The capital gains tax discount is unjustified

[washunut]

Re: Special strokes for special folks

The vast majority of commercial profits that qualify for the reduction of taxes upon incomes derived from capital gains were not due to investments* but rather to transfers of wealth such as stocks and bonds.

[Economists’ definition of “investment” is considerably narrower than the common usage of the word. Investment is the dedication of goods and/or efforts for the production of additional goods or service products. Savings are transfers of wealth. Investments are, (and saving are not) factored into the calculation of nations’ GDP].

The reduction of taxes due to capital gain profits does not directly promote savings or invest. It does promote the sales of things held for a year or more.

When the tax policy is the deciding factor that induces such sales, the sale is not clearly to our economy’s best interest. When the tax policy is not the deciding factor, its only purpose is to shift greater portions of tax burden upon all other tax payers. It does not substantially increase savings or investments in our nation.



The long term capital gains tax discount is among the less complicated issues. I recognize eliminating favorable treatment for tax payers’ profits due to the sales of their homes is politically unfeasible. Otherwise retaining the tax policy’s that unjustifiably favor the narrow interests of the few at greater burden to all other taxpayers is unjustified.

Respectfully, Supposn

Supposn, It is easy in this age of populism to try and wring all the tax revenue out of the " few" as you put it. Full disclosure, I am probably someone classified as part of that few. So I do have a dof in this debate.

Saying that the reason why our tax code is so large as there are a ton of exceptions, which if you understand tax law you already know. On the specifics of capital gains even the trading stocks portion that you disdain. You know that the government currently owns about 6 billion shares in Citicorp worth about $20 billion. They own the shares equal to about 80% ownership of AIG and many shares in GM. So they do not want to devalue those. Also the stock market has a total value of about $15 trillion, what happens to that wealth if we change the tax laws as you expect. How much of those 15 trillion is in workers 401Ks and pension funds that are already underfunded.

There are also unintended consequences. We need companies to be able to raise capital ( Venture capital and stocks on exchanges) increasing the taxes makes this more expensive for the creators of new businesses. A year ago we needed banks to recapitalize. You know that money came from selling additional stock.

I agree with graduated tax rates. People who have benefited in our system should be willing to help those who were less fortunate.

One of the strenghts of the U.S. economy is that people from all over the world park their money here. If we change the rules of the game there may be unfortunate consequences.

Respectfully

 

[I'm Supposn]

Re: Special strokes for special folks

Supposn, It is easy in this age of populism to try and wring all the tax revenue out of the " few" as you put it. Respectfully

WashUNut, this is not an “age of populism”. Conservatives have to whatever thus far they could to shift greater portions of our nation’s debts and taxes upon wage earning families. Repealing the capital gains tax reduction that favors a narrow source of income shifts a greater burden upon all other taxpayers.

In the case of the capital gains tax discount, we are promoting transactions that are not clearly of net economic benefit to our nation.

In cases where the more favorable tax treatment was the determining factor for the decision to sell, Those who more trust the judgment of entrepreneurs rather than a tax policy that only favors selling, should logically be opposed to favoring profits due to sales.

The incomes of those who nurture and re-invest in their enterprises are not less worthy of tax consideration. The incomes of those who create intellectual property are not less worthy of tax consideration. I believe that no source of income is less worthy of tax consideration and all income sources are worthy of equitable tax treatment.

Respectfully, Supposn

 

[washunut]

Re: Special strokes for special folks

WashUNut, this is not an “age of populism”. Conservatives have to whatever thus far they could to shift greater portions of our nation’s debts and taxes upon wage earning families. Repealing the capital gains tax reduction that favors a narrow source of income shifts a greater burden upon all other taxpayers.

In the case of the capital gains tax discount, we are promoting transactions that are not clearly of net economic benefit to our nation.

In cases where the more favorable tax treatment was the determining factor for the decision to sell, Those who more trust the judgment of entrepreneurs rather than a tax policy that only favors selling, should logically be opposed to favoring profits due to sales.

