I think your point mirrors Scott Galloway's and Warren Buffet's philosophies. Why is sweat, regular labor, taxed much more than capital gains? Why do CEOs who are fantastically rich need lower taxation rates than the 100s of laborers their lifestyle relies upon? We tax sweat, we let riches run free.
I was always told the reason was to encourage investing, to increase the velocity of money. Interest income from parking your money in the bank is taxed as ordinary income; lower taxes on investment income (capital gains) helps make investing more attractive vs parking the money.
This may not make a lot of sense right now when interest rates are close to zero, but there was also a time when interest rates were 20%.
Capital gains -- gains from dividends or retained earnings -- are taxed at the corporate tax level before being distributed. I don't think we should retax them at all. I think dividends should be untaxed, and so should the retained earnings portion when selling a stock, but all capital gains attributed purely to increase in speculative valuation can be taxed more, sure. Just a small nitpick.
I think the exact opposite. Taxing capital gains and eliminating corporate taxes would incentivise value creation.
Low tax dividends and capital gains benifit individuals without active participation in the value creation.
> Low tax dividends and capital gains benifit individuals without active participation in the value creation.
Presumably, actively working (like with a job) to generate wealth to invest in other enterprises is 'active participation in the value creation'. I mean, sure, if you want to introduce steep capital gains on invested capital that was inherited, or won, or whatever, that's fine.
>Presumably, actively working (like with a job) to generate wealth to invest in other enterprises is 'active participation in the value creation'.
This is my exact point. Working (like with a job) creates value. Investing money in a secondary market for stocks generates no value whatsoever. Perhaps it keeps some stock brokers emplayed
> Investing money in a secondary market for stocks generates no value whatsoever.
Great, then let's open the primary market (which does generate value) up to individual investors. Unfortunately, this value generating mechanism has been legislated away.
Im open to lessinging restrictings on accredited investors to allow more access. That said, it is worth pointing out that public investors do have access to primary market IPOs.
That said, I do think this is somewhat beside the point of how capital gains should be taxed. I think that stock appreciation profit should be taxed at least as high as personal income.
> I think that stock appreciation profit should be taxed at least as high as personal income.
I don't understand why... if I invest money I worked to earn, the profit from putting that money to use should be taxed three times: once while paying the employee the company hires to carry out business, twice after profit is calculated and corporate income tax taken, and then thrice when they tax me for the dividend. Surely twice is enough?
> That said, it is worth pointing out that public investors do have access to primary market IPOs.
Not quite, the have access to the resellers of the primary market IPO. The original buyers of the equity are the underwriters plus whoever registered during the road show -- and they must be accredited I believe.
>I don't understand why... if I invest money I worked to earn, the profit from putting that money to use should be taxed three times: once while paying the employee the company hires to carry out business, twice after profit is calculated and corporate income tax taken, and then thrice when they tax me for the dividend. Surely twice is enough?
My point is that if you are investing in a secondary market, you are not putting that money to use. It goes into the pocket of whoever sold you the stock and the company doesn't see a dime from the transaction.
If we must have taxes, I would rather have them not come from earned income (like a job), which takes labor and creates value. Income from the secondary market require no labor, and create no value.
If you believe rewarding and incentivizing value creation is more moral and socially desirable.
Rewarding individuals for simply possessing assets is at best neutral.
Is this regardless of legal structure? The choice to incorporate as a corporation comes with a side effect of double taxation but the sole proprietorship doesn't...
Not sure where you're based, but do the recent economic events in the US change your tune here at all? Given 'too big to fail' how do you prevent organizations from retaining zero earnings and then asking for loans when liquidity dries up? Double taxation is an incentive against this behavior
I think we should go to a system where companies must pay out all profits to investors, who can choose whether to reinvest or not. Stop the 'too big to fail' mentality -- if companies want money, ask the investors, not the government.
