Re:Capital vs. labor: who risks more?
by gamblor956 on Saturday October 25, 2014 @01:09PM
(#8508728)
Capital gains taxes are not savings taxes. They are taxes on income arising from the disposition of capital assets. They are subjected to lower rates than normal income to incentivize capital investment income streams over normal income streams.
Only a few countries impose savings taxes (also known as "wealth taxes"): France, Spain, the Netherlands, Norway, and Switzerland. There might be two or three more that I'm missing. Wealth taxes are intended to prevent the concentration of wealth by essentially forcing a minimum level of capital investment by the extremely wealthy.
In your example, the person who earns and saves $100 is not taxed any differently than the person who earns $100. The saver has not invested any capital (yet), he is simply sitting on the money. Both were taxed at the appropriate tax rates (0% or their applicable marginal rate), so both have the same amount of money. If the saver then invests the money in a capital producing asset, when he later disposes of the asset, he may be taxed on the gain, if any, he recognizes on the income (i.e., the increase in the price of the capital asset over the price he paid for it). If the saver sold the capital asset for the same price, or for less, he is not taxed on the sale--in those situations, he is not treated any differently than the spender. It is only if the saver realizes a capital gain that he is subject to a capital gains tax, and when he is, he pays a far lower rate on that income than he would if he had earned the income (max 20% rate vs 25% rate or higher assuming saver is above the poverty line).
Re:Capital vs. labor: who risks more?
by dllthomas on Saturday October 25, 2014 @02:29PM
(#8508941)
In the presence of inflation, capital gains serve as a low (tax rate * inflation rate) tax on saving in something that is not cash. (Inflation itself is kinda sorta a tax on savings that are cash.)
Only a few countries impose savings taxes (also known as "wealth taxes"): France, Spain, the Netherlands, Norway, and Switzerland. There might be two or three more that I'm missing. Wealth taxes are intended to prevent the concentration of wealth by essentially forcing a minimum level of capital investment by the extremely wealthy.
In your example, the person who earns and saves $100 is not taxed any differently than the person who earns $100. The saver has not invested any capital (yet), he is simply sitting on the money. Both were taxed at the appropriate tax rates (0% or their applicable marginal rate), so both have the same amount of money. If the saver then invests the money in a capital producing asset, when he later disposes of the asset, he may be taxed on the gain, if any, he recognizes on the income (i.e., the increase in the price of the capital asset over the price he paid for it). If the saver sold the capital asset for the same price, or for less, he is not taxed on the sale--in those situations, he is not treated any differently than the spender. It is only if the saver realizes a capital gain that he is subject to a capital gains tax, and when he is, he pays a far lower rate on that income than he would if he had earned the income (max 20% rate vs 25% rate or higher assuming saver is above the poverty line).