> capital gains tax should be much higher than income tax

Then you would in effect discourage investing. Investing, which creates jobs and promotes innovation. Is as simple as that.

[citation needed]

Consider the opposite extreme, where the government subsidizes investments to 100x what they are actually worth. Would this create more jobs and innovation, or merely "bullshit investments"?

If a subsidy wouldn't create jobs and innovation, a tax wouldn't take them away.

There is also the likely possibility that the same investments would be made, but valued lower.

>>[citation needed]

Any economics text book.

Go on. Which economics text book would tell me that if the government incentivized investments to 100x their actual value, the resulting investments wouldn't be bullshit?

Any economic textbook will tell you increasing taxes on capital, decreases investments. No need to make up silly analogies which are false equivalences.

Then decreasing taxes on capital increases investments. Decreasing them all the way to negative ten thousand percent would increase investments a lot. Is that a good thing?

You really aren't making an argument you think you are. If you are truly interested about macroeconomics there are plenty of good books out there from many different ideological viewpoints. Most of them explain what you are trying so vehemently disapprove with weird analogies.

>> Decreasing them all the way to negative ten thousand percent would increase investments a lot.

A physicist would say you have just invented perpetuum mobile.

>> Is that a good thing?

Does it matter if what you suggest is impossible?

Can you answer the question? No, you can't.

The government can't incentivize investments up to 100x times or make negative 1000% taxes on investments. I thought my reference to perpetuum mobile made that clear.

Of course the government can.

No, they really can't.

Then let's do something to encourage actually investing—putting money into a company, not into the stock market.

If I buy shares of, say, APPL today, Apple Inc. doesn't actually get that money. The person who owned those shares before does. Even if I bought up $2B worth of shares, Apple would see none of that money. It is not actually invested in the company in any way.

If you want to encourage investing, then you need to find a way to advantage shares being sold directly by the company. (And, frankly, strongly discourage stock buybacks, because that's literally the opposite of investing, and generally only benefits the wealthiest shareholders.)

I wish there were a way to differentiate capital gains arising from being a passive owner vs capital gains arising from being an active owner.

If your only contribution to a company is that you've funded it, I really don't think you should enjoy the same tax benefits as an entrepreneur who put their blood and sweat into it.

Let's define it like this - if working for a company is your primary occupation, you can enjoy the lower capital gains tax from its success. This includes founders and employees with equity. For everyone else it's income tax, because they've done little else than speculate, and, well, gambling wins count as personal income.

Maybe, but then let me capture my long and short term gains together to offset gains.

It's crazy that if I have a $5k loss in year one, I can't completely offset it in year 2 if I have a 5k gain. Now I can only use 3k going forward forever.

> Now I can only use 3k going forward forever.

Wait did they change the carry forward rules?

At least the way it used to work was:

* Year 1 - 50k loss, 3k offset of ordinary income 47k carry forward

* Year 2 - 60k gain, 47k zeroed out from last year's carry forward, 13k is taxed

Is that not still the case?

No change. It's been as such (3k) for quite some time.