The incomes of those who nurture and re-invest in their enterprises are not less worthy of tax consideration. The incomes of those who create intellectual property are not less worthy of tax consideration. I believe that no source of income is less worthy of tax consideration and all income sources are worthy of equitable tax treatment.

Respectfully, Supposn

Say what you will I have never heard a Democratic president ask to have capital gains treated as ordinary income. So this is not a liberal versus comservative issue, just what is best for the American economy.

I have started to hear from others your talking point about what is the benefit of something. Who in a free nation is to say what is a benefit or not. What is the economic benefit of going to baseball games. Yet the government allows this as a business expense. I do not know what business you are in, but I am sure it gets tax breaks that I may feel has no benefit to the nation so let's double tax that, silly.

You refuse to argie against the point that capital gains helps people who have pensions, 401Ks, school endowments, which give free tuition to kids who can't pay. So your arguement that capital gains and the equity markets help a narrow part of the population is just wrong, so please address this or let's end this discussion

 

[I'm Supposn]

WashUNut, I’m a proponent to the greatest extent politically and financially feasible), that we shift our federal sources of revenues from income taxes to a consumption tax. It's a superior taxing method.

Refer to the discussion topics:
“Fair tax; taxing consumption”
and “Value added tax; (i.e. VAT sales tax method)”.

Respectfully, Supposn

 

[imagep]

Re: Special strokes for special folks

Say what you will I have never heard a Democratic president ask to have capital gains treated as ordinary income. So this is not a liberal versus comservative issue, just what is best for the American economy.

I have started to hear from others your talking point about what is the benefit of something. Who in a free nation is to say what is a benefit or not. What is the economic benefit of going to baseball games. Yet the government allows this as a business expense. I do not know what business you are in, but I am sure it gets tax breaks that I may feel has no benefit to the nation so let's double tax that, silly.

You refuse to argie against the point that capital gains helps people who have pensions, 401Ks, school endowments, which give free tuition to kids who can't pay. So your arguement that capital gains and the equity markets help a narrow part of the population is just wrong, so please address this or let's end this discussion

While the capital gains tax discount may help certain groups of people, it harms others groups - primarally people who work for a living. For every dollar that we discount one persons taxes we have to raise another persons taxes by that same dollar. Other forms of taxes are nessasarally higher than they could be if we did not give special discounts to certain groups.

Supposn is simply suggesting that we should not give special interest groups special deals. That everyone and every source of income is treated exactly the same. Sounds fair and reasonable to me.

You are suggesting that certain groups that get the tax discounts are more worthy of tax discounts than others. I tend to agree with Supposn that our government should really not be picking and choosing which groups are more worthy than others. We could increase capital gains and reducing income taxes to an equal rate creating revenue neutral situation. Or we could reduce income taxes to the same rate as capital gains and find another revenue source (such as a consumption tax) to replace the tax revenues lost due to lowering income taxes. Either way: this would in no way penalize those who recieve the benefits of capital gains tax - this would simply remove the special treatment which they now recieve.

Now I have to ask a question, lets say that we decided to reduce tax on income derived from working to just 1% but to leave capital gains at it's current rate, wouldn't people who currently get the capital gains discount be upset that they did not also get a discount? Many people who pay capital gains currently are very happy with recieving the discount that they get from it. But it is because they percieve that they are getting a special deal which favors them. If that special deal was to remain exactly the same, but they percieved it was not as good a deal as other had, they would be quite upset.

People who recieve the tax discount are likely a little more educated than the general public. If the general public was to realize that they are getting a raw deal by paying a higher marginal rate on their income than rich people do, the general public would be outraged. They just dont realize it because it is for the most part, over their heads, or althernatively they just except it because they know that they have little power or ability to change the status quo.

