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Comment by netcan | Hacker News Reader

Tax policies are evolved creatures with the very big evolutionary force being the practicalities of what you can tax.

For most income earners, defining money as income is easy and taxing it is easy. For high income earners, it is not. Is this a revenue, profit, personal income, capital gains, etc? Capital is mobile, you're right. So are cash flows from that capital. A lot of that is for reasons to do with legal structures: jurisdictions, corporate law, etc. It's hard stuff to change, especially if your goal is "raise more tax next year."

This is why the upper middle classes pay so much tax. They're easy to tax.

Anyway, I agree with you to a certain extent. It's hard to tax capital gains, or other incomes that are not "salary from job X." But, I don't think the "improves the lives of those at the bottom" argument holds water at all. So is "Labour" and so is "Natural Resources" or any other economic fundamental.

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I'd like to see a large shift from taxing productive activity to taxing things like pollution. I.e. reduce taxing things we want people to do and increase taxing things we want less of.

I think sin taxes are marginal, ultimately. I have nothing against them, but I don't think they change the game in fundamental ways.

Historically, they do. People talk about high marginal tax rates in the 1950s, but few to nobody actually paid those rates. This was because there were a lot of tax shelter options available, and deductions were a lot looser. Reagan got the tax reductions through Congress by agreeing to eliminate the tax shelters and tightening up a lot on deductions.

The result was a massive shift out of relatively unproductive tax shelter investments into more productive ones. Although I've never seen this opinion in print, I suspect a lot of the economic growth that resulted was a consequence of this shift in investments.

But inequality is something we don't want. I'm more OK with the argument that income/wealth taxes are only good to the extent they progressive. [As a US resident] VATs don't sound appealing.

What if we want less wealth inequality?

Tax those whose income exceeds the desired upper limit. In other words, in addition to having a minimum wage you have a maximum wage, where the maximum wage is a multiple of the minimum wage (x1000, for example). Any income earned between the minimum and maximum wage would go untaxed, but exceeding the maximum wage results in incurring tax.

In order for this to work, we would need to include a way to tax assets as well, as otherwise people could just put their money into assets.

The best way to do what is to make everybody poor. Historically, that is about the only things that works. This idea of both high and equal wealth for everybody doesn't seem to be possible if we use history as our gauge.

Are you suggesting that wealth inequality is lower now than it has ever been?

I find this idea appealing too, because it creates good incentives in the market. What I wonder about is the kind of incentives it creates in government (what do we do when pollution is eliminated but the government is broke?). Do you know of any good writing on this topic?

Is anyone really worried about pollution being eliminated? :-)

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