Capital gains tax is stupid. So is income tax. Why? They both tax changes to wealth. They are damping terms in the system. They actually slow down change. I thought Social Change is what you wanted?
Instead, there should be a WEALTH tax, with a rate slightly exceeding historical returns to capital (say 15%), and with a standard deduction of at least $5M. The purpose of income reporting would then be to influence the tax agency's estimate of your cumulative wealth.
Capital gains tax perverts incentives: It tells people to hold on to investments, even if they now think those investments are crap, even if they would rather now allocate their capital in some other way. This is one of the reasons why ETFs are a thing, and one reason why zombie companies continue to shamble on. Roths are the only accounts WITHOUT this feature.
And income tax hurts people who actually work for their money. Really rich people -- do people think some boss gives them a SALARY? That's not how it works: They live off investment income. Capital gains and dividends. Both of which are taxed less than regular income.
This wealth tax would directly stabilize the system towards a state in which everyone had $5M. There are other forces at play as well, so we wouldn't end up at that equilibrium, but we'd move closer to it.
Basically, if you want to change the rules of Monopoly so the game ends with EVERYONE owning some hotels, this is how you do it.
But you cannot, cannot set the deduction too low. People depend on investments for their retirement. You can't destroy that.
...
Now I back off from my confident-sounding rhetoric. Is this actually true? What effects would this have on investment and corporate governance? Would it create a giant market for cryptocurrency? For perk-based compensation? I'm curious what second-order effects I have overlooked.
Instead, there should be a WEALTH tax, with a rate slightly exceeding historical returns to capital (say 15%), and with a standard deduction of at least $5M. The purpose of income reporting would then be to influence the tax agency's estimate of your cumulative wealth.
Capital gains tax perverts incentives: It tells people to hold on to investments, even if they now think those investments are crap, even if they would rather now allocate their capital in some other way. This is one of the reasons why ETFs are a thing, and one reason why zombie companies continue to shamble on. Roths are the only accounts WITHOUT this feature.
And income tax hurts people who actually work for their money. Really rich people -- do people think some boss gives them a SALARY? That's not how it works: They live off investment income. Capital gains and dividends. Both of which are taxed less than regular income.
This wealth tax would directly stabilize the system towards a state in which everyone had $5M. There are other forces at play as well, so we wouldn't end up at that equilibrium, but we'd move closer to it.
Basically, if you want to change the rules of Monopoly so the game ends with EVERYONE owning some hotels, this is how you do it.
But you cannot, cannot set the deduction too low. People depend on investments for their retirement. You can't destroy that.
...
Now I back off from my confident-sounding rhetoric. Is this actually true? What effects would this have on investment and corporate governance? Would it create a giant market for cryptocurrency? For perk-based compensation? I'm curious what second-order effects I have overlooked.