Ah, I think I see now. So what?
Let’s say, for the sake of argument, that the Salt Lake City Olympics paid Romney $1,000,000. Romney paid $300,000 taxes on that income. He spent $300,000 to support his family. So he wisely invests the remaining $400,000 in stock. That stock doubles, and he sells. He now has an additional $400,000 in capital gains. How is that not income?
In what way are his taxes on the previous income relevant to his new income?
I assume that he takes the income he earns in each world for working x hours, and makes the same investment in each world with those money. Thats all.
They are relevant because they have an effect on his new income. Since they lower it.
My overall line of thought is that the 13.9% tax rate is just an incidental result of the division between income tax and capital gains tax. It would have the same effect on Romney if one of them was lower and another was higher by a certain amount. Then I ask the questions of post 9:27.
OK, so you’re asking, positing that Romney has made $1,000,000 in income and $400,000 in capital gains over a period of years, which is more unfair:
[ol]
[li]Romney pays $300,000 in income tax and $0 in capital gains tax.[/li][LIST=2]
[li]Romney pays $150,000 in income tax and $150,000 in capital gains tax.[/li][LIST=3]
[li]Romney pays $0 in income tax and $300,000 in capital gains tax.[/li][/ol]
They’re all unfair. Romney should pay my posited 30% on all his income.
That is the same as Romney C above. You can imagine a world with lower income tax and capital gains tax equal to the income tax, so that the Romney of that world earns exactly the same this year as the Romney of this world. How then, can one world be fair and one unfair? When they earn the same, and their earnings are reduced by the same amount due to taxes-
No it’s not. In all three of your scenarios, Romney pays $300,000 in taxes. In mine, he pays $420,000.
Fair enough. One thing I should say is that I am not probably not in favour of low taxes for the rich. That is not what I am trying to argue. You’d like them to pay more, I have no argument with that.
What I have an argument about is that we should tax them in the optimal way, and that we should be honest about how much we are actually taxing them.
In your world he pays 30% income tax, 30% capital gains tax. Why is that more fair than a world where he pays (30+x)% income tax and (30-y)% capital gain tax, in a way so that he ends up having done the same amount of work, and ending up with the same amount of money to spend? It seems to me those two worlds are equivalent in fairness.
You think it’s unfair that people who have been uniquely privileged by our society to make more money than 99% of everyone else should not also be uniquely priviliged by our society to pay more taxes than 99% of everyone else?
Good heavens. And good night.
You might want to try and read my last post again.
Am I allowed to characterize a line of argument as InsaneTrollLogic?
I don’t think my point is particularly outrageous. Perhaps people are confused because they think that I advocate lower taxes for the rich (and they are strongly against that) but that is not a point I am addressing. I guess I am also bad at explaining myself, since I haven’t seen any counter-arguments that actually were relevant for the concept I was trying to talk about.
Here is a professor of economics and author making the exact same point as me:
I fully understand your argument, and addressed it in post #220. You’re claiming that there shouldn’t be a capital gains tax, because they’re already receiving less money from their investments, due to paying taxes in the past. However that assumes that money not spent on taxes, would definitely be invested, when it’s entirely possible that someone paying less in taxes would still invest exactly the same amount and spend the rest. You can’t base tax code on hypothetical money that very likely would never existed anyway.
Additionally, “Having less money because of taxes” is not the same thing as “Taxes”. If I’m regularly receiving less money than I would’ve if I hadn’t been taxed years ago, I not regularly paying taxes, because that money isn’t going to run the government. It just doesn’t exist.
Correct me if I am wrong, but isn’t your central argument that capital gains should not be taxed? And the reason is that the principal they proceed from was already taxed as income when it was earned?
No. I’m claiming that Romney is paying more than 15% taxes, in effect.
If the taxes are lower on capital gains, there is no reason why people should invest less. On the other hand, if there are higher taxes on capital gains, people have higher incentives to spend the money instead of investing it. And that is actually the problem with capital gains tax. It discourages work (since any tax discourages work) but it also discourages investment.
But also the government had that money long time ago, and supposedly have had an advantage of having it in that extra time.
Otherwise, why not lower the income tax and increase the capital gains tax. Since the money gained from income tax doesn’t exist.
My central / original argument is that Romney is paying more than 15% tax. Also that you can’t use the capital gains tax alone to decide whether what he pays is unfair. You have to consider the other taxes he has paid also.
Later I was asked what tax system I would prefer, and I think I would prefer something in the direction of only having consumption tax, theoretically. But that is not my central argument.
My argument against that was, lost opportunity is not a tax.
I fully understand your argument. I just disagree with it, and find your reasoning unpersuasive.
But if the effect on him is exactly the same in two models, how can one model be unfair and one be fair, with respect to him?
We’re not talking about the relative fairness of two models on one individual; we are talking about the relative fairness between the wealthy and the middle class *under one model. *Introducing a hypothetical model regarding the relative fairness for one wealthy individual is outside the scope of this thread.
In other words, *it doesn’t matter. *
I don’t think that you can just say that my arguments are outside the scope of the thread, and that wer’re not talking about what I am talking about.
I have to use a hypothetical where the tax system is different, in order to interpret this specific tax system.
Maybe because it’s not about “the effect on him.” We’re not talking about fines.
It’s about taxing the money everyone makes, less standard exemptions and deductions. It’s about taxing the whole economy, not as a punishment but as a way of raising funds; and not giving a better deal on the pieces that flow to people who didn’t even work for them.
You want to talk about effects on the citizenry?
How much deadweight loss do we suffer taxing professional salaries at a higher rate? Why should they have to pay more for Mitt Romney’s sweetheart deal?
What does constantly releasing more Treasury bonds into the market do to the price of financial investments? Can you see how that lowers the price to investors of private and municipal bonds, in other words raising the dividend a business has to pay or the interest a locality has to pay for their debt? There are real macro effects to constantly increasing federal debt–for Mitt Romney’s class’s sweetheart deal!