[quote=Eugene][quote]IMHO, we need to discourage gambling and encourage work. That’s why I would lower the rate on **earned** income, and tax investment income at a much higher rate, with steeply progressive rates.
I would not support a consumption tax, because it’s too regressive. Most poor people spend almost all of their income on basic necessities, while the rich can invest theirs. It would be totally immoral and unethical to tax gamblers at 0-15%, while taxing poor people at the maximum rate (if consumption tax is the highest tax).[/quote]
Agreed. VAT only makes sense if you exempt basic necessities, or compensate with a generous tax refund (say, 10% for every dollar earned up to median household income).
Instead I’d suggest that we eliminate mortgage tax deduction, tax all capital gains as income, raise the estate tax to 50% on every dollar above $500,000, close all loopholes and subsidies in corporate tax code, and lower income tax brackets to make the system revenue-neutral.
[quote]We should encourage saving, so people can make intelligent decisions about investment in the future. [/quote]
I’m not so sure that we should encourage saving. Sometimes too much private saving is a bad thing. (Like right now, for example.) And we certainly shouldn’t do it by lowering taxes on capital gains. All it does is inflate P/E ratios of the stock market, with no tangible benefits for the overall economy.
But we should encourage labor vs. passive investment. It would make sense for the top income tax rate to be equal or lower than the capital gains rate.[/quote]
Agreed.
The only thing I disagree with is the inheritance tax. IMHO, that is double taxation, and as a property rights advocate, I don’t like the idea of taxing property (am technically opposed to property tax). Income that has already been earned and taxed should not be taxed again when it’s kept in the family.
Contrary to popular belief, the act of inheriting property or an estate does NOT concentrate wealth; it dilutes it. In the vast majority of cases, when a wealthy person dies, his/her estate is divided up among a number of heirs and beneficiaries — who tend to spend it right back into the economy.
What concentrates wealth are low taxes on passive income. The power of compounded returns on investments is greater than most people understand. IMHO, low taxes on passive income is the #1 reason for the growing wealth divide.
I’d also like to see us distinguish between real investing vs. speculating. SK in CV nailed it when he mentioned that “investing” (as we tend to define it) does not necessarily benefit society or increase productive capacity.
IMO, real investing requires direct investments in things that increase or improve productive capacity, improve infrastructure, etc.
Buying something that already exists (competing with legitimate, organic buyers) in the hope of extracting rents from organic demand, or of getting a higher price for it later, is speculating or gambling. It does nothing to benefit society or increase productivity. This sort of “investing” should be taxed at very high rates, even from the first dollar earned. It creates a dangerous wealth gap, causes market disruptions and paves the way for a damaging boom/bust economy, which benefits the gamblers at the expense of everyone else.