Now as far as getting tax deductions for attending baseball games, well that is rediculous. Now I am not suggesting that you are being rediculous, I know it happens, I am just saying that a system that allows such is rediculous. People who deduct stuff like that may be bending the intent of the law concerning tax deductablility of stuff like work meeting expenses. I own my own business and I never deduct stuff like that. I can't seem to find a line on my tax forms to deduct "baseball game attendance". Can you tell me what line number that is?

Personally I have explained in detail many times the poor logic in believing in supply side economics and the merits of demand side economics and I have never had anyone to point out any flaws in my logic. Thus unless anyone can indicate to me how our economy is more driven by the supply side than it is the demand side, I will continue to believe that the capital gains tax discount exists just to benefit the people who created the law (the rich and powerful) - and at the detrement of our economy.

Here is what it all comes down to. If you believe that our economy is supply side driven then you will naturally believe that the capital gains tax discount is justifiable due to the theory that it improves our economy. If you believe that our economy is demand driven then you should believe that the capital gains tax discount harms our economy. Until we can all agree on that, we will never agree on much of anything to do with economics.

 

[I'm Supposn]

Re: Special strokes for special folks

........... Saying that the reason why our tax code is so large as there are a ton of exceptions, which if you understand tax law you already know. On the specifics of capital gains even the trading stocks portion that you disdain. You know that the government currently owns about 6 billion shares in Citicorp worth about $20 billion. They own the shares equal to about 80% ownership of AIG and many shares in GM. So they do not want to devalue those. Also the stock market has a total value of about $15 trillion, what happens to that wealth if we change the tax laws as you expect. How much of those 15 trillion is in workers 401Ks and pension funds that are already underfunded.
Respectfully

WashUNut, I don’t understand why you believe that any of this is germane to a discussion of more favorable tax treatment for capital gains incomes.

Respectfully, Supposn

 

[I'm Supposn]

Re: Special strokes for special folks

......... Also the stock market has a total value of about $15 trillion, what happens to that wealth if we change the tax laws as you expect. How much of those 15 trillion is in workers 401Ks and pension funds that are already underfunded.
Respectfully

Owners of 401k and other pension funds derive extremely little (if any) benefit due to the reduced tax rates granted to long term capital gains. I don’t suppose it is applicable to income funded by pre-tax dollars and the retirement years are generally the years of taxpayer’s lowest effective income tax rates.
Respectfully, Supposn

 

[washunut]

WashUNut, I’m a proponent to the greatest extent politically and financially feasible), that we shift our federal sources of revenues from income taxes to a consumption tax. It's a superior taxing method.

Refer to the discussion topics:
“Fair tax; taxing consumption”
and “Value added tax; (i.e. VAT sales tax method)”.

Respectfully, Supposn

I am fine with a consumption tax as long as we abolish all other taxes. I concern we should think about that I have seen with state sales taxes, is the ease of raising the rates as people don't notice 1% changes that add up to a lot of money.

 

[washunut]

Re: Special strokes for special folks

Owners of 401k and other pension funds derive extremely little (if any) benefit due to the reduced tax rates granted to long term capital gains. I don’t suppose it is applicable to income funded by pre-tax dollars and the retirement years are generally the years of taxpayer’s lowest effective income tax rates.
Respectfully, Supposn

True that retired folks have a lower tax base. Many people do not think of the laws of compounding which allows younger people to have their money grow. They get the benefit when they start using the funds to live on.

On another point, when you sat that this reduced rate gives a benefit to a narrow portion of the population. I huess since 47% of the population paid no taxes at all, if you look at the people paying taxes only, the proportion may be a bit higher.

 

[cpwill]

Re: Special strokes for special folks

Owners of 401k and other pension funds derive extremely little (if any) benefit due to the reduced tax rates granted to long term capital gains. I don’t suppose it is applicable to income funded by pre-tax dollars and the retirement years are generally the years of taxpayer’s lowest effective income tax rates.
Respectfully, Supposn

many workers are putting their wealth into Roth-style accounts, and the gains are protected.

however, let's run the numbers:

A median worker today is going to bring home around 50K. let's say he saves 5%, or, 2,500 a year.

from Jan 1 1982 to Dec 31 2009 the market return (after you adjusted for inflation and the compounded annual growth rate) averaged at 7.98%.

