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Comment by bko | Hacker News Reader

A lot of people think wealth is just a large Scrooge-McDuck pile of money sitting in someone's vault and a wealth tax means just sharing some of that money with others. But most wealth is owning and running extremely valuable companies. So taxing someone like Elon 2% or whatever of his 'wealth' per year, would mean some random Blackrock bozo passive investors running the companies after a few years. You're basically preventing him from owning a valuable company. Sure he's still rich, but he can't run Tesla, or any company for that matter.

For someone that actually did something to create a company (replace Elon w/ Bezos, Branson, Jobs, etc), would we be better off with them running the company or a few additional 100s of millions in the coffers of a government that spends $5 trillion a year (less than one hundredths of 1 percent)?

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We get rich in the sense of consumption when money moves around.

The question in any economy is what balance between private and public is best at allocating capital.

With high taxes, the govt is trusted with allocating capital. With low taxes, corporations are trusted with allocating capital.

What usually happens is that Govt is a natural monopoly so they end up being ineffective at allocating capital to drive higher efficiencies. And if corporations have a mono/duo poly hold on market, they end up being effective.

The best $ spent by govt is:

- building common infrastructure to make goods and services move around faster, cheaper and safer. Then let corporations compete on what goods and services to move around based on demand and supply.

- enforce transparent pricing and certain safety bars are enforced.

- enforce competition in market with anti-trust.

- Create new players by injecting investment in new industries. China is really good at creating new industries (Solar, steel, infrastructure, cars, electronics)

Essentially govt collects tax to build a safe efficient competitive market. Ensure Corporations compete in that market.

Define wealth.

I wouldn't confine wealth to just the billionaire class; I'd say wealth is anyone with 5 million+ USD in liquid assets (specifically, that sum of money in stocks, bonds and cash).

The poorest of the poor in the United States (that have to pay tax), make around $12K per year, and pay more in tax, percentage-wise, for their work than an individual doing absolutely nothing but passively investing in the market does (10% long-term capital gains).

There's zero political will to change this because, surprise, every senator, and most members of congress, would be shooting themselves in the foot if legislation to increase captial gains tax were passed.

There's too much focus on billionaries -- the United States population as a whole consists of many, many individuals with absurd amounts of wealth that pay next to nothing for doing nothing.

At any rate, it is what it is, the American corporate wealth machine benefits, largely, the already wealthy.

Basically, capital gains tax should be much higher than income tax. That seems obvious to me. Someone working for a paycheck should pay a smaller tax rate than someone who randomly bought NVDA stock a few years ago and watched the number go up.

> capital gains tax should be much higher than income tax

Then you would in effect discourage investing. Investing, which creates jobs and promotes innovation. Is as simple as that.

I wish there were a way to differentiate capital gains arising from being a passive owner vs capital gains arising from being an active owner.

If your only contribution to a company is that you've funded it, I really don't think you should enjoy the same tax benefits as an entrepreneur who put their blood and sweat into it.

Let's define it like this - if working for a company is your primary occupation, you can enjoy the lower capital gains tax from its success. This includes founders and employees with equity. For everyone else it's income tax, because they've done little else than speculate, and, well, gambling wins count as personal income.

[citation needed]

Consider the opposite extreme, where the government subsidizes investments to 100x what they are actually worth. Would this create more jobs and innovation, or merely "bullshit investments"?

If a subsidy wouldn't create jobs and innovation, a tax wouldn't take them away.

There is also the likely possibility that the same investments would be made, but valued lower.

>>[citation needed]

Any economics text book.

Go on. Which economics text book would tell me that if the government incentivized investments to 100x their actual value, the resulting investments wouldn't be bullshit?

Any economic textbook will tell you increasing taxes on capital, decreases investments. No need to make up silly analogies which are false equivalences.

Then decreasing taxes on capital increases investments. Decreasing them all the way to negative ten thousand percent would increase investments a lot. Is that a good thing?

You really aren't making an argument you think you are. If you are truly interested about macroeconomics there are plenty of good books out there from many different ideological viewpoints. Most of them explain what you are trying so vehemently disapprove with weird analogies.

>> Decreasing them all the way to negative ten thousand percent would increase investments a lot.

A physicist would say you have just invented perpetuum mobile.

>> Is that a good thing?

Does it matter if what you suggest is impossible?

Can you answer the question? No, you can't.

The government can't incentivize investments up to 100x times or make negative 1000% taxes on investments. I thought my reference to perpetuum mobile made that clear.

Of course the government can.

No, they really can't.

Then let's do something to encourage actually investing—putting money into a company, not into the stock market.

If I buy shares of, say, APPL today, Apple Inc. doesn't actually get that money. The person who owned those shares before does. Even if I bought up $2B worth of shares, Apple would see none of that money. It is not actually invested in the company in any way.

If you want to encourage investing, then you need to find a way to advantage shares being sold directly by the company. (And, frankly, strongly discourage stock buybacks, because that's literally the opposite of investing, and generally only benefits the wealthiest shareholders.)

Maybe, but then let me capture my long and short term gains together to offset gains.

It's crazy that if I have a $5k loss in year one, I can't completely offset it in year 2 if I have a 5k gain. Now I can only use 3k going forward forever.

> Now I can only use 3k going forward forever.

Wait did they change the carry forward rules?

At least the way it used to work was:

* Year 1 - 50k loss, 3k offset of ordinary income 47k carry forward

* Year 2 - 60k gain, 47k zeroed out from last year's carry forward, 13k is taxed

Is that not still the case?

No change. It's been as such (3k) for quite some time.

Wealth has a definition. It is what you own (minus what you owe) now whether you are wealthy or not is another question. Someone making 12k a year is not going to pay much on taxes. Some sales tax, maybe some property tax. That is about it. Meanwhile a wealthy person is going to pay gobs in taxes. Sure they may pay a lower percentage of their total income (and even lower of their total wealth) but they will be paying plenty in taxes

> 10% long-term capital gains

That is not the long-term capital gains rate in the US.

You're right, it's actually 0% with any amount invested, $100,000 or $1,000,000,000,000,000, doesn't matter, provided you don't sell more than roughly $40k, or, god forbid, generate additional income through, say, work.

That flat tax rate certainly scales nicely the wealthier you happen to be, paying a max of 20% if you hold for more than a year and decide to cash in on this now several year massive run up in the markets.

It was most likely already taxed.

If I invest my paycheck in the market, that money was already taxed at 30-40%. Now I make a dollar in the stock market , and it's taxed again at 20%.

This get ridiculous fast.

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