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Comment by bluecalm | Hacker News Reader

Capital gain tax is stupid anyway. It's one of the first tax that should be removed.

You can tax business at home by land/revenue/resources usage/ip protection taxes. As it is owners in different jurisdictions pay a different (or sometimes no) tax on selling shares. Selling itself is something you want to encourage, not discourage. It's a pointless tax that penalizes exactly the things you want to encourage.

You think that someone moving to Portugal to avoid it is unfair but then a share holder living in 0 cap gain jurisdiction in the first place would pay 0 anyway.

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IMO corporate income tax is the first that should be removed, with a corresponding shift to income taxes. Those can be as progressive as you want, have much lower compliance costs, and don’t distort behavior in the same way. Thought in practice I’m not sure how tax collection from foreign owners would work.

I would rather argue for the following

- No PIT on dividend income, which is fair since CIT has already been paid on the money earned by the firm(and paid bt by you as a shareholder in that firm)

- CIT payable only on dividend distribution, not yearly so if a firm keeps on re-investing in the firm paying salaries/suppliers and investing in growth they don't pay any CIT.

Another side effect of 1) is that it would cause companies to distribute dividends rather than doing stock buyback since dividend would have a lower tax rate(0%) than the STCG/LTCG tax rate on stock appreciation.

This is how estonia does it, so we already have some data on effectiveness of this.

It is at least not wildly regressive like consumption taxes are.

It would be better to tax IP protection, inheritance, resource use and land only but realistically if we get rid of capital gains the tax burden will land squarely on wage earners doing all of the actual work who are already taxed more than the people who own their productive output.

There are many ways to make consumption taxes not regressive. You can implement refunds up to certain threshold. You can use the revenue to fund services used by lower income families. You can tax luxury good at higher rates.

EU countries already realize it's the case with IT services (everyone wants their share with digital tax) and with big supermarket chains (big issue in Poland). It's just painfully slow for them to connect the dots and introduce a general solution.

> There are many ways to make consumption taxes not regressive. You can implement refunds up to certain threshold. You can use the revenue to fund services used by lower income families

Every one of those "solutions" is just a patch on the basic problem that consumption taxes are fundamentally regressive.

Go tell someone living paycheque to paycheque that it's okay, you'll get a rebate every quarter for the extra tax they paid, or worse, on their annual tax filing, and tell me how that'll make their household budget actually work.

Honestly, when I read ideas like this, I realize just how massive the disconnect is between the lived experiences of the relatively well off and the working poor...

Except consumption correlates with income and wealth, and it's already not uncommon for states to exempt necessities like food and clothing from taxation, which keeps them affordable without a convoluted bureaucratic system. Implemented correctly, consumption taxes are less regressive than property taxes, which prop up rents and constitute a barrier to home ownership for working class people.

There are arguments to be made against heavily taxing consumption to encourage economic activity, but you're oversimplifying this by disregarding the indirect costs of alternatives and looking for problems instead of solutions. Not that I think the one you commented on is a good one.

The attraction of consumption taxes largely IS that they are regressive. That's certainly why people like Bob McNair pushed them.

A billionaire who spends 0.2% of their wealth every year, paying a 100% consumption tax on that would still have a vastly lower relative tax burden than somebody who spends their whole paycheck but only pays 50% consumption tax.

> It is at least not wildly regressive like consumption taxes are.

Why is it just assumed that regressive taxes are bad?

If you want to make a case that regressive taxes are not bad, feel free.

> who are already taxed more than the people who own their productive output.

Top 5% by income in USA pay 60% of income tax. It is NOT the run-of-the-mill wage earners who may most, not even close.

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