US wealth gap putting the squeeze on state revenue (2013, accounting, union)
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If they start taxing the crap out of everything, what incentive is there to invest?
In the 1970s tax rates were much higher than now. Also investment as a share of GDP was higher too. When tax rates fell in the 1980s so did investment. If anything investment correlates positive with tax rates - the higher the one, the higher the other. Low tax rates encourage ruthless cashing out by the owners, high tax rates encourage them to reinvest their capital and gains back into the economy.
Really problem solved or new ones created. If we don't sell we aren't paying capital gains. Oh yeah and pension funds taxation? Annuities? Retirement funds? etc etc etc.
I've said in countless threads that increasing the capital gains tax rate to regular income is my prescription AFTER abolishing corporate taxes. I don't agree with corporate taxation.
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Originally Posted by GoFigureMeOut
If they start taxing the crap out of everything, what incentive is there to invest?
Unearned income > earned income.
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Originally Posted by gen811
tax their property and assets and lets see what happens.
will they sell them and crash the housing market?
maybe, maybe not
no. Taxing encourages them not to sell. They can hold onto everything until they die, and just cough up the estate taxes over to the government. You can't cheat taxes.. you can only defer them.
In the 1970s tax rates were much higher than now. Also investment as a share of GDP was higher too. When tax rates fell in the 1980s so did investment. If anything investment correlates positive with tax rates - the higher the one, the higher the other. Low tax rates encourage ruthless cashing out by the owners, high tax rates encourage them to reinvest their capital and gains back into the economy.
Raise the minimum wage. 5 families making $40K each per year buy five loaves of bread, One family making $200K buys one loaf of bread. Also 5 households, 5 means of transportation, etc
And with the "wealth" tax many are advocating, there goes the incentive to save.
No there goes the incentive to cash out gains at low tax rates, thus the re-investment of gains becomes much more lucrative at higher taxes, for the benefit of the national economy. Example: tax rate 20% so you save 20% if you invest in your business, tax rate 70% and you save 70% when investing in your business. Cash out at 20% or at 70% taxes. What is the better stimulus? Question: what happened to investment as % of GDP as tax rates declined in the 1980s? Did it go up or down?
(hint: it went down because it became more lucrative for shareholders and owners to cash out gains instead of reinvesting them back into their businesses.)
No there goes the incentive to cash out gains at low tax rates,
thus the re-investment of gains becomes much more lucrative at higher taxes...
There's some truth to this idea.
Too much of "investing" is little more than churning.
But like the AMT the problem isn't in the tax so much as where it gets applied.
Changing the time reference of "short" vs "long" term for capital gains would do all this just as well.
That would also put the long term rate back in line with the estate taxes where it belongs.
And while we're at it raise the AMT threshold.
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