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On first glance that's the case, in practice they clamp down hardest on middle and professional classes. The rich borrow against gains or pay long term capital

• grunder_advice 1y ago
  You are not wrong, but that situation won't change if you moved to another taxation scheme. The poor are too poor to have much to take from them. So they go after those who are a rung or two above to tax. The dynamic does not change irrespective of taxation system.
• debug-desperado 1y ago
  "The scam of income tax is that it's progressive on paper but not in practice." Perfectly put. It's always bothered me that the tax brackets don't continue on in a logarithmic fashion, e.g. new brackets at 1.5 million, 15 million, 150 million, etc.
  • mindslight 1y ago
    Focusing on brackets for earned income is a distraction. Those only apply to relatively rare sports stars, actors, etc. The real cheats are things like tax rates being lower for capital gains, and that people receiving rental/royalty income can subtract all of their expenses (whereas wage earners cannot).
    • atmavatar 1y ago
      Arguably a bigger cheat is that if you have enough wealth tied up in stocks, you can realize capital gains for the sake of taking out loans to live off of without having to realize the gains for the sake of taxes. Then, you can pass those investments onto your inheritors with a stepped-up cost basis so they don't have to pay tax on the gains, either.
      • ty6853 1y ago
        Yes even though I'm no fan of taxes, allowing borrowing against gains is clearly "realizing" them, it is an absolutely absurd fiction that allows this to be untaxed.
      • debug-desperado 1y ago
        Ah yes: buy, borrow, and die. It definitely works. I don't think stepped-up basis should go away though, otherwise it's just the government getting a second cut of the inflation it causes. The bigger issue for society is that our equity markets just don't have any real risk of losing your lunch anymore, so these strategies emerge.
      • mindslight 1y ago
        Sure, that was already mentioned and I skipped mentioning it again because focusing too much on that one thing is likely to distract from the overall problem. It's not bigger, it's just different. It has also been made less attractive now that interest rates exist again (at least for the time being until Krasnov gets his hands on that lever of market manipulation) (another one in the same vein is that when you donate an appreciated asset, you get a tax deduction of the unrealized value)
• Aloisius 1y ago
  > The rich borrow against gains That they have to pay back with interest. This made a little sense except for short-term loans when one had liquidity issues when interest rates were close to zero or in very, very limited circumstances where someone knew they were close to death - but that more has to do with the broken way we handle taxing inheritance. With the prime rate is 7.5% today, it makes far less sense. > "re-invest" (no profit) into durable assets for their business Capital expenditures aren't subtracted from revenue. They have no effect on profit.
  • ty6853 1y ago
    >Capital expenditures aren't subtracted from revenue. They have no effect on profit. This is a cheap slight of hand to confuse unsophisticated readers. It has effect on taxable profit since much of cap ex is deductible.
    • Aloisius 1y ago
      > since much of cap ex is deductible Since when? Last I checked, capex was not deductible. You can deduct depreciation of assets over time, but that's not going to offset profit to create a loss unless you're spending far more money than you profited (by say, taking out loans). There is the expiring bonus depreciation provision on a limited limited class of assets which would let you create a loss, but even that's subject to recapture if you sell those assets.