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Income taxes are higher than capital gains taxes. This isn't based on economic theory or anything, it's just a political choice we have made as a country. We'v

Income taxes are higher than capital gains taxes. This isn't based on economic theory or anything, it's just a political choice we have made as a country. We've chosen to reward those who move money around and trade capital more than we reward those who labor. And this at a time when, supposedly, the country is trying to increase its ability to build things. I thought this specific fact worth mentioning.

thesmtsolver 1y ago
1. Only long term capital gains are lower than income tax 2. Long term investors invest in things that great new jobs, it is not just moving capital around.
- cgannett 1y ago
  3. Private equity has made long term investment a poor mans game.
- Buttons840 1y ago
  "Long term" is 1 year, right? What a joke. Everyone can judge for themselves if 1 year is "long term".
  - thesmtsolver 1y ago
    Do you have another suggestion to address the core problem of how to inventive long term investments?
- slt2021 1y ago
  its not only capital gains, it is the property and the system of shells and offshores that hides assets https://x.com/Finance_Nerd_/status/1952063667458978160 https://x.com/Finance_Nerd_/status/1952063667458978160 https://x.com/Finance_Nerd_/status/1952063659599106545 https://x.com/Finance_Nerd_/status/1952063659599106545
  - thesmtsolver 1y ago
    So you are saying only ultra rich benefit from long term capital gains taxes? Any data on that?
    - slt2021 1y ago
      please refer to the tweets I quoted for receipts
jparishy 1y ago
We're on the same wavelength. To me, I find it hard not to think about our explosive growth as a country happening at the same time we refuse to expand representation of the public. These charts are very frustrating to me: https://www.congress.gov/crs-product/IN11547 https://www.congress.gov/crs-product/IN11547 The people in power do not want to lose control, but clearly have no idea how to manage the scale of what has been built. There's an American leadership crisis going on right now that is hard to ignore, both in public and private life.
- Buttons840 1y ago
  We should go back to having the house filled with 1 representative per 10,000 people. Also, we should do something new and have all the representatives in the house be chosen by lottery. Normal people are not represented in congress, because politicians are not normal people, but if we chose people by lottery we would have a branch of congress filled with normal people. They would have time enough to study the issues. Some of them would be stupid, but this is no worse than the current crop of politicians.
  - zackmorris 1y ago
    I don't normally reply twice to the same thread, but I just wanted to say that I wish that the US had been founded with a co-equal branch of government comprised of people drawn via lottery (probably voluntary) like in ancient Greece: https://en.wikipedia.org/wiki/Sortition https://en.wikipedia.org/wiki/Sortition I believe that this was one of the great mistakes by our founders. I'm sure that many suggested it, but unfortunately their ideas were suppressed due to our roots in slavery, colonialism and aristocracy (meritocracy today).
    - vondur 1y ago
      Ancient Greek politics were chaotic and violent, especially cities like Athens.
      - moshun 1y ago
philipallstar 1y ago
If we want to build things we need capital investment and a reward for risking capital.
- deleted 1y ago
  [deleted]
- recursivedoubts 1y ago
  Yes. And that reward should be called "profits" delivered as dividends.
- Analemma_ 1y ago
  This reply is a complete non sequitur. Taxing capital gains as ordinary income does not mean the removal of a "reward for risking capital" because the potential upside is still unlimited compared to working a wage job.
- maxsilver 1y ago
  We need labor more, and labor investment always involves substantially more risk for that person, than any capital investment ever carries.
jandrewrogers 1y ago
This is simply incorrect. To make the tax incidence on wages and capital gains equivalent, you must first deduct losses due to inflation and risk. For wages, inflation and risk round to zero. For long-term capital gains inflation and risk are large and often the majority of the "gain". Short-term capital gains are already taxed like wages. In the US, unlike some other developed countries, there is a very limited ability to deduct losses due to inflation and risk from long-term capital gains. Consequently, if they made the tax rate the same as wages then the tax incidence on capital gains would be much higher than wages. As a policy matter in the US, they fix this large difference in tax incidence by reducing the tax rate instead of adjusting the cost basis for inflation and allowing full deductibility of losses. If you pencil out the implications of these two policies, I suspect you'd find that you like the way the US does it better. Making risk and inflation deductible to equalize tax incidence enables a lot of financial structuring.
- recursivedoubts 1y ago
  Capital gains should be taxed as straight income. We should favor dividends over capital gains, which are harder to game with debt, PE burnouts, etc. Inflation should be low and we should make it in the interests of the rich that it stays so.
  - Analemma_ 1y ago
    > Inflation should be low and we should make it in the interests of the rich that it stays so. The prevailing opinion of a lot of progressive economists is just the opposite: standard policy for 40 years post-Volcker was to run with low inflation, loose money and slack labor markets, and probably all this did was keep wage growth depressed. The brief inflationary period in 2022-2023 was fantastic for low-income workers, it was the only serious growth in real wages they'd seen in a half-century. But voters revolted and probably guaranteed we'll go back to the low inflation, high unemployment policy for another generation at least.
    - msgodel 1y ago
      Growth in wages is meaningless if inflation consumes it. My opinion is that inflation is generally a bad idea but the thing that really matters is inflation volatility. The market will adjust for whatever the inflation rate is (unless its extreme) but volatility just results in loss.
ponector 1y ago
>> This isn't based on economic theory or anything, it's just a political choice we have made as a country Is it? I've heard that low capital gain taxes are better for long-term GDP growth.
- y0eswddl 1y ago
  You've also heard that giving billionaires more money would "trickle down" to the rest of us...

