4 ms·

If you're poor and only have your work to sell, you'll get taxed progressively until you're rich enough to save money and invest. Meaning your effective tax rat

If you're poor and only have your work to sell, you'll get taxed progressively until you're rich enough to save money and invest. Meaning your effective tax rate increases as you get reasonably rich (from work) and then when you're really rich, the rate slowly decreases down to the level of capital gain tax. I don't understand why this is accepted. I find this revolting as I'm in the position to benefit (my tax rate going below that of people far less wealthy than me).

chii 4y ago
capital gains is income from investing, which is how new productivity gets funded (via buying new plant and equipment, etc). Encouraging investments is not a bad idea. Of course, it's possible to be too pro-investment, but a 25% flat rate on investment based income is not too low, but not too high. It's slightly lower than wage income as an incentive for people to save and invest.
- rcMgD2BwE72F 4y ago
  >capital gains is income from investing, which is how new productivity gets funded (via buying new plant and equipment, etc). How does that justify taxing work more than capital? For people with high salary, any extra income (from work) is taxed almost 2x that of capital gains. Also, only a small % of investment actually goes funding productivity. Most is just rich people's money changing hands, base only on speculation with zero regards for impact on businesses/society. >a 25% flat rate on investment based income is not too low, but not too high Do you have a study on this, or is this your opinion?
  - chii 4y ago
    > a study on this, or is this your opinion? it is an opinion. The policy setting is not a fact based research, but ideologically based opinion. i would argue that any research is basically paid opinion pieces to try and convince someone on the fence. > How does that justify taxing work more than capital? the justification is in my comment above - it is taxed less than wage income to encourage people to spend their money investing, rather than spending it in consumption.
    - BlargMcLarg 4y ago
      But capital gains tax alone doesn't make the entire equation of risk vs reward, unless you're putting capital gains tax all the way to 100%. Even if it was 90%, if the risk was zero, the time investment was near zero and the reward was your assets going up by 4% post-tax, you'd bet people would still invest, regardless of income tax.
      - chii 4y ago
        > if the risk was zero no investment has zero risk. in any case, the 90% tax would discourage the investment for some people - because that investment might not return enough to be worth the opportunity cost of consumption instead. The point is, more investments means more possible productivity in the future, and any consumption->investment switch is good. This is the same calculus as wage tax of course, but since most people don't have a choice but to work for a wage, they don't need to be incentivized to work by lower taxes.
        nybble41 4y ago
        > and any consumption->investment switch is good Not always: It is possible to over-invest and under-consume. Don't forget that the purpose of investment in the present is to enable consumption in the future. In the extreme case, a society which only invested and never consumed would starve to death. There is a natural balance point, and moving away from that point in either direction results in a less efficient allocation of resources.
        chii 4y ago
        > It is possible to over-invest and under-consume. certainly is, but i would argue that more people under-invest and over-consume! I would also argue that the minimal amount of consumption (let's say, you keep yourself alive, just barely), and maximizing your investment amount, is the best outcome for your future, and is the most efficient allocation of resources.
