Ask HN: Why are you not outraged at the capital gains tax proposal?
Since unrealized capital gains would seem to impact founders disproportionately I wonder why there is not discussion of the proposal here?
I just looked it up. Why would I get outraged over something that affects less than 1,000 people, all of which who are billionaires?
If new government spending is really justified, it should be popular enough to fund it in a broad-based way.
Progressive taxes are supposed to handle this in a broad-based way, but billionaires can afford to finagle the system so that they pay less in taxes than the rest of us.
Whether it is someone stealing from people who "can afford it", or increase taxes for certain categories that don't include them, people are in no shortage of 'arguments' and seem to find things 'obvious'.
The trouble though with taxing unrealized capital gains is in the implementation.
For instance, somebody might own a huge amount of shares in a private company that is valued at a certain price. That might be almost all of the wealth.
If they are taxed on the capital gain they are going to have to (1) find some price the government believes is the real price of the asset, (2) sell some of the asset to get the money to pay the tax.
Since it is a private company, (2) might be very hard to do, particularly if you want to get the price (1).
[1] from the book Triumph of Injustice. If I recall correctly, all taxes added up comes out to about a 30% flat tax for everyone except billionaires. https://www.goodreads.com/book/show/45894166-the-triumph-of-...
[2] https://sven-giegold.de/wp-content/uploads/2020/03/europe-ca...
Like Warren Buffett literally said: “The wealthy are definitely undertaxed relative to the general population."
And if someone has a billion dollars or more in unrealized wealth, forcing them to realize some of that wealth in order to pay taxes on it does not bother me much.
Personal income taxes are about 58% of taxes on personal income. The other 42% are the much more regressively-distributed payroll taxes, where the middle and upper classes pay less-to-none while the working class pays heavily.
> The US has one of the most progressive tax systems in the world.
[citation needed], but even if so then it more than makes up for it with the distribution in spending; considering taxes and spending together, the US has consistently been near the bottom at policy progressivity (measured by post- vs. pre- transfer change in Gini coefficient.)
> How much more progressive of a system do you want?
At a minimum, not giving preferential tax treatment to a form of income received predominantly by the super-rich (long-term capital gains); while there is an argument that income earned over multiple years but realized all at once should get taxed in a way that reflects that in a progressive system, a step reduction for long-term capital gains is not a sensible way to do that, as it both reduces tax on income for which that doesn't make sense and misses much where it does. Allowing options time-shift income for tax purposes (free advance recognition and limited deferral) does that better, handles thing like artistic projects that are developed over years and then realize income over a shorter period later as well as long term capital gains, but doesn't give tax cut for long terms gains that wouldn't change tax brackets even if spread out over the full term the asset was owned. It is much more fair as well as more progressive.
> Unrealized capital gains are imaginary
If that's really true, the LTCG are just windfall income that should be fully taxed in the year received. It’s not, though.
I have, indeed, made that argument before.
> The operating assumption underlying all of your arguments is that bigger government is better.
No, the operating basis is that – completely independent of either the desired size of government or the desired target tax revenue (you’ll note I’ve not talked about the desirable absolute rates of any taxes, only the relative treatment of different kinds of income and the mechanisms for handling income that depends on something happening over more years than those over which it is actually realized) – it is undesirable to systematically provide favorable tax treatment to kinds of income disproportionately concentrated in the super-rich rather than taxing all income as income.
I think the degree to which you want to incentivize investment is highly variable over time and a central focus of monetary policy, not something you want to blindly bake into income tax policy, especially in a way which actively exacerbates inequality, when relative deprivation manifestly is a much greater source of disutility in the developed world than absolute deprivation.
> With the current proposal a windfall of inheritance would not be taxed but a unicorn founder would.
We have an estate tax for windfalls of inheritance; but, yes, I agree that it would be better to abolish estate and gift taxes in favor of taxing those as income to the recipients, too. (As with other income sources, allowing spreading via advance and/or deferred recognition).
And the outflows (benefits) from those taxes are capped, right? It's a single payer paradigm. If were talking about a paradigm shift not mentioned in the prior comments then I think we need to point that.