thesmtsolver 1y ago

1. Only long term capital gains are lower than income tax 2. Long term investors invest in things that great new jobs, it is not just moving capital around.

cgannett 1y ago
3. Private equity has made long term investment a poor mans game.
Buttons840 1y ago
"Long term" is 1 year, right? What a joke. Everyone can judge for themselves if 1 year is "long term".
- thesmtsolver 1y ago
  Do you have another suggestion to address the core problem of how to inventive long term investments?
slt2021 1y ago
its not only capital gains, it is the property and the system of shells and offshores that hides assets https://x.com/Finance_Nerd_/status/1952063667458978160 https://x.com/Finance_Nerd_/status/1952063667458978160 https://x.com/Finance_Nerd_/status/1952063659599106545 https://x.com/Finance_Nerd_/status/1952063659599106545
- thesmtsolver 1y ago
  So you are saying only ultra rich benefit from long term capital gains taxes? Any data on that?
  - slt2021 1y ago
    please refer to the tweets I quoted for receipts

jparishy 1y ago

We're on the same wavelength. To me, I find it hard not to think about our explosive growth as a country happening at the same time we refuse to expand representation of the public. These charts are very frustrating to me: https://www.congress.gov/crs-product/IN11547 https://www.congress.gov/crs-product/IN11547 The people in power do not want to lose control, but clearly have no idea how to manage the scale of what has been built. There's an American leadership crisis going on right now that is hard to ignore, both in public and private life.

Buttons840 1y ago
We should go back to having the house filled with 1 representative per 10,000 people. Also, we should do something new and have all the representatives in the house be chosen by lottery. Normal people are not represented in congress, because politicians are not normal people, but if we chose people by lottery we would have a branch of congress filled with normal people. They would have time enough to study the issues. Some of them would be stupid, but this is no worse than the current crop of politicians.
- zackmorris 1y ago
  I don't normally reply twice to the same thread, but I just wanted to say that I wish that the US had been founded with a co-equal branch of government comprised of people drawn via lottery (probably voluntary) like in ancient Greece: https://en.wikipedia.org/wiki/Sortition https://en.wikipedia.org/wiki/Sortition I believe that this was one of the great mistakes by our founders. I'm sure that many suggested it, but unfortunately their ideas were suppressed due to our roots in slavery, colonialism and aristocracy (meritocracy today).
  - vondur 1y ago
    Ancient Greek politics were chaotic and violent, especially cities like Athens.
    - moshun 1y ago

philipallstar 1y ago

If we want to build things we need capital investment and a reward for risking capital.

deleted 1y ago
[deleted]
recursivedoubts 1y ago
Yes. And that reward should be called "profits" delivered as dividends.
Analemma_ 1y ago
This reply is a complete non sequitur. Taxing capital gains as ordinary income does not mean the removal of a "reward for risking capital" because the potential upside is still unlimited compared to working a wage job.
maxsilver 1y ago
We need labor more, and labor investment always involves substantially more risk for that person, than any capital investment ever carries.

jandrewrogers 1y ago

This is simply incorrect. To make the tax incidence on wages and capital gains equivalent, you must first deduct losses due to inflation and risk. For wages, inflation and risk round to zero. For long-term capital gains inflation and risk are large and often the majority of the "gain". Short-term capital gains are already taxed like wages. In the US, unlike some other developed countries, there is a very limited ability to deduct losses due to inflation and risk from long-term capital gains. Consequently, if they made the tax rate the same as wages then the tax incidence on capital gains would be much higher than wages. As a policy matter in the US, they fix this large difference in tax incidence by reducing the tax rate instead of adjusting the cost basis for inflation and allowing full deductibility of losses. If you pencil out the implications of these two policies, I suspect you'd find that you like the way the US does it better. Making risk and inflation deductible to equalize tax incidence enables a lot of financial structuring.

recursivedoubts 1y ago
Capital gains should be taxed as straight income. We should favor dividends over capital gains, which are harder to game with debt, PE burnouts, etc. Inflation should be low and we should make it in the interests of the rich that it stays so.
- Analemma_ 1y ago
  > Inflation should be low and we should make it in the interests of the rich that it stays so. The prevailing opinion of a lot of progressive economists is just the opposite: standard policy for 40 years post-Volcker was to run with low inflation, loose money and slack labor markets, and probably all this did was keep wage growth depressed. The brief inflationary period in 2022-2023 was fantastic for low-income workers, it was the only serious growth in real wages they'd seen in a half-century. But voters revolted and probably guaranteed we'll go back to the low inflation, high unemployment policy for another generation at least.
  - msgodel 1y ago
    Growth in wages is meaningless if inflation consumes it. My opinion is that inflation is generally a bad idea but the thing that really matters is inflation volatility. The market will adjust for whatever the inflation rate is (unless its extreme) but volatility just results in loss.

ponector 1y ago

>> This isn't based on economic theory or anything, it's just a political choice we have made as a country Is it? I've heard that low capital gain taxes are better for long-term GDP growth.

y0eswddl 1y ago
You've also heard that giving billionaires more money would "trickle down" to the rest of us...