich as "leeches" and "parasites". Sarcasm aside, I think the problem with your analysis is that it doesn't account for people who don't benefit from the system being extremely invested in maintaining it, especially those who understand that they have no realistic chances of coming out on top. There are a lot of hierarchical mindsets that can be deconstructed given the right exposure and sufficient time, but the belief in the necessity, inevitability and moral good of hierarchies themselves is extremely difficult to unlearn and can be found in most parts of the political spectrum (though of course being overrepresented in some groups, e.g. Evangelical Christian conservatives). Most people therefore take some hierarchies for granted while being in disbelief that anyone could take the ones they reject seriously. You can believe in absolute meritocracy without believing in "race realism" for example.

Symmetry 5y ago

One clever plan to do that I've heard is the idea of a progressive consumption tax. That is, you have the existing income tax structure but you make all savings in banks or brokerages or whatever tax deductible but tax anything you withdraw from them as regular income. This would tend to have some nice properties with letting people smooth consumption, getting rid of special items in our tax code for particular sorts of savings, and solve the problem of billionaires borrowing against their stock to live without having to pay taxes. You do have to keep having a special case for housing which is both a form of consumption and a savings vehicle and a few others but it looks like it would be a bit simpler and fairer.

ratboy666 5y ago

1 - I have already paid tax on the money. 2 - In making the investment, I stand to lose (or gain) 3 - The lost money is not an expense Given all of this, I expect that the capital gain rate is specified as lower to encourage me to invest. If the capital gain rate were higher than the income rate, I would not make risky investments. I could use my money to invest in my own business -- where I have expenses available. And, take an income. Any loss would then be an expense. I just wouldn't invest in other business. How would you encourage investment behavior?

ryandrake 5y ago
> 1 - I have already paid tax on the money. Money is taxed over and over all the time. Your income gets taxed, then it's taxed again when you spend it, then it's taxed again when the store owner reports it as earnings, and on and on. There's no rule that once a dollar is taxed it shouldn't be taxed again. But, for some reason, it's only shareholders who complain about how unfair "double taxation" is [1]. 1: https://www.thepatriotaxe.com/spot-the-double-taxation/ https://www.thepatriotaxe.com/spot-the-double-taxation/
- ratboy666 5y ago
  I like your cartoon. The difference with the dividend flow is that the payment was made... not for a good or service (which all the other flows have in common) but tax on a repayment. Not a fixed, negotiated payment either... A repayment that is, interestingly, not in the control of the shareholder. Thus differing from a loan. I would no longer purchase stocks -- I would then prefer bonds (loans). Which means I would take risk into account, and this would stifle (some) innovation. I don't mind taxation at all!

mortehu 5y ago

Lower capital gains and qualified dividend rates are tied to entities that pay corporate taxes. As an example, REITs do not pay corporate taxes, so their dividends are treated mostly as ordinary income.