        4y ago
  - littlecranky67 4y ago
    This argument is brought up over and over, but people forget that companies in Germany pay roughly 30% (depending on county) tax on their profits. As a solo entrepreneur with a registered company, that would mean if I make 100€ of profit, 30€ company tax are deducted, and then 25% of the remaining 70€ as capital gains tax when I pay myself the dividends - so I am left with ~53€. That is 47% tax in total, which is actually higher than the maximum personal income tax bracket (42%).
    - chii 4y ago
      yes, this is double taxation, which i don't personally like. In australia, there's franked dividends, which basically passes the tax credits down to shareholders (effectively, companies pay a 30% tax, but give that same dollar amount as credits to shareholders, who can then use it as tax paid in lieu). See https://www.investopedia.com/terms/f/frankeddividend.asp https://www.investopedia.com/terms/f/frankeddividend.asp
    - leipert 4y ago
      But if you get dividends or profits from stock as a private person that doesn’t apply and you just pay capital gains. If you have a company or are a solo entrepreneur you can also reduce your profits by expensing things via the company (tech, cars, etc.) or investing further.
      - littlecranky67 4y ago
        I does apply equally if you got stocks - at least on a national level as AG (Aktiengesellschaft in Germany) pay equal amount of corporate taxes. But yes, it got kind of skewed with international companies like amazon etc. paying no taxes at all. But we should fix that (them not paying any corporate tax), and not punish small shops like me (again, I am a solo-enterpreneur/developer - if you tax me 30% corporate tax + 42% on dividends, I will leave germany next day).
        leipert 4y ago
        I am just wondering which kind of „Selbstständigkeit“/incorporation you are talking about. If you are solo-selbstständig no special tax of 30% applies, maybe Gewerbesteuer which is much lower. If you are running a GmbH or UG or GbR things might be different, but then why don’t you keep assets inside of the entity? Then the entity could grow its assets and you could only take what you need and save some assets for the future. (Assuming you make more than what you need to maintain your lifestyle)
- pydry 4y ago
  >Encouraging investments is not a bad idea. It definitely is if theres a glut of capital. Which there is and has been for at least a decade.
- bckygldstn 4y ago
  By the same logic, income tax comes from working, which is how productivity gets done! Besides, what are the wealthy going to do with their excess wealth except invest it?
  - ruggeri 4y ago
    That might be true if they couldn't move wealth outside the country. But a concern is that those with savings might move money out of the country to invest in jurisdictions with lower capital gains tax. One view is that this tax jurisdiction forum-shopping creates a race to the bottom.
    - snovv_crash 4y ago
      It's the same for workers, they can just perform their labour outside of the country and they would create a much larger problem.
- idiotsecant 4y ago
  >investing, which is how new productivity gets funded As opposed to working, which is how productivity actually happens.
stjohnswarts 4y ago
I feel the same way. Income is income. Hell if I lose my $150k a year job and take a $120k job just because I need money coming in I can't get a $30k "capital losses" advantage on my taxes like I can with stocks. Tax system is rigged against middle and lower classes everywhere it seems.

