3 ms·

The solution is to stop taxing human labor/income and to start taxing every financial transaction, from buying a piece of candy, a computer component, a service

by toss1 10mo ago

The solution is to stop taxing human labor/income and to start taxing every financial transaction, from buying a piece of candy, a computer component, a service, a house, a data center, or a share of stock, etc. Just the volume of Equities + TRACE fixed income/structured + munis + real estate is over $200Trillion. A mere 3% tax on those would put the $6T US budget in large surplus. Add $1.7 Quadrillion of ovrerall payments and a 0.3% tax on transactions (yes, $3 per $1000) would also put the US budget in surplus. All of it would also involve far less tracking and bureaucratic overhead, and indeed far less govt intrusion into people's lives (i.e., not digging into every source and amount of income).

Yodel0914 10mo ago
I in principle agree, but it’s very hard to implement a progressive tax system if the basis is consumption (or “financial transactions”)
- toss1 10mo ago
  How not; wouldn't it be straightforward to have tax rate tables based on transaction size? E.g., transaction <$10=0, <$100=0.1%, <$10k=0.2%, <$100k=0.3%, <$1MM=0.4%, =>$1MM=0.5%, with restructuring payments to avoid taxes to carry heavy penalties. Not many poor people will be making million-dollar+ transactions, and it seems like taxing ALL transactions will help make the rich pay their fair share, as their money tends to have low velocity relative to consumer goods, but they still do a lot of transactions. EDIT: Also it should have zero taxes on necessities such as food & non-luxury clothing, similarly to how current state/local sales taxes work. Also, if there is sufficient tax rate and income to do UBI to above poverty level, wouldn't the need for a progressive tax structure become obsolete?
  - Yodel0914 10mo ago
    When you say transactions, what are you thinking of? I was thinking of your usual VAT/GST - in that case any sort of progressive tax would be hell for small businesses (or large ones) to implement. If you’re talking about banks taxing financial transactions, that’s something I haven’t really thought through- it would have some interesting side effects and work arounds. I like the simplicity of a flat consumption tax combined with a UBI - I’m not sure how politically viable it is, though.
    - toss1 10mo ago
      I'm not sure how politically viable it is either — the wealthy owners of congresspeople will scream like they are being murdered. I wasn't thinking of any kind of VAT, where you need to subtract out your cost, etc.; that is a mess! Just a straight shaving off the transaction. The idea is to spread it over so many transactions the rates are so low it isn't worth bothering to work around. For example, if you try to structure a $1million house purchase into ten %$99,999 payments to get from 0.5% down to 0.4% rate, you will save a grand total of $1000, hardly worth it considering there should also be laws with strong penalties for such structuring.
joquarky 10mo ago
Also gains on sales of things like stocks and commodities should be taxed proportionally to how briefly they are owned, with an asymptote approaching 100% for HFT. And no basis reset upon inheritance.
- toss1 10mo ago
  YES!! I've long thought the tax rates on cap gains should be extremely progressive with holding time, ranging from 99%+ for sub-second holding (HFT) to sub 5% for decade+ holding periods. This would also effectively eliminate the utility of basis reset on inheritance, since the rate for multi-decade holding goes so low. Also a great idea I saw recently is to treat any encumbrance of a capital asset as a realization event. For example, early investors in a company holding stock may have $millions in unrealized gains. Those gains are 'realized' and taxed on sale of the stock. However, if they take a loan using the stock as collateral, it is not taxed because there is a matching obligation to repay the loan and the stock ownership doesn't change (except in a default). Such loans should be taxed as a realization event, since they are pledging the stock at its current value, not its comparatively microscopic original purchase value.

by toss1 10mo ago

Yodel0914 10mo ago

I in principle agree, but it’s very hard to implement a progressive tax system if the basis is consumption (or “financial transactions”)

toss1 10mo ago
How not; wouldn't it be straightforward to have tax rate tables based on transaction size? E.g., transaction <$10=0, <$100=0.1%, <$10k=0.2%, <$100k=0.3%, <$1MM=0.4%, =>$1MM=0.5%, with restructuring payments to avoid taxes to carry heavy penalties. Not many poor people will be making million-dollar+ transactions, and it seems like taxing ALL transactions will help make the rich pay their fair share, as their money tends to have low velocity relative to consumer goods, but they still do a lot of transactions. EDIT: Also it should have zero taxes on necessities such as food & non-luxury clothing, similarly to how current state/local sales taxes work. Also, if there is sufficient tax rate and income to do UBI to above poverty level, wouldn't the need for a progressive tax structure become obsolete?
- Yodel0914 10mo ago
  When you say transactions, what are you thinking of? I was thinking of your usual VAT/GST - in that case any sort of progressive tax would be hell for small businesses (or large ones) to implement. If you’re talking about banks taxing financial transactions, that’s something I haven’t really thought through- it would have some interesting side effects and work arounds. I like the simplicity of a flat consumption tax combined with a UBI - I’m not sure how politically viable it is, though.
  - toss1 10mo ago
    I'm not sure how politically viable it is either — the wealthy owners of congresspeople will scream like they are being murdered. I wasn't thinking of any kind of VAT, where you need to subtract out your cost, etc.; that is a mess! Just a straight shaving off the transaction. The idea is to spread it over so many transactions the rates are so low it isn't worth bothering to work around. For example, if you try to structure a $1million house purchase into ten %$99,999 payments to get from 0.5% down to 0.4% rate, you will save a grand total of $1000, hardly worth it considering there should also be laws with strong penalties for such structuring.

joquarky 10mo ago

Also gains on sales of things like stocks and commodities should be taxed proportionally to how briefly they are owned, with an asymptote approaching 100% for HFT. And no basis reset upon inheritance.

toss1 10mo ago
YES!! I've long thought the tax rates on cap gains should be extremely progressive with holding time, ranging from 99%+ for sub-second holding (HFT) to sub 5% for decade+ holding periods. This would also effectively eliminate the utility of basis reset on inheritance, since the rate for multi-decade holding goes so low. Also a great idea I saw recently is to treat any encumbrance of a capital asset as a realization event. For example, early investors in a company holding stock may have $millions in unrealized gains. Those gains are 'realized' and taxed on sale of the stock. However, if they take a loan using the stock as collateral, it is not taxed because there is a matching obligation to repay the loan and the stock ownership doesn't change (except in a default). Such loans should be taxed as a realization event, since they are pledging the stock at its current value, not its comparatively microscopic original purchase value.