A worker from age 18 to 65, putting aside this 2,500 a year at an average return of that 7.98% retires with $1,293,663.32 in today's money in the bank.

By slapping on our current 20% tax on those returns, you get an average return of 6.384%, which leaves that same worker with $745,474.23 for retirement.

By bumping capital gains up to 39%, you get an average return of 4.87%, which means that our hard-working and thrifty (he is saving more than most Americans lately) worker will retire with $454,524.05; or, about 35% of our original figure.

65% of your nest egg, cut like that? That's greater than the latest market crash, from peak to trough. I'd call that 'significant"

 

[imagep]

I am fine with a consumption tax as long as we abolish all other taxes. I concern we should think about that I have seen with state sales taxes, is the ease of raising the rates as people don't notice 1% changes that add up to a lot of money.

There are certainly a lot of merits to the concept of consumption tax. I would also agree with a consumption tax - to the extent that it would lower income taxes to the same rate that capital gains taxes are. My two biggest issues with trying to totally replace taxes on income with consumption taxes are that 1) Without significant reductions in spending the consumption tax would be outrageous and 2) Extremly rich people spend only a very small percent of their income on consumer goods thus the total taxes that they would pay would be extremely disproportional to their income.

Without some type of tax on income, and if our only source of tax was on consumption, ultimately all wealth would eventually be concentrated and held by a very small number of people. This has always happened througout history and is one of the circumstances that inevitably leads to monarchies and oligarchies. One of the principle sources of power is wealth. If only a few people are allowed to become wealthy then ultimately our political system would return to what we had during the days in which there was no middle class, kings ruled and Robin Hood had to rob from the King just to feed the poor.

The middle class guy would not be able to save or invest money because he would be paying his share of taxes plus part of the rich guys share of taxes plus the share of taxes that is inevitably given to people who physically or mentally cant exist without handouts plus the welfare that we provide to people who are just plain lazy. Thus the middle class guy could NEVER become rich, no matter how hard he tried, no matter how smart he is, no matter how much drive and ambition he has. He would have no "seed" money to start a business, no money to invest in the stock market, no money to make a down payment on a home, and no money to save in his piggy bank. There are of course to exceptions to this - 1) those who are lucky enough to win the lottery 2) those who are fortunant to have the genetics to be amazing entertainers 3) those who are immoral enough that they will lie, cheat, or steal for wealth.

The guy who was fortunant enough to inherit large sums of money would have control of the means of production, and thus would become even richer.His heirs could become even "more richer". Its a zero sum situation, what I own you cant own and thus what the extremely rich owns can't be owned by the guy who has to work on the assembly line or pick crops in the fields. There would be no ladder for most Americans to climb, there would be no path to success. No real reason to be productive, no financial gain in inventing a new product.

Our society would "go to hell" if consumption was our primary source of tax revenue.

Personally, I know that this sounds crazy to most people, but I think that inheritance tax should be much more relied on as a source of tax revenues. Why tax me now, when I am alive and really need to keep what I earn, when you can tax me after I am dead and no longer need whatever wealth that I did not consume while I was alive. It's really just a long term deferance on taxes.

 

[imagep]

Re: Special strokes for special folks

many workers are putting their wealth into Roth-style accounts, and the gains are protected.

however, let's run the numbers:

A median worker today is going to bring home around 50K. let's say he saves 5%, or, 2,500 a year.

from Jan 1 1982 to Dec 31 2009 the market return (after you adjusted for inflation and the compounded annual growth rate) averaged at 7.98%.

A worker from age 18 to 65, putting aside this 2,500 a year at an average return of that 7.98% retires with $1,293,663.32 in today's money in the bank.

