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Comment by craigyk | Hacker News Reader

I don't think you need to do much more than add more tax brackets and increase them. The top bracket really should be approaching like 90% for income in excess of $1M a year... IE. the tax brackets and rates should generate an income return that looks somewhat like a sigmoidal curve... if you've looked at biology this usually results (or is a result of) stable equilibria.

Also, capital gains gets taxed as income.

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"Also, capital gains gets taxed as income."

That, is the most heart stopping sentence you can say to an American rich person. The tax structure is setup to tax the poor and middle class the hardest. If you are in a class that can do capital gains, 83b elections, double irish -- no taxes.

It's also not fair because you lose some of your investment's value to inflation.

So that 15% long term rate ends up closer to 30% if you include the fact that your dollar is worth less today than when you bought the stock.

I did some rough math on putting money into the stock market vs. inflation:

http://www.reddit.com/r/politics/comments/38b2u9/once_you_ar...

This is utter ballocks. Inflation affects everyone equally, there is no reason why people with enough unneeded income/capital to invest it should get tax breaks.

You know who really suffers from inflation? Minimum wage workers who's wages do not go up despite inflation.

Again, like I showed in my numbers, it's NOT a tax break. It's offsetting inflation. You pay very little inflation on your income this year, but you paid inflation "tax" on those investments from years ago you sold today.

The obvious solution to that would be to tax capital gains above inflation, using some government-standardized measure of inflation.

Yes, in an ideal world. But as you can see to responses, people still don't understand the point that I'm trying to make.

I would be completely fine with charging personal income rates on capital gains, as long as the capital gains are counted above inflation.

Giving you the benefit of the doubt this is really sloppy logic to argue what capital gains tax should be.

A 17 year doubling rate is a PA return of 4% if you're only expecting a 4% yearly return then yes shares aren't great, no shit. Also you can control your CGT liability by choosing when to sell.

On top of that you're doing calculations on stock market investment without looking at dividends? I mean given how cheap it would be for a billionaire to pay shills for this sort of thing, and how terribly damaging an increase in CGT would be for them.

Actually giving you the benefit of the doubt frankly you really SHOULD sell this sort of posted logic as a service. LAAS the next big HN thing perhaps? :D

Not my problem than the S&P 500 only returned 4% from 1998 to today. What do you want me to do, start counting from the bottom of the market? Nobody knows to buy at the bottom of the market because the bottom can only be known retrospectively.

Sure, if you invested in 2002 then your returns might be 2.5x today and the inflation lower, and the tax rate might be 20% (or whatever, I'd have to redo the numbers)

If you invested in 2000, however, you'd make 40% on your investment, lose money to inflation and THEN pay capital gains tax. You'd be getting taxed for losing money.

So I picked a more neutral date like 1998 where it wasn't a bubble yet, but not close after a crash. I didn't include dividends because I'd have to add those constantly as the divident yield from S&P 500 changes from month to month. It's around 2% (actually under 2% for the majority of the last 15 years), though, so that does change the numbers.

I would say then the inflation is around ~2%, dividends around 2%, stocks grew around 4%, so around 6% year-to-year nominal profit which you would pay 0.9% capital gains tax, and 4% real profit which is 22.5% capital gains tax (0.9/4 = 0.225)

Consider the following: A single individual with $200,000 salary with two personal exemptions would pay $45,000 in total taxes which is the same overall rate even though the marginal rate is 33%

So a rich individual who doesn't work, but only sits on $5,000,000 that yield him $300,000 a year (and that 5M loses $100,000 of purchasing power a year) would pay the same federal taxes as an individual who just works for his $200,000

So if you spend 10 years building a company and then sell it for 10 million, you think that you should only get to keep 1 million(ish)?

The only way to make a long term gains tax fair is to allow you to spread it out over the time it took you to make the gain. And even then it isn't really fair.

If you make a company and sell it in three years for 50 million, why is it fair that you only keep 5 million?

>So if you spend 10 years building a company and then sell it for 10 million, you think that you should only get to keep 1 million(ish)?

Of course. By the time you're selling it, most of the actual value is being created by people beneath you.

Wait what? Two friends of mine sold a company for $10M last year, that was like them and 4 other employees, and the (technical) founders easily did more than half the work..

How much money did you make during that process?

The only way to answer questions like this are by first asking our goals. Is our goal to let successful business leaders become ludicrously wealthy while externalizing much of the risk? Is our goal to have a system where the natural luck of the system creates lottery-style winners and losers and let that be? Or is our goal to have a maximally productive and healthy society?

I am not for 90% income taxes, but capital gains taxed as income is a good idea. I suggest starting with a rate between the current income and capital gains rate.

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