Your post belies one of the most harmful stereotypes that many rich and right-leaning people hold, that the poor would simply "rather have just one coconut today", and it's due only to their own short-sightedness and lack of impulse control that that they are poor.

For many people, it's not a fucking choice. It's eat your last coconut or starve until your next paycheck.

The recent story on HN about performance on the "marshmallow test" being predicated on being born rich is relevant: https://www.theatlantic.com/family/archive/2018/06/marshmall...

Your point about "penalizing future consumption in preference to current consumption" makes no sense either. Capital gains tax could be 99% and (modulo inflation) you'd still be ahead by investing, so I don't get your point. God forbid someone who earns their income from investing rather than manual labor should have to pay taxes on it.

You wouldn't be ahead because there is risk in investing. The biggest capital gain tax the less sense it makes to invest. That's why the capital gain tax rate is different than income tax. Making capital gain tax progressive is a recipe for not getting any more investment from private citizens.

Who says we need more investment from private citizens? Perhaps we need less.

If you care about people benefiting from economy growth you want them to own part of it. This is accomplished by them investing instead of consuming.

If something really crazy like progressive capital gain tax is introduced then a lot of people will rather consume instead of taking bets with a lot of risk attached to it and very little upside. This goes for every high tax: if the upside becomes not very tempting you may just as well settle on what you have and stop trying to improve your situation/produce more as huge part of that surplus will be taken away from you anyway.

Since when do you pay taxes on capital losses?

You don’t. But you lose the money. Risking $10 to make $10 is much different that risking $10 to make $0.10.

You are more willing to invest at 1:1 odds than you are 100:1. Especially since the odds actually don’t reflect the actual risk of the investment itself. 100:1 on a sure thing is better than 1:1 on something that is very high risk. However, no investment is a sure thing. There is a non-zero level of risk in any investment, so if the payoff doesn’t match the risk, you simply will put the money under your mattress.

Yes, there are people at the extreme ends whose spending vs. saving behavior can't be influenced (much) by the relative favorability of investing. But there are also lots of people who will respond to this incentive, and we should be concerned about what effects that might have.

Your post belies an assumption that the new tax revenue would actually be spent on the people for whom "it's not a fucking choice." But that's orthogonal. Congress is perfectly happy to spend new tax revenue on tax cuts for the very rich, on the military-industrial complex, on seniors of all income brackets, on predominately upper-middle-class students, etc. "What are the right ways to raise revenue" is a different question from "what are the right things to spend it on," and having a compelling reason to spend has no bearing on the virtue of any particular method of raising the funds.

Your claim that capital gains taxes could be 99% and you’d still be better off by investing makes no sense. Because why would you risk $1,000,000 — money that you could completely lose, for the chance to earn $10,000 after taxes? That would be an insane thing to do. You would be better off simply burying the money in the backyard.

I read the tone of your post as angry disagreement, you seem to be agreeing with me? My point was

>I think what we're really upset about when it comes to rich people making a lot of money through investments is not that interest isn't taxed more, but rather that they had such a high (non-investment) income in the first place.

And people having different levels of income is definitely at the heart of your objection. Rich people tend to have more flexibility with regard to their ability to choose future consumption over current. The problem we have with that is that they're rich enough to do that, not that they are making that tradeoff. The tradeoff is inherently benign and should not be discouraged through taxation.

The problem comes when you are contributing labor to the underlying asset. In this case you can forgo wages in lieu of capital and that labor should be taxed the same as anyone else's.

Alternatively, investments should have much higher tax rates. If someone invested money then they clearly did not need it, thus they need returns even less.

Really, you can try to justify any tax policy by reframing the question, but the root argument breaks down to having other people pay more so I pay less which is never really justified.

> Really, you can try to justify any tax policy by reframing the question, but the root argument breaks down to having other people pay more so I pay less which is never really justified.

Indeed, the "root argument" in favor of taxation is fundamentally all about "having other people pay more so that I pay less". That being the case, why did you start out by saying that "investments should have much higher tax rates", only to contradict yourself later?

Because I was simply coming up with a counter argument not advocating for a position.

I could support the fist line by saying investments are taxed at below average rates including loans (bonds) which are not double taxed. And a flat tax without any form of tax breaks is the only fair solution.

But, again not trying to support a position just disappointed with the way taxes are discussed. Arguably all people deserve a tax break, but the only way to do that is reduce spending.

This is an incredibly anti-savings policy, given that we have central banks ensuring positive inflation (except in Japan) and capital gains are calculated in nominal, not real terms.

In other words, if you just hold some money for a few years and it doesn't lose value (interest rate equals inflation), you _already_ owe tax on it. That's just broken.

If we did capital gains in inflation-adjusted dollars, the situation would be somewhat different.

The world is flush capital which is driving down returns. We don't need to try and increase it as people with a surplus are always going to invest it.

I agree there's a problem there: we seem to have more capital than we need, yet we also have less savings (in the sense of people deferring consumption) than individuals need to have a comfortable retirement, for example.

I have yet to see good solutions for this problem.

So a teacher’s 401k is money they don’t really need? Because that’s an investment too you know.