By slapping on our current 20% tax on those returns, you get an average return of 6.384%, which leaves that same worker with $745,474.23 for retirement.

By bumping capital gains up to 39%, you get an average return of 4.87%, which means that our hard-working and thrifty (he is saving more than most Americans lately) worker will retire with $454,524.05; or, about 35% of our original figure.

65% of your nest egg, cut like that? That's greater than the latest market crash, from peak to trough. I'd call that 'significant"

Looks good when you present it like that, and thanks for taking the time to go through the numbers - I like that.

But the part you are missing is that it is a trade off. You are assuming that Mr. Worker will pay a higher rate of taxes on his investments, but you are ignoring the fact that we are suggesting that he pay a lower rate of taxes on his income in exchange for having to pay that higher rate of taxes on his investments. It's a trade off.

Now rework the numbers, assuming that Mr. Worker will be able to save an additional $2,500 because his income tax rate has been reduced. I think that you may find that the worker will end up retiring with something like $909,048.10 after paying the rate of 39% (which is the arbitrary number you selected). This would yield the worker with an extra after retirement savings of: $163,573.87. Thats a good chunk of change for the average working stiff.

No one is suggesting that we should just arbitrarally raise capital gains to 39% without lowering the tax rate on income. Supposn is suggesting that the rates of capital gains and the rates of income taxes should be equalized at whatever amount would be tax revenue neutral. If this change would to occur, the worker would not only be able to save a few bucks extra each year, he would also not have to pay anything nearly as high as the 39% rate that you suggested.

 

[imagep]

Re: Special strokes for special folks

I have never heard a Democratic president ask to have capital gains treated as ordinary income.

Of course not. Very few people in power positions would ever suggest a thing like that because it would be to their own detrement. Our top elected officials always become rich if they arn't already rich (take a look at how Al Gore's personal wealth has increased to 50 times pre-VP wealth, or how Sarah Palin has gone from a marginal millionare to a mega millionare in the last year). But at the same time, there are at least a few rich people who have suggested that they pay way to little in taxes (ie Warren Buffet).

Unfortunately their are very vew Warrn Buffet type people (honest - even to their detrement) who are egotistical and power hungry enough to run for public office, and if they were that egotistical and power hungry they certainly would not vote for laws that didn't work in their favor.

 

[I'm Supposn]

WashUNut, I do not disdain profits due to trading stock and bonds. I’m opposed to favoring profits due to a particular type of sale and thus shifting greater portions of tax burden upon all other taxpayers.

The justification for favoring such a narrow source of income (above all other sources), would be an obviously much greater economic benefit to our nation.

When the reduced tax rate is the determining factor that induced a sale, the question of a sale’s benefit or detriment to our nation’s economy is questionable. When in such marginal determinations involve sale of an enterprises’ major portions, it is as likely that retaining, improving and re-investing into the enterprise would have been of equal or greater benefit to our nation.

Profits due to transfers of wealth in themselves are of no greater than other income sources economic benefit to our nation. In cases where the capital gains tax reduction was not the determining factor, the sale would have been transaction without the tax reduction.

The tax reduction favoring capital gains profits is unjustified.

Respectfully, Supposn

 

[cpwill]

Re: Special strokes for special folks

Looks good when you present it like that, and thanks for taking the time to go through the numbers - I like that.

thanks to the handy dandy calculator.

But the part you are missing is that it is a trade off. You are assuming that Mr. Worker will pay a higher rate of taxes on his investments, but you are ignoring the fact that we are suggesting that he pay a lower rate of taxes on his income in exchange for having to pay that higher rate of taxes on his investments. It's a trade off.

except that it's not. for example, consider this claim you make:

Now rework the numbers, assuming that Mr. Worker will be able to save an additional $2,500 because his income tax rate has been reduced.

The real-world evidence shows that VATs are strongly linked with both higher overall tax burdens and more government spending. In 1965, before the VAT swept across Europe, the average tax burden for advanced European economies (the EU-15) was 27.7 percent of economic output, versus 24.7 percent of GDP in the United States.

