5 ms·

The fact that capital gains are differently taxed than worker income is further evidence that the game is stacked in favor of the rich.

rgbrgb 2y ago
I don't disagree with your broader point, but isn't the lower cap gains tax rate also incentive design to reward investment over pure consumption?
- oooyay 2y ago
  Yes, but it very much matters why you're doing it. Someone who doesn't have enough money to functionally retire, even if they're wealthy, is doing it to get closer to a retirement number. "Rich" people as described here, that make a majority of their money on investment ROI, are playing an entirely different ball game with the same mechanics.
- skizm 2y ago
  Specifically long term investment, which is why you only get the benefit of lower taxes after a year.
  - SR2Z 2y ago
    And we need to reward this behavior SO MUCH that we'll drop more than half of the taxes? People will invest as long as the taxes aren't worse than income taxes. We don't need this much "encouragement" because stock market returns are high enough already.
- roncesvalles 2y ago
  I don't see how that follows. A salaried person has to bootstrap a company using income-taxed money, whereas a business person can engage in creative accounting whereby an existing business can invest in a new business practically tax free. If your average income tax is 35%, you're paying a ~50% premium to acquire the same assets as someone who rolls over money from business to business. This includes real estate and everything else.
AnthonyMouse 2y ago
It does, however, invalidate the original argument, which was that tariffs are being promoted by the rich because it's better for them than the existing income tax. Since the existing income tax has lower rates for long-term capital gains than earned income, and the rich defer taxes in various ways or use various tax shelters so they're not even paying that, and payroll taxes (~40% of federal revenue) have a flat rate with an income cap, the conclusion then becomes completely the opposite. They don't pay the income tax as it is but they'd have to pay the tariffs like anybody else.
- bayarearefugee 2y ago
  > They don't pay the income tax as it is but they'd have to pay the tariffs like anybody else. As a percentage of their wealth they will pay a lot less than the middle class or poor do when it comes to any consumption tax or tariff. Because once again, the system is stacked in their favor.
  - deleted 2y ago
    [deleted]
  - AnthonyMouse 2y ago
    Neither sales nor income taxes are "a percentage of their wealth" in any case. The issue is that in practice their declared income isn't inherently higher than their spending and it's often lower, so the argument that the existing income tax would collect more from them than a consumption tax is erroneous.
  - throw678937 2y ago
    [dead]
- sangnoir 2y ago
  > It does, however, invalidate the original argument, which was that tariffs are being promoted by the rich because it's better for them than the existing income tax If I were to steelman that argument, I'd say getting rid of income tax takes the wind out of the sails of the "wealth tax" / "tax the billionaires" / "fix the loopholes" argument which seem to be gathering steam. That it kills or underfunds government social-safety programs is a secondary bonus, and using it as an excuse for decapitating safety/oversight/enforcement agencies who get in the way of higher profits via "overregulation" is a tertiary bonus for those that believe in starving the beast that is central government.
amazingamazing 2y ago
any country that doesn't incentivize investment will quickly languish. what the usa should do is allow pre-tax income to be invested, so poor people can also take advantage.
- dboreham 2y ago
  > pre-tax income to be invested Which of course, they do.
  - nine_k 2y ago
    Interestingly, some do. The thought of making some money by buying a small amount of some high-growth stocks, with fractional investment being a thing for several years, energizes many small-time users of Robinhood and similar services. It's still a better gamble than buying lottery tickets, which many poor folks do a lot, sadly. Poor people are people like us (or sometimes are us), some are quite prudent and would love to make an investment that pays, even if it's small.
- wing-_-nuts 2y ago
  >any country that doesn't incentivize investment will quickly languish And yet the US is pretty unique amongst countries in treating capital gains as wholly different from earned income, and taxed significantly less if at all. Even as someone who benefits from it, I've yet to see a good argument as to why a working stiff should pay more taxes than someone who makes their income from investments. That's inherently regressive.
  - amazingamazing 2y ago
    because investments result in growth, which results in revenue which results in more being taxed in the net. consider all of these VCs throwing away money on things like uber. would it be better if they just kept it in a savings account (because of no financial benefit of investing)? most investments don't pay off, so you need a push, the push is that long term capital investments are taxed less.
santoshalper 2y ago
I don't think it does invalidate the argument. As a cohort, wealthy people spend a much lower percentage of their total wealth than middle or lower class people do. Any spending-based tax (sales tax, tariffs) will be much better for wealthy people than the equivalent income or wealth based tax.
- AnthonyMouse 2y ago
  "The rich" are really two separate groups. The majority of "the 1%" isn't billionaires, it's cardiologists etc. making mid six figures rather than nine, and those people do actually spend most of their income. They buy a big house and a new luxury car every two years and a boat and eat at fancy restaurants every night, and make enough to do that but not enough to do that and have much left over. The people who don't are the billionaires or nearly billionaires, but they also don't pay the existing income tax because they have teams of tax lawyers and deploy international shenanigans. And then an "income tax" which they pay on $20,000 of declared income is not actually taxing them more than a consumption tax at the same nominal rate on all the cars and boats the billionaire buys the same as the cardiologist does.
rayiner 2y ago
Free trade is one of those aspects of the game stacked in favor of the rich. It allows US companies to bypass all the protections for American workers and have things built cheaply overseas using foreign labor. There’s a reason the American left opposed free trade until five minutes ago: https://reason.com/2016/03/10/bernie-sanders-free-trade-mythology/ https://reason.com/2016/03/10/bernie-sanders-free-trade-myth...
- stretchwithme 2y ago
  The rich are always behind every change that people don't like or understand. The argument used to be that low tariffs enabled shifting work to where labor and environmental laws were weaker, reducing demand for American labor. Effectively subsidizing pollution and human suffering. But then someone came along and agreed. Can't believe something that he agrees with.
  - segfaultex 2y ago
    This is a bit reductive. The opposition to tariffs doesn't stem from a kneejerk reaction to a certain someone wanting them. It comes from economic consensus. Implementing targeted tariffs in a way that spurs domestic labor and secures vital industries is common practice. What's not common practice or beneficial are the broad tariffs we're levying, which come from a place of ignorance. The implementers literally didn't think retaliation would happen, but it is/will. All these are accomplishing is increasing the cost of goods.
    - rayiner 2y ago
      > The opposition to tariffs doesn't stem from a kneejerk reaction to a certain someone wanting them. It comes from economic consensus. Democrats think lots of things that are "economic consensus" do not accurately describe how the world works in practice, or fails to capture important values. "Economic consensus" also is that VAT is the most efficient form of taxation and that capital gains taxes are harmful.
      - 2y ago
paulddraper 2y ago
Correct.
stuckkeys 2y ago
Sounds like an episode from the Jackal.
tim333 2y ago
Not entirely. Non rich people own houses. If your average person buys a house for 200k, it goes up to 400k and then they have to move to an identical house also costing 400k, getting a bill for 200k of income is going to annoy them. Just one example why gains are taxed differently.
- skyyler 2y ago
  >If your average person buys a house for 200k, it goes up to 400k and then they have to move Maybe we should be questioning a system that demands a house double in value in a few years.