But going to my main point - your argument is predicted on a belief that more taxes will solve problems. I think we disagree insofar as the government is competent or even really cares to solve important issues.
Then you have the game mentality that you have to pick the candidate with the most chance of winning that still shares some of your views, or that the polling shows your higher pick will lose. Ranked choice could really help here.
By the time you get to the general election it's basically a choice between a shit sandwich and a shit sandwich without the bread.
In your example the government is dropping the ball on solving the homeless problem. But I'd rather live in a world where at least my government tries to solve problems, rather than one where it says, "well, we can't do a perfect job, so we might as well do nothing."
I'm also pretty unconvinced that
> they have no incentive to do anything about the problem because they’d work themselves out of a job.
since it's their job to do something about the problem. I'm plenty cynical about the US, but even I find it hard to reason that everyone here is just sitting on their hands and collecting their paychecks instead of actually trying to do a job that basically everyone (homeless, housed, and politicians) wants done.
It seems this premise is debatable and subject to variable weight depending on how much value an individual sees in those institutions, and more importantly what that money is actually spent on.
The homelessness call out was meant to be an example. It’s not the only inefficiency. My own city has had more and more innovative taxes - on both businesses, and on individuals. As a tax payer, taxes are increasing for me, yet I don’t see any meaningful improvement. And I’m not talking about a 6 month or 2 year timespan but 10-15 years. In the same time, the government apparatus has gotten larger and larger. There are more ways the government has found to extract revenue from workers. But what are we getting in return? Our public schools aren’t great. Teacher salaries are a joke.
Bridges and roads require maintenance, but these contracts seemingly go to specific bidders who are on a revolving door - they deliver such a low standard service that we’re doing the same repairs a year later.
There’s a mixture of corruption and incompetence. But the government has unlimited authority to increase taxes, giving the appearance they’re doing so to help the less fortunate. In reality, it’s basically an industry of jobs that doesn’t have to compete. If they had to compete, they would have failed as a business a very long time ago.
So while slippery slope arguments aren't great, it seems there is some support for it based on past government actions.
Over the last several decades taxes on pretty much everything have decreased, with the result being that we have a non-progressive tax system that favors the ultra-wealthy. Check out the footnotes on my original post.
They started taxing alcohol in my state to recover from a disaster and decided to keep taxing it. They didn't previously tax gains from property sales, now they do. They started a state income tax that they promised would only be about .5%, now it's over 6x that and they are talking about raising it more. Federal gas tax has stagnated, but many states have substantially increase fuel taxes. The property rates increase despite the promise that money from casinos will reduce property taxes. Taxes on cigarettes have substantially increased over the years and have simply become punitive. Sales tax previously excluded the first $10k of a vehicle purchase, but not anymore. The list goes on and on.
The promise is that the tax money will be used to fix some issue and that there will be no need to extend it, yet those promises are consistently broken. They are always looking for new taxes, expanding the current ones, and yet we still face the same issues and budget shortfalls.
Suppose for example that N=1. Would it be ok to target one person with tax increases? What about 10, 100, or 1000 people?
I'm not part of the 1% and never will be. But we should make just laws.
Some people will think "yeah, but the rich people don't pay taxes" which is exactly my problem with it. Again, we've created a situation in which the law only applies to some. The solution isn't to reverse the situation, but to balance the law.
N=1 is not a hypothetical example.
That is partly the problem. The law definitely needs to be changed to address the fact that the people who have generated massive amounts of wealth have done so by avoiding taxes, and then lobbying for favorable outcomes for themselves that are in direct contradiction to the welfare of society—e.g. increasing the price of insulin making it difficult for people to afford it, when the cost has not increased and it is purely for profit.
The law only ever "applies to some". That is the point. Driver's license laws only "apply to" people over a certain age. Accredited investor regulations only apply to people of certain means. Citizenship laws apply under a specific set of conditions. The list goes on. That is literally the point of "law". Conditioned restriction on behavior to sustain order and welfare amongst mass amounts of human beings.
https://news.ycombinator.com/item?id=29013201
I think the implementation of the plan is stupid and inefficient. It won't affect me (nor most people) directly.