[quote=SK in CV][quote=AN][quote=SK in CV]
Straw man argument. Nobody has suggested such a preference. Historically, the US tax code has provided preferences both for earned and various types of unearned income. With very minor exception there is little empirical evidence that rate changes, by themselves, either promote or reduce the availablity of capital or labor.[/quote]
Are you sure nobody has suggested such a preference? Here, I’ll help you out:
[quote=CA renter]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.[/quote]
[/quote]
I understand the confusion. It was the other preference you suggested that was straw.
[quote=AN]So those who prefer active income vs passive income prefer people working till they die vs being able to retire. After all, once you retire, you’re not making active income anymore.[/quote][/quote]
Let me clarify this a bit. I would tax passive income at around the same rate as earned income up to a certain amount (maybe up to $50K/year). After that, it graduates, and at some point, it would begin to get steeper (perhaps above $200K/yr, but this could be smoothed to avoid extremely high taxes on one-time sales, etc.). Passive income above $500K/yr would be taxed at the highest marginal rate. I’m pulling these levels out of thin air, and would want to do a more detailed analysis before determining the exact rates and income levels, but these numbers are probably pretty close to what I’d call optimal. Of course, I would allow for some smoothing, maybe over three years, so that windfall events don’t trigger the highest rate if most years only see very low returns.
