Are the rich paying their 'fair' share?

[Hauldren Collider]

I wouldn't worry about it. Once he takes the bar he won't actually be a human being anymore.

[Dauphin]

Something to consider... If, in a world with no dividend or CG taxes, shares in company X paid a dividend of $5/share in perpetuity were valued at $100. What would be the effect on the share value if all dividends and CG were charged at 20% tax. What would be the effect on return on investment?

Mostly interested in seeing thought processes....

[Jon Miller]

why would shares stay valued at 100, is it because there is no inflation and all net profit is given out in dividends? (in addition to there being plenty of other investments at the same rate?)

then we can assume the same is true for the second case?

with these assumptions, I am not sure what conclusions you desire to draw?

JM

[Dauphin]

why would shares stay valued at 100

Currently valued at $100.

[Jon Miller]

I still think we are lacking information, although it does make it a bit more complicated if in both cases the share value can go up/down

everything else being equal, the share value in the first place would go up faster than the share value in the second case

still, for not doing any work, both would be quite wonderful deals

JM

[Dauphin]

I think you've missed the point entirely.

In simpler language, I'm asking what the effect on stock prices and yields is when introducing a dividend tax.

[Jon Miller]

Oh, well, that is pretty obvious and similar (but opposite) to what happens when you remove a tax....

I don't see how it has anything to do with whether taxes should be higher for CG/dividends or not.

For this sort of thing, the most important is what happens at the steady state, not what happens when you adjust that state.

JM
(And it wasn't clear that you were asking what would happen if we suddenly increased the taxes by 20%, I thought you were referring to two worlds where the only difference was the tax rate.)

[Fake Boris]

Someone still has to explain me why value resulting from labor*capital-wage should be considered different than value from labor*capital-profit.

[giblets]

could you please explain what those terms are supposed to mean?

[Fake Boris]

Ultimately, no capital could value without labor.

Why then should we make a difference between capital gains and earned income?

[giblets]

The distinction exists because earned income results from forgoing leisure in exchange for the ability to engage in either present or future consumption while investment income such as capital gains results from forgoing present consumption in exchange for future consumption. The tax on earned income increases the cost (in terms of forgone leisure) of both present and future consumption while the tax on investment income increases the cost (in terms of forgone leisure) of only consumption in the future. The assumption is made that those receiving investment income got their start by earning income, and then saving some of it, so all income was originally earned and taxed as earned income. The effects of these taxes are significantly different so a distinction between earned income and investment income is useful.

[Fake Boris]

Thanks for the explanation.

I'm not really convinced the distinction is all that useful though.

[Aeson]

The distinction breaks down in some cases anyways.

Self employed day trader who makes their income solely from capital gains vs employed trader who makes their income from a paycheck/performance bonuses. In both cases they are (or at least could be) doing the same type and amount of work for the same compensation. But the fruits of their labor would be taxed differently. (Not just in regards to capital gains/self employment/income taxes either. Taxes on the corporation would indirectly affect the employed trader's compensation.)

Better to just move to consumption taxes all around.

[Jon Miller]

But how do you account for all the goods that wealth provides but which are not purchasable in a shop?

JM
(And in many cases you can acquire these goods without even spending your wealth.)

[Jon Miller]

But how do you account for all the goods that wealth provides but which are not purchasable in a shop?

JM
(And in many cases you can acquire these goods without even spending your wealth.)