rgbrgb 2y ago

I don't disagree with your broader point, but isn't the lower cap gains tax rate also incentive design to reward investment over pure consumption?

oooyay 2y ago
Yes, but it very much matters why you're doing it. Someone who doesn't have enough money to functionally retire, even if they're wealthy, is doing it to get closer to a retirement number. "Rich" people as described here, that make a majority of their money on investment ROI, are playing an entirely different ball game with the same mechanics.
skizm 2y ago
Specifically long term investment, which is why you only get the benefit of lower taxes after a year.
- SR2Z 2y ago
  And we need to reward this behavior SO MUCH that we'll drop more than half of the taxes? People will invest as long as the taxes aren't worse than income taxes. We don't need this much "encouragement" because stock market returns are high enough already.
roncesvalles 2y ago
I don't see how that follows. A salaried person has to bootstrap a company using income-taxed money, whereas a business person can engage in creative accounting whereby an existing business can invest in a new business practically tax free. If your average income tax is 35%, you're paying a ~50% premium to acquire the same assets as someone who rolls over money from business to business. This includes real estate and everything else.

AnthonyMouse 2y ago

It does, however, invalidate the original argument, which was that tariffs are being promoted by the rich because it's better for them than the existing income tax. Since the existing income tax has lower rates for long-term capital gains than earned income, and the rich defer taxes in various ways or use various tax shelters so they're not even paying that, and payroll taxes (~40% of federal revenue) have a flat rate with an income cap, the conclusion then becomes completely the opposite. They don't pay the income tax as it is but they'd have to pay the tariffs like anybody else.

bayarearefugee 2y ago
> They don't pay the income tax as it is but they'd have to pay the tariffs like anybody else. As a percentage of their wealth they will pay a lot less than the middle class or poor do when it comes to any consumption tax or tariff. Because once again, the system is stacked in their favor.
- deleted 2y ago
  [deleted]
- AnthonyMouse 2y ago
  Neither sales nor income taxes are "a percentage of their wealth" in any case. The issue is that in practice their declared income isn't inherently higher than their spending and it's often lower, so the argument that the existing income tax would collect more from them than a consumption tax is erroneous.
- throw678937 2y ago
  [dead]
sangnoir 2y ago
> It does, however, invalidate the original argument, which was that tariffs are being promoted by the rich because it's better for them than the existing income tax If I were to steelman that argument, I'd say getting rid of income tax takes the wind out of the sails of the "wealth tax" / "tax the billionaires" / "fix the loopholes" argument which seem to be gathering steam. That it kills or underfunds government social-safety programs is a secondary bonus, and using it as an excuse for decapitating safety/oversight/enforcement agencies who get in the way of higher profits via "overregulation" is a tertiary bonus for those that believe in starving the beast that is central government.

