for nye

[KrazyHorse]

And if John, Bob's father, paid Bob $1.2 million to collect butterflies so that Bob could 'earn' a living for the rest of his life on investments without working and without paying a dime in taxes, how would that be?

a) Bob isn't earning a living. Bob's income is UNEARNED. This is the terminology generally in use, and is what I've been discussing

b) Bob's father paid the taxes on the original sum. By taxing the income from Bob's inheritance, you are double-taxing the father (who made the original decision to save the money instead of spending it)

[KrazyHorse]

There's great truth in the statement that Americans trust governments to be ineffective, and have their faith rewarded. The saving grace is that historically their government has been relatively small.

Europe has chosen to have a larger, more efficient government.

I'm afraid that the US is headed toward a large, inefficient government, (under)funded by inefficient taxation

[notyoueither]

a) Bob isn't earning a living. Bob's income is UNEARNED. This is the terminology generally in use, and is what I've been discussing

b) Bob's father paid the taxes on the original sum. By taxing the income from Bob's inheritance, you are double-taxing the father (who made the original decision to save the money instead of spending it)

No, Bob's father didn't, because it's a business expense.

The collection of butterflies was R&D for the expansion to Africa.

Your scheme would get gamed to death.

We've already had one Gilded Age.

[notyoueither]

There are other ways of encouraging savings without turning the entire tax system on its head.

[Solomwi]

If John got to deduct it as a business expense, Bob paid taxes on it as earned income. Either way, it got taxed at some point before Bob got to invest it.

[notyoueither]

Europe funds itself largely with consumption taxes, and maintains a level of government spending which would break the US under its current system of taxation.

The US manages only because it collects taxes at a fairly low overall rate, and can thus afford luxuries like ridiculously high capital gains taxes which distort greatly without yielding much money (~5% of personal income taxes).

Europe has quite high levels of capital gains taxes as well.

How do they differ significantly from the US?

[notyoueither]

If John got to deduct it as a business expense, Bob paid taxes on it as earned income. Either way, it got taxed at some point before Bob got to invest it.

And then he lived off it, tax free, for the rest of his life.

I doubt very much that this scheme passes the political smell test.

[Solomwi]

No, then we're right back to what's been described to you over and over. He keeps getting 80% of the return he otherwise would have.

[notyoueither]

I get that.

I give the same response, so what?

[Drake Tungsten]

NYE is right about the political difficulties of reforming the American tax code in a logical way, as most of the population is just as retarded as he is.

[Solomwi]

That's been explained to you repeatedly, too. So any further tax on capital gains is punishment for saving.

[notyoueither]

It costs an immense amount of cash to run a modern society with banks, transport, regulation, education, healthcare (optional for Yanks) social programs to keep the prols sedated, etc.

When you save and get any return at all, you are benefiting from society's large investments that make it possible for you to feel the least bit safe to make investments to begin with. There is a **** load of labour behind your ability to push a button on your computer and execute a trade.

You should pay something for the upkeep of everything that goes into you being able to push that button.

[Kuciwalker]

Suppose Bob does not work and derives an income of $100K from returns on investment.

Sally works for a living and has a salary of $100K.

They both pay 20% tax, leaving each with 80%. Sally's future earnings from her labour will only be worth 80% to her, just as Bob's returns from investment will be.

No, that leaves Bob with 64% of what he would have had without the tax.

Furthermore, the scheme you propose would see Bob not taxed on his income at all. There is a certain gilded quality to that proposal, and I am not sure public policy should ignore it.

Bob is already paying 80% tax on his income because he would be getting $125K if there were no tax.

[Solomwi]

It costs an immense amount of cash to run a modern society with banks, transport, regulation, education, healthcare (optional for Yanks) social programs to keep the prols sedated, etc.

When you save and get any return at all, you are benefiting from society's large investments that make it possible for you to feel the least bit safe to make investments to begin with. There is a **** load of labour behind your ability to push a button on your computer and execute a trade.

You should pay something for the upkeep of everything that goes into you being able to push that button.

I thought you said you got that part already.

[KrazyHorse]

Europe has quite high levels of capital gains taxes as well.

How do they differ significantly from the US?

France has high capital gains taxes. Germany had until recently very low capital gains taxes, IIRC. In most cases the capital gains taxes are somewhat lower than the equivalent earned income taxes. In the US, short-term capital gains were taxed, historically, as earned income. Canada taxes capital gains at half the earned income tax rates.

If the US raised all rates equally to raise the level of taxation that Europe does, its capital gains rates would be by far the highest in the developed world.