Thread: Why should capital gains be taxed?

Originally Posted by imagep

haymarket, you really didn't need to point that out. Far right economic theory NEVER makes sense. It's all a bunch of giberish. I think thats a given. That might even be in the DP rules somewhere.

Oh its still well and good to shine the strong and pure light of illumination upon the darkness of wrong and evil.

Originally Posted by Keridan

My concern would be the effect of all those investments suddenly being sold to avoid the new higher taxes crashing the economy severely.

In theory, everyone wants to sell, few people want to buy. The price drops drastically, as well as value of those stocks. No one then invests in the corporations that those markets fund and then the big crash comes.

As I said, I would be open to taxing as income, but when you get a higher tax rate, you get into a dangerous shift.

I did a little looking and I was wrong here. The reason that revenues generally stay the same or go down after increasing taxes on investments is not because people pull money out. It's because they leave it alone. Instead of moving the money around and paying the higher tax, they just leave the stocks alone and don't sell their homes.

Moving that money around is important. First, it creates the tax base and often increases revenue. Additionally, we are not talking about the companies that have a large cash pool that need more money. We are talking about start-ups getting funding. That group is one of the largest employers in America.

Originally Posted by phattonez

Because you are taxed on future gains, in a sense. Instead of having $100,000 to spend, say you only have $50,000. If your investments doubled, then because of that tax you are short $100,000. So in a sense, you were taxed $100,000 in the future, not just the $50,000 at the present. And then you're going to tell me that the gains that happened even after the first taxation should also be taxed? You really put a damper on investment.

So was I. I could have built in far more production in my side business if my other income was not taxed.

Originally Posted by CriticalThought

I'm just curious why should there even be a tax on capital gains? If people invest with money that they earned, then that income was already taxed, so why should they be taxed based on whatever that money earns? It isn't like the government pays people back if they lose money through investments so why should the government be free to tax money earned off of investments?

The government DOES "pay people back", CT. There's a deduction for assets that are qualified as capital gains that sell at a loss. As for why "should" this income be taxed, well, the government needs money to run. No, a deduction will not make an investor whole...but the government does not insure assets (other than deposits in banks, etc.)

The most efficient method (leave aside our byzantine method of implementing it) for our government to use to raise money is to tax income. A gain on a capital asset, at sale, is income.

I get your double tax argument, but it doesn't really fly. The income that is earned is all that is taxed; that which was invested to begin with is not.

Originally Posted by imagep

If anything, we should tax capital gains at a higher rate than earned income. After all, by the definition of capital gains, the owner did nothing to generate the gains, other than to own the item that appreciated.

So we should not allow banks to charge interest on loans, then, according to this logic.

Where does risk factor into your argument?

Originally Posted by imagep

It doesn't put a damper on investment, it just shifts the ownership of investment capital to the middle class.

It shifts capital to the political class, not the middle class.

It also encourages people to make wiser investments.

Having less to invest with does not necessarily mean wiser investments. It may look that way, but having less capital in total also means that riskier but potentially much more fruitful investments don't happen.

You see, we don't distroy money when we tax it away. It gets redistributed. Most of it gets redistributed by the gov purchasing stuff (creating demand) or building stuff (creating infrasture) or hiring people (creating jobs). Naturally all three of those methods of redistribution create jobs, and those new jobs create more jobs as when people have money they spend, and when money is spent it is used to purchase products, which are produced, requiring more people to be hired. Some money gets redistributed for welfare, as a conservative I am totally against welfare, but regardless, that welfare creates demand.

Entrapanures and investors both love demand because increased demand translates into increased profits. Every penny that the wealth pay in taxes gets returned to them in the form of additional profits, thus taxation does not neccessarally reduce the wealth of the wealthy. In most cases it improves it. Thats why the wealthy got wealthier during WW2 when they were taxed so much. Sure, most of their profits were taxed away, but their profits were enormous. A small percent of an enormous amount is a lot more than 100% of nothing. Those increases in profits more than make up for higher taxation.

Part of the reason that income tax is as high as it is, is because capital gains taxes are as low as they are.
If we were to increase capital gains taxes and lower income taxes, the middle class would tend to invest more as they would have more money to invest. That alone totally blows the theory that lower capital gains taxes results in higher investment. People invest 100% of their "excess" income. If the very wealthy are the only ones with excess income, then only the wealthiest of us will ever have any true financial wealth. If the middle class are allowed to keep more if their money, then the middle class can also invest and have a piece of the American pie.

What I am saying is that if you want to be all about the uber rich becoming richer, then keep on repeating all of that far right class warefare crap. Who knows, you may get lucky and become uber rich yourself one day. But if you have any interest in all Americans being able to get a head in life, then you need to abandon all of that rhethoric.

Is the benefit that comes from government spending and investment outweigh the benefit that comes from private investors making those investments with their own money? You're dodging the heart of the issue.

Originally Posted by phattonez

So we should not allow banks to charge interest on loans, then, according to this logic.

??? Of course we should allow banks to charge interest. And banks should have to pay taxes on the profits they make, and people who deposit money in banks should have to pay tax on their deposits.

Where does risk factor into your argument?

People choose the level of risk they feel comfortable with. The higher the level of risk, the higher the profit may tend to be. they are rewarded for risk by higher profits. We don't need the gov to subsidise risk by giving risky activities discount tax rates. Really, the gov shouldn't be subsidising anything unless it subsidises that same thing for every American (like military, roads, education, police).

Originally Posted by phattonez

It shifts capital to the political class, not the middle class.

How's that?

Is the benefit that comes from government spending and investment outweigh the benefit that comes from private investors making those investments with their own money? You're dodging the heart of the issue.

Without the gov benefit of military protection and the other things it offers, we would have little wealth as our weath would be plundered year after year by invaders. So in a way, some government expenditures are indeed more important that private investment. Anyhow, I never suggested that we have a 100% tax on anything.

Originally Posted by imagep

The government is granted the power to levy taxes in the constitutuion.

Our founding fathers were very smart.

And thus it should be.

You should be more patriotic.

An attack on taxation is an attack on George Washington, James Madison, that guy who did the key and lightning magic trick, John Adams (both of 'em), the Adams family, Thomas Jefferson, the Jeffersons, Jefferson Airplane, and the Jackson 5.

the founders wanted taxes paid for usage like tariffs. not taxes on income or capital

Originally Posted by TurtleDude

the founders wanted taxes paid for usage like tariffs. not taxes on income or capital

That year was 1787.
This year is 2012.