Lower tax rates, not necessarily lower taxes.
We have a marginal tax system so effective rates should be higher for those that make more. Them paying lower tax rates (like Buffet said) is them having more loopholes in the system.
A lower tax payment is a different thing.
So, for example, if someone makes most of their money on dividends, then they pay capital gains tax, and it appears like they are unfairly paying a lower rate than everyone else. ...but that's not a fair comparison because it's a different sort of income, with a VASTLY riskier risk profile. Taxing it at the income rate wouldn't make sense.
In the past, in the US, capital gains wasn't taxed at all because it was considered double taxation (since the investment was already taxed). ...and in some other countries, there is no tax on capital gains.
I've seen people claim that country XYZ has higher tax rates than the US, but then when you look closed, they have zero capital gains taxes.
PS: Either lower taxes on capital gains or allowing people to deduct losses is reasonable in the name of risk, but we do both.
Or just use a consumption tax, which is largely the same thing but a lot less complicated.
Yes, I've come to this conclusion too. The long-standing argument that capital gains rates should be low is about what happens, for example, if your gain on an investment exactly matches inflation: you'd pay taxes on it, but you haven't made any profit in real dollars. The right fix for that is not to divide your paper gain by some amount before taxing it; it's to subtract the loss due to inflation. In times of low inflation, as we have now, this won't make much difference, but if inflation picks up again at some point, it will make quite a large difference.
Of course, such a plan raises the question of exactly what inflation estimator one should use. I'm not enough of an expert to have a strong opinion, but the T-bill rate [0] seems like a reasonable first cut, since it's a good estimator for the risk-free rate of return. Paper gains from holding T-bills would thus not be taxed at all.
Whatever the inflation estimator used, the more important (and likely more controversial) aspect of the proposal is that gains beyond that amount be taxed as ordinary income. The argument is one of simple fairness: once the inflation problem is handled, how can one justify doing otherwise?
[0] https://www.investopedia.com/terms/t/treasurybill.asp -- Okay, I see there isn't just one rate, since the rate depends on the maturity interval, but we can go with the highest one, which is the one for the 52-week bill. This creates the oddity that holders of shorter-term bills will actually get a tax credit, but it will be small; I think we can live with this.
This means you don't get an interest free loan from the government to continue to invest in an asset just because you haven't sold yet.
Having the government give people de facto interest free loans of their own money in order to continue to investing it is also optimal anyway, because the government borrows at an interest rate significantly lower than the average market rate of return. They actually come out ahead by lending the money to investors who are then collecting taxable interest on it, because the tax on the interest can be more than the rate the government pays to issue bonds in the meantime, not even counting the overall economic benefit of stimulating investment (i.e. more/better jobs for people who are themselves paying taxes).
One thing that complicates the above is that the US does tend to run a larger deficit than Canada.
Yes, earning the money with labor is vastly riskier. Telling a financial advisor where to put money incurs no risk to your life.
Compare that to being a welder, tree feller, home builder, where your health or life is a daily concern.
I really don't understand why those who go out and work hard every day have to pay more in tax (as a percentage) than those that just sit on the couch and watch their wealth grow.
Ah yes, the riskiest activities of them all: investing in fortune 500, government bonds, index funds and inflating real-estate prices. They all count as capital gains.
RB2 Is the form you fill out if an employer goes bust, to get some cash from the government.
The risk of investing is, in the large, "my £10,000 might be worth £9,500 tomorrow", not "tomorrow I might lose my job through no fault of my own and suddenly have to make a major lifestyle change".
The same thing can be said about every tax ever. Every time you tax money as it changes hands, that same money has changed hands before and was probably taxed then.
> They have constructed a historical database that tracks the tax payments of households at different points along the income spectrum going back to 1913, when the federal income tax began.
It may be reading the book for the full detail on methods and results. I plan to.