Comment by throwawaygh | Hacker News Reader

Comment by throwawaygh | Hacker News Reader

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> federal income tax paid by top 1

Again, top 1% income earners and top 1% by wealth are VASTLY, VASTLY different things.

Top 1% by wealth is unattainable even for most people making top 1% by income.

I'm top 1% by income. I am nowhere even close to top 1% by wealth. Even after working the rest of my career in the top 1% by income, I will not get anywhere even close to top 1% by wealth.

"In order to be in the top 1% of household wealth in the U.S., you'd need to be worth at least $10,374,030.10, according to Forbes." On the other hand, "Nationwide, it takes an annual income of $538,926 to be among the top 1%."

Saving up to $10MM making $500K/yr takes the better part of a career. However, practically no one makes this sort of income for most of their working lives. Most 1% income earners only make that for the back half (at most) of their career -- more often, less than a decade. And lots of 1% income earners don't even start their career in earnest until 30+. So it's a relatively short portion of a career making $500K+/yr but with 10 years of deferred income (and appreciating/compounding) at the outset. Possibly also a pile of debt.

I'm somewhat biased, but my general take is that the top 1% by income do pay roughly their fair share but the top 1% by wealth don't. Why do we tax capital gains at a lower rate than productive labor? That's insanity.

There are, in my opinion, two ways to look at capital gains taxes, depending on where the relevant assets come from:

1. For assets that come from income you yourself earned, the tradeoff is basically whether you spend the money immediately or spend it later. If you're going to have a capital gains tax, that tends to penalize people who don't spend the money immediately. You can mitigate that by at the very least inflation-adjusting the basis, but the US currently does not; I can't speak for other countries. And that still ignores the time value of money and discount rates, of course. But inflation indexing of basis seems like a bare minimum requirement for claiming that capital gains income is like wage income; otherwise you are taxing nominal gains that are not real gains.

2. For assets that come from an inheritance, there is an argument to be made that now this is no longer you just deferring consumption. It's still deferred consumption in the sense that whoever you inherit money from deferred it, but the moral argument becomes a little more complicated, because now you start having the basic moral argument about whether inheritance should be a thing at all. There are also the complications around basis step-up (which is, I suspect, there for practical reasons that may be becoming less and less important in a world where the record-keeping is outsourced to brokerages and the like more and more).

More generally, it's not clear to me that "income" is even the right thing to be taxing. A progressive consumption tax might be a better idea if what you want to tax is consumption of resources in excess of "normal". Unfortunately even small moves in that direction (e.g. luxury taxes that used to exist) have largely gone away in the last few decades. In large part under the flag of "it's hurting jobs in our state's industry".

> my general take is that the top 1% by income do pay roughly their fair share but the top 1% by wealth don't

What evidence do you have of that?

> Why do we tax capital gains at a lower rate than productive labor?

Because it's already been taxed (corporate tax rates). Labor expenses come out of pretax revenue.

>> my general take is that the top 1% by income do pay roughly their fair share but the top 1% by wealth don't

> What evidence do you have of that?

The tax rate on my salary is way higher than the tax rate on my investments and property.

It's perhaps possible that the top 1% by income are also not paying their fair share, but in that case the top 1% by wealth definitely aren't.

> Because it's already been taxed (corporate tax rates). Labor expenses come out of pretax revenue.

So what? I pay taxes on my grocery bill, and I buy groceries with money I already paid taxes on.

> So what? I pay taxes on my grocery bill, and I buy groceries with money I already paid taxes on

As you will with capital gains income. Saying it's ok to triple tax capital gains because wages are double taxed doesn't work.

I'm saying that controlling the number of times a dollar is taxed simply isn't a policy objective I care about.

I.e., "so what?"

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