Because politicians sell progressive income taxes as a way to screw the rich, when it actually just screws the upper middle class, since the actual rich don't have jobs to tax the income from.
In Europe, most wealth is inherited, and power in concentrated in family dynasties.
If you have, say a $200K minimum threshold to start owing minimal annual tax, and a progressive scale after that, do you really think it would stop the next Bill Gates?
Why would anyone, including Pickety, want to prevent Bill Gates?
We should be trying to discourage the accumulation of power as well.
A person earning 40k per year isn't MUCH better off than the other. They are both broke, and only have money for the necessities. But if we only tax consumption. The person earning 10k will end up spending a larger percentage of their income in taxes than their counter part.
Now lets throw into the mix, me. I make a healthy 6 figure salary. Lets say I also only pay for what I use, and as a penny-pincher, I only get cheap housing, buy bread and cheese for my food, and tap water. I'm now paying the same taxes as the person earning an order of magnitude less than me.
Do you know many people with high incomes but super frugal lifestyles? If so, are they a rare counterexample, and not the norm?
Most every person I knows spends in line with income.
1. Rainy day fund, because you know one day the high pay may stop.
2. Retirement, because you know one day your ability to work may stop.
3. Estate planning, so that your family will be set up for a life that was better than the one you were given.
4. Investment capital, so you can turn your 100s of thousands into 10s of millions or more.
5. Startup capital for a future venture.
The difference between the middle class and the high-earners are that the high earners save their excess income.
1. You spend the savings, and pay consumption tax
2. You die, and pay the estate tax.
A consumption tax is always regressive.
More likely, we would heavily tax goods that poor people cannot afford. Things like dining out, travel, fashion, electronics, cars, and housing in excess of basic sq footage.
in my opinion, for a clean treatment of value taxation, either corporate tax or capital gains tax must go.
It's the investor's job to make sure their investments are producing an adequate risk-adjusted return, not the government's job to help you get there.
If I have you 51% odds on a coin flip, that's a good bet. But if you only get paid out 60% when you win, it's a bad bet.
But I do think that's a different argument by a few degrees than the idea that capital gains taxes should be lower to somehow compensate investors for their risk.
Source: https://taxfoundation.org/capital-gains-rate-country-2011-oe...
And companies wont last with out access to capital trust me I have chaired share holder meetings caused by lack of capital
Nonsense. What alternatives do people have? Putting money in a lousy US savings account with a 1% annual interest rate? By comparison the US stock market's average annual return has been 7%. Hence even if income tax rate were the same as capital gains tax rate, the stock market would still give you returns 7× higher.
Comparing your experience chairing shareholder meetings to tax policy is apples and oranges. Specifically, that because you've chaired a shareholder meeting, this somehow makes you an expert on the efficacy and outcome of changes to the tax code.
The theory of "investment fleeing" due to capital gain tax increases is, frankly, not proven by the data. We've had an increase in the capital gains taxes under Obama (2014) - yet investment continued across private equity, venture and general investment.
I'm not really serious, but perhaps something along those lines is an option?
What do people imagine rich people would do with their money instead, if capital gains were taxed like income? Stuff it their madrasses, and be at the mercy of inflation? Probably not.
I don't know why we have a flat tax on investment income but a progressive tax on labor. The easy, and fair fix, is to progressively tax investment income.
I recommend Ken Fisher's "Debunkery" which covers a lot of economic what-ifs with hard data. Capital gains tax rates and treatment varied widely throughout the US history, yet collected revenues did not.
See http://money.cnn.com/2015/01/30/pf/taxes/obama-taxes-rich/in...
I've seen the song and dance for a while now and hoped Obama was different. Promise enough to get elected and hope they forget about the promises after.
Trump is literally doing to same thing. NAFTA and NATO are obsolete, oh wait now that I'm in office I didn't mean what I said. They're important.
I don't see why it can't be a two-pronged approach with both higher income taxes and wealth taxes. It's what was done in the 1950's, and there was still plenty of wealth then.
(Which would get you to three million by the way)
I suppose this is a matter of your definition of "plenty of people".
[0] https://statisticalatlas.com/United-States/Household-Income
[1] https://www.quora.com/How-many-people-earn-200-000+-per-year...
That time period was one of great prosperity that won't be repeated. Market returns were higher; most of the low hanging fruit has been plucked, and you can expect ~5% in equities returns. Its going to take far more capital now to get the same returns your grandparents had, which is why you see capital chasing returns across the world.
https://www.cnbc.com/2017/05/07/get-ready-for-dramatically-l...
"The leaders of Vanguard Group, overseers of some $4 trillion in client assets, have been advising investors to expect a typical 60 percent stocks/40 percent bonds portfolio to deliver two- to- three percentage points less in nominal annual returns than its long-term norm. (Since 1926, such an asset mix has returned better than 8.5 percent annualized.)"
"Other forecasts are even less generous. Research Affiliates, a quantitative and "smart beta" fund manager, projects that U.S. stocks might only offer one percent a year for the next decade, after inflation. This is based largely on the so-called Shiller P/E, a ratio of the S&P 500 index to its trailing ten-year average earnings, which is now above 29 and higher than any period aside from the run-up to the 1929 and 2000 market peaks."
"And with risk-free 10-year government debt yielding a skimpy 2.3 percent in the U.S. and far less elsewhere, all other financial assets have repriced for skimpier future returns as well."
The example they provide
> Farmer spends $50 on tractor repair from mechanic. Mechanic buys $40 of corn from farmer. Mechanic spends $10 on barn cats from farmer.
does not involve stuff made abroad, massive corporations with economies of scale eliminating the middleman, or foreign-owned entities.
Most of that velocity will end up in China invested into another skyscraper ghost town, a massive infrastructure project or a cryptocurrency mining farm.