But the Europeans began imposing VATs in the late 1960s, and now the European Union requires all members to have a VAT of at least 15 percent. Good news has not followed. By 2006, the average tax burden for EU-15 nations had climbed to 39.8 percent, versus 28 percent in the United States...

and that's just one example. claims of "raising this tax to lower another", as far as i am aware, virtually never pan out.

I think that you may find that the worker will end up retiring with something like $909,048.10 after paying the rate of 39% (which is the arbitrary number you selected).

well, it's not really arbitrary; it's the planned tax rate for next year for high end earners. well, actually that rate is 39.6%, but i knocked off the 0.6.

and when we run with that new figure ($2,500 more annually), and we assume a constant 5% savings rate, that comes out to another $125 saved annually; which gives our worker (under the 39% tax rate) a final result of $477,258.54. with 20% capital gains he see's $782,760.97, and with no capital gains tax he retires with $1,358,368.56 in today's money.

This would yield the worker with an extra after retirement savings of: $163,573.87. Thats a good chunk of change for the average working stiff.

477,258.54 - 454,524.05 = $22,734.49

now, if he had invested the entire $2,500 he would have retired with $909,049.86; but we are running with a 5% savings rate.

No one is suggesting that we should just arbitrarally raise capital gains to 39% without lowering the tax rate on income.

except of course the Democratic Party?

Supposn is suggesting that the rates of capital gains and the rates of income taxes should be equalized at whatever amount would be tax revenue neutral

dynamically or statically scored? income tax revenue is much less elastic than capital gains.

If this change would to occur, the worker would not only be able to save a few bucks extra each year, he would also not have to pay anything nearly as high as the 39% rate that you suggested.

unfortunately, it ultimately depends on whether or not you believe in economic reality.

...The best place to be for a ruthless revenue-maximizer is a tax rate on labor of about 65% (from the current 28%) and a tax rate on capital of about 22% (from the current 36%)... For the last several decades, the federal government raised about 18.3% of GDP on average. If our ruthless federal revenue-maximizers went all-out in raising taxes, they could raise maybe 24% of GDP. That is not quite salvation when the federal government is spending over 24% of GDP right now (And it plans to spend that much forever. See that CBO report...




any tax scheme must come combined with drastic spending cuts, or the country goes bankrupt. :shrug:

 

[I'm Supposn]

I am fine with a consumption tax as long as we abolish all other taxes. I concern we should think about that I have seen with state sales taxes, is the ease of raising the rates as people don't notice 1% changes that add up to a lot of money.

WashUNut, I just posted a response to this message within the discussion topic of “Value added tax; (i.e. VAT sales tax method)”. It’s specifically addressed to you.

Respectfully, Supposn

 

[imagep]

Re: Special strokes for special folks

OK CP, you convinced me. Any bill proposing a tax rate increase on capital gains should only be supported if it also required a tax rate reduction for income taxes. And any bill proposing a tax on consumption whould only be supported if it also requires a tax reduction on income tax. I will never support any tax increase on anything unless it is coupled with a revenue neutral tax decrease on something else. Of course I was already convinced of those facts. But it is obviously possible to increase one tax and decrease another. We increase and decrease taxes frequently. The thing is to do both in one bill so that we won't get tricked by false promises.

And you'r right about the Democratic Party wanting to raise taxes without any tax trade offs. I was straight up wrong about that. I guess that is why I will likely never vote for a Democrat. I also agree that we need drastic spending cuts. Like I suggested, I would much prefer us to be able to cut income tax rates to the discount rate of capital gains taxes, as opposed to increasing capital gains rate to that of income tax - I'm with ya on that.

 

[I'm Supposn]

Re: Special strokes for special folks

The real-world evidence shows that VATs are strongly linked with both higher overall tax burdens and more government spending.