amazingamazing 2y ago

any country that doesn't incentivize investment will quickly languish. what the usa should do is allow pre-tax income to be invested, so poor people can also take advantage.

dboreham 2y ago
> pre-tax income to be invested Which of course, they do.
- nine_k 2y ago
  Interestingly, some do. The thought of making some money by buying a small amount of some high-growth stocks, with fractional investment being a thing for several years, energizes many small-time users of Robinhood and similar services. It's still a better gamble than buying lottery tickets, which many poor folks do a lot, sadly. Poor people are people like us (or sometimes are us), some are quite prudent and would love to make an investment that pays, even if it's small.
wing-_-nuts 2y ago
>any country that doesn't incentivize investment will quickly languish And yet the US is pretty unique amongst countries in treating capital gains as wholly different from earned income, and taxed significantly less if at all. Even as someone who benefits from it, I've yet to see a good argument as to why a working stiff should pay more taxes than someone who makes their income from investments. That's inherently regressive.
- amazingamazing 2y ago
  because investments result in growth, which results in revenue which results in more being taxed in the net. consider all of these VCs throwing away money on things like uber. would it be better if they just kept it in a savings account (because of no financial benefit of investing)? most investments don't pay off, so you need a push, the push is that long term capital investments are taxed less.

santoshalper 2y ago

I don't think it does invalidate the argument. As a cohort, wealthy people spend a much lower percentage of their total wealth than middle or lower class people do. Any spending-based tax (sales tax, tariffs) will be much better for wealthy people than the equivalent income or wealth based tax.

AnthonyMouse 2y ago
"The rich" are really two separate groups. The majority of "the 1%" isn't billionaires, it's cardiologists etc. making mid six figures rather than nine, and those people do actually spend most of their income. They buy a big house and a new luxury car every two years and a boat and eat at fancy restaurants every night, and make enough to do that but not enough to do that and have much left over. The people who don't are the billionaires or nearly billionaires, but they also don't pay the existing income tax because they have teams of tax lawyers and deploy international shenanigans. And then an "income tax" which they pay on $20,000 of declared income is not actually taxing them more than a consumption tax at the same nominal rate on all the cars and boats the billionaire buys the same as the cardiologist does.

rayiner 2y ago

Free trade is one of those aspects of the game stacked in favor of the rich. It allows US companies to bypass all the protections for American workers and have things built cheaply overseas using foreign labor. There’s a reason the American left opposed free trade until five minutes ago: https://reason.com/2016/03/10/bernie-sanders-free-trade-mythology/ https://reason.com/2016/03/10/bernie-sanders-free-trade-myth...

stretchwithme 2y ago
The rich are always behind every change that people don't like or understand. The argument used to be that low tariffs enabled shifting work to where labor and environmental laws were weaker, reducing demand for American labor. Effectively subsidizing pollution and human suffering. But then someone came along and agreed. Can't believe something that he agrees with.
- segfaultex 2y ago
  This is a bit reductive. The opposition to tariffs doesn't stem from a kneejerk reaction to a certain someone wanting them. It comes from economic consensus. Implementing targeted tariffs in a way that spurs domestic labor and secures vital industries is common practice. What's not common practice or beneficial are the broad tariffs we're levying, which come from a place of ignorance. The implementers literally didn't think retaliation would happen, but it is/will. All these are accomplishing is increasing the cost of goods.
  - rayiner 2y ago
    > The opposition to tariffs doesn't stem from a kneejerk reaction to a certain someone wanting them. It comes from economic consensus. Democrats think lots of things that are "economic consensus" do not accurately describe how the world works in practice, or fails to capture important values. "Economic consensus" also is that VAT is the most efficient form of taxation and that capital gains taxes are harmful.
    - 2y ago

paulddraper 2y ago

Correct.

stuckkeys 2y ago

Sounds like an episode from the Jackal.

tim333 2y ago

Not entirely. Non rich people own houses. If your average person buys a house for 200k, it goes up to 400k and then they have to move to an identical house also costing 400k, getting a bill for 200k of income is going to annoy them. Just one example why gains are taxed differently.

skyyler 2y ago
>If your average person buys a house for 200k, it goes up to 400k and then they have to move Maybe we should be questioning a system that demands a house double in value in a few years.