chii 4y ago

capital gains is income from investing, which is how new productivity gets funded (via buying new plant and equipment, etc). Encouraging investments is not a bad idea. Of course, it's possible to be too pro-investment, but a 25% flat rate on investment based income is not too low, but not too high. It's slightly lower than wage income as an incentive for people to save and invest.

rcMgD2BwE72F 4y ago
>capital gains is income from investing, which is how new productivity gets funded (via buying new plant and equipment, etc). How does that justify taxing work more than capital? For people with high salary, any extra income (from work) is taxed almost 2x that of capital gains. Also, only a small % of investment actually goes funding productivity. Most is just rich people's money changing hands, base only on speculation with zero regards for impact on businesses/society. >a 25% flat rate on investment based income is not too low, but not too high Do you have a study on this, or is this your opinion?
- chii 4y ago
  > a study on this, or is this your opinion? it is an opinion. The policy setting is not a fact based research, but ideologically based opinion. i would argue that any research is basically paid opinion pieces to try and convince someone on the fence. > How does that justify taxing work more than capital? the justification is in my comment above - it is taxed less than wage income to encourage people to spend their money investing, rather than spending it in consumption.
  - BlargMcLarg 4y ago
    But capital gains tax alone doesn't make the entire equation of risk vs reward, unless you're putting capital gains tax all the way to 100%. Even if it was 90%, if the risk was zero, the time investment was near zero and the reward was your assets going up by 4% post-tax, you'd bet people would still invest, regardless of income tax.
    - chii 4y ago
      > if the risk was zero no investment has zero risk. in any case, the 90% tax would discourage the investment for some people - because that investment might not return enough to be worth the opportunity cost of consumption instead. The point is, more investments means more possible productivity in the future, and any consumption->investment switch is good. This is the same calculus as wage tax of course, but since most people don't have a choice but to work for a wage, they don't need to be incentivized to work by lower taxes.
      - nybble41 4y ago
        > and any consumption->investment switch is good Not always: It is possible to over-invest and under-consume. Don't forget that the purpose of investment in the present is to enable consumption in the future. In the extreme case, a society which only invested and never consumed would starve to death. There is a natural balance point, and moving away from that point in either direction results in a less efficient allocation of resources.
        chii 4y ago
        > It is possible to over-invest and under-consume. certainly is, but i would argue that more people under-invest and over-consume! I would also argue that the minimal amount of consumption (let's say, you keep yourself alive, just barely), and maximizing your investment amount, is the best outcome for your future, and is the most efficient allocation of resources.
        4y ago
- littlecranky67 4y ago
  This argument is brought up over and over, but people forget that companies in Germany pay roughly 30% (depending on county) tax on their profits. As a solo entrepreneur with a registered company, that would mean if I make 100€ of profit, 30€ company tax are deducted, and then 25% of the remaining 70€ as capital gains tax when I pay myself the dividends - so I am left with ~53€. That is 47% tax in total, which is actually higher than the maximum personal income tax bracket (42%).
  - chii 4y ago
    yes, this is double taxation, which i don't personally like. In australia, there's franked dividends, which basically passes the tax credits down to shareholders (effectively, companies pay a 30% tax, but give that same dollar amount as credits to shareholders, who can then use it as tax paid in lieu). See https://www.investopedia.com/terms/f/frankeddividend.asp https://www.investopedia.com/terms/f/frankeddividend.asp
  - leipert 4y ago
    But if you get dividends or profits from stock as a private person that doesn’t apply and you just pay capital gains. If you have a company or are a solo entrepreneur you can also reduce your profits by expensing things via the company (tech, cars, etc.) or investing further.
    - littlecranky67 4y ago
      I does apply equally if you got stocks - at least on a national level as AG (Aktiengesellschaft in Germany) pay equal amount of corporate taxes. But yes, it got kind of skewed with international companies like amazon etc. paying no taxes at all. But we should fix that (them not paying any corporate tax), and not punish small shops like me (again, I am a solo-enterpreneur/developer - if you tax me 30% corporate tax + 42% on dividends, I will leave germany next day).
      - leipert 4y ago
        I am just wondering which kind of „Selbstständigkeit“/incorporation you are talking about. If you are solo-selbstständig no special tax of 30% applies, maybe Gewerbesteuer which is much lower. If you are running a GmbH or UG or GbR things might be different, but then why don’t you keep assets inside of the entity? Then the entity could grow its assets and you could only take what you need and save some assets for the future. (Assuming you make more than what you need to maintain your lifestyle)
pydry 4y ago
>Encouraging investments is not a bad idea. It definitely is if theres a glut of capital. Which there is and has been for at least a decade.
bckygldstn 4y ago
By the same logic, income tax comes from working, which is how productivity gets done! Besides, what are the wealthy going to do with their excess wealth except invest it?
- ruggeri 4y ago
  That might be true if they couldn't move wealth outside the country. But a concern is that those with savings might move money out of the country to invest in jurisdictions with lower capital gains tax. One view is that this tax jurisdiction forum-shopping creates a race to the bottom.
  - snovv_crash 4y ago
    It's the same for workers, they can just perform their labour outside of the country and they would create a much larger problem.
idiotsecant 4y ago
>investing, which is how new productivity gets funded As opposed to working, which is how productivity actually happens.

stjohnswarts 4y ago

I feel the same way. Income is income. Hell if I lose my $150k a year job and take a $120k job just because I need money coming in I can't get a $30k "capital losses" advantage on my taxes like I can with stocks. Tax system is rigged against middle and lower classes everywhere it seems.