CPWill, concerning you link to Daniel J. Mitchell’s opinion: Mirchell doesn’t find fault with VAT but rather what he wrote was an attack upon what he believes is the Democratic Parties intentions. He actually expressed no criticism of VAT within the link you provided.

If you post anything that would add to the discussion topic of “Value added tax; (i.e. VAT sales tax method)”, I’ll read it and try to respond within that thread.

Respectfully, Supposn

 

[I'm Supposn]

Re: Special strokes for special folks

You all, I mentioned consumption taxation, (e.g. sales tax) because it’s a feasible alternative to income taxes. I mentioned VAT because it is the most superior method of taxing gross sales.

I agree with all those that contend no sales tax can replace all income tax revenues.
I contend that to whatever extent we retain any income taxes, incomes derived from all sources should be treated in a similar manner.
I regret my introducing any of this within this discussion thread. Is there any chance of returning this thread to the discussion capital gains?

Please refer fair trade and sales tax posts to:
. “Value added tax; (i.e. VAT sales tax method)”
. And “Fair tax; taxing consumption”.

Respectfully, Supposn

 

[imagep]

Re: Special strokes for special folks

You all, I mentioned consumption taxation, (e.g. sales tax) because it’s a feasible alternative to income taxes. I mentioned VAT because it is the most superior method of taxing gross sales.

I agree with all those that contend no sales tax can replace all income tax revenues.
I contend that to whatever extent we retain any income taxes, incomes derived from all sources should be treated in a similar manner.
I regret my introducing any of this within this discussion thread. Is there any chance of returning this thread to the discussion capital gains?

Please refer fair trade and sales tax posts to:
. “Value added tax; (i.e. VAT sales tax method)”
. And “Fair tax; taxing consumption”.

Respectfully, Supposn

Sure, but before we do, you want to start a new thread on Inheritance Tax? I would be interested in your ideas on that.

 

[washunut]

Re: Special strokes for special folks

You all, I mentioned consumption taxation, (e.g. sales tax) because it’s a feasible alternative to income taxes. I mentioned VAT because it is the most superior method of taxing gross sales.

I agree with all those that contend no sales tax can replace all income tax revenues.
I contend that to whatever extent we retain any income taxes, incomes derived from all sources should be treated in a similar manner.
I regret my introducing any of this within this discussion thread. Is there any chance of returning this thread to the discussion capital gains?

Please refer fair trade and sales tax posts to:
. “Value added tax; (i.e. VAT sales tax method)”
. And “Fair tax; taxing consumption”.

Respectfully, Supposn

I am just going to guess that you personally do not benefit much fro a lower capital gains tax. So it may be just another way of shifting the tax burden from one set of folks to another. Pretty typical in our current political environment.

 

[imagep]

Re: Special strokes for special folks

I am just going to guess that you personally do not benefit much fro a lower capital gains tax. So it may be just another way of shifting the tax burden from one set of folks to another. Pretty typical in our current political environment.

There is nothing wrong with correcting something that is wrong to begin with.

What if it was the other way around, what if capital gains was taxed at a rate higher than other income. Wouldn't you be all for lowering calital gains to the same rate as other income?

 

[washunut]

There are certainly a lot of merits to the concept of consumption tax. I would also agree with a consumption tax - to the extent that it would lower income taxes to the same rate that capital gains taxes are. My two biggest issues with trying to totally replace taxes on income with consumption taxes are that 1) Without significant reductions in spending the consumption tax would be outrageous and 2) Extremly rich people spend only a very small percent of their income on consumer goods thus the total taxes that they would pay would be extremely disproportional to their income.

Without some type of tax on income, and if our only source of tax was on consumption, ultimately all wealth would eventually be concentrated and held by a very small number of people. This has always happened througout history and is one of the circumstances that inevitably leads to monarchies and oligarchies. One of the principle sources of power is wealth. If only a few people are allowed to become wealthy then ultimately our political system would return to what we had during the days in which there was no middle class, kings ruled and Robin Hood had to rob from the King just to feed the poor.

The middle class guy would not be able to save or invest money because he would be paying his share of taxes plus part of the rich guys share of taxes plus the share of taxes that is inevitably given to people who physically or mentally cant exist without handouts plus the welfare that we provide to people who are just plain lazy. Thus the middle class guy could NEVER become rich, no matter how hard he tried, no matter how smart he is, no matter how much drive and ambition he has. He would have no "seed" money to start a business, no money to invest in the stock market, no money to make a down payment on a home, and no money to save in his piggy bank. There are of course to exceptions to this - 1) those who are lucky enough to win the lottery 2) those who are fortunant to have the genetics to be amazing entertainers 3) those who are immoral enough that they will lie, cheat, or steal for wealth.

The guy who was fortunant enough to inherit large sums of money would have control of the means of production, and thus would become even richer.His heirs could become even "more richer". Its a zero sum situation, what I own you cant own and thus what the extremely rich owns can't be owned by the guy who has to work on the assembly line or pick crops in the fields. There would be no ladder for most Americans to climb, there would be no path to success. No real reason to be productive, no financial gain in inventing a new product.

Our society would "go to hell" if consumption was our primary source of tax revenue.

Personally, I know that this sounds crazy to most people, but I think that inheritance tax should be much more relied on as a source of tax revenues. Why tax me now, when I am alive and really need to keep what I earn, when you can tax me after I am dead and no longer need whatever wealth that I did not consume while I was alive. It's really just a long term deferance on taxes.

You make some fair points. Perhaps we can start income taxes at a much higher level. Something like a millionaires tax because you are correct that wealthy people spend less of their income on consumption than the average worker. On the inheritance tax, I would again have no problem with higher graduated tax rates. However as you may know there are a number of ways people legally avoid this tax through generation skipping, trusts etc.

As to the amount of money that is needed, that is up to the American public. If they want a big defense as well as a big social safety net then they should be prepared to pay for it. We should be concerned that the wealthy do not pay their fair share but also the folks who contribute nothing is also not right.

 

[washunut]

Re: Special strokes for special folks

There is nothing wrong with correcting something that is wrong to begin with.

What if it was the other way around, what if capital gains was taxed at a rate higher than other income. Wouldn't you be all for lowering calital gains to the same rate as other income?

The way I try and do things is to understand the rules of the road so to speak and work to suceed within those rules, not change them. I am especially careful not to try and change something that is good for me but bad for others. That is just morally how I look at things, and I have been fortunate that things have worked out.

My concern is that the U.S. now faces some structural problems. Problems we have had for something like thirty years but are now reaching a tipping point. What I see as a response is disappointing. Every man ( and woman) for himself, screw everyone else. You are not going to fix America's problems by screwing the " rich". There are reasons they are rich. Not just that they are greedy or cheaters. Some are actually pretty good at what they do. You should be concerned that in a shrinking world, the best and brightest do not have to stay in America if this becomes a soak the rich place. There will be a brain drain that will be worse than outsourcing because you will be losing the folks that drive the economy for all of us.

 

[fredmertz]

If you, (as I am) a proponent of free enterprise, you should also be opposed to government’s granting special strokes for special folks; you should be opposed to the unjustified capital gains tax discount.

Respectfully, Supposn

I am a proponent of free enterprise. But I'm not sure I understand your ideas against long term capital gains tax. I don't see LT CG tax as 'special strokes for special folks' since in a truly free enterprise, everybody would have equal opportunity to start an investment portfolio and have capital gains tax. Everybody has the same information on the investments and it's up to them to make the profit. I don't think it should be 'income' but rather capital gains. And therefore long term capital losses shouldn't be able to be used to offset short term capital gains, perhaps, unless they fall under the same tax code.

But nonetheless, could you please explain to me what I'm missing? Not that I do support LT CG tax as it is, but please explain how being a proponent of free enterprise is a contradiction to supporting a reduced capital gains tax