Also, capital gains gets taxed as income.
That, is the most heart stopping sentence you can say to an American rich person. The tax structure is setup to tax the poor and middle class the hardest. If you are in a class that can do capital gains, 83b elections, double irish -- no taxes.
So that 15% long term rate ends up closer to 30% if you include the fact that your dollar is worth less today than when you bought the stock.
I did some rough math on putting money into the stock market vs. inflation:
http://www.reddit.com/r/politics/comments/38b2u9/once_you_ar...
You know who really suffers from inflation? Minimum wage workers who's wages do not go up despite inflation.
I would be completely fine with charging personal income rates on capital gains, as long as the capital gains are counted above inflation.
A 17 year doubling rate is a PA return of 4% if you're only expecting a 4% yearly return then yes shares aren't great, no shit. Also you can control your CGT liability by choosing when to sell.
On top of that you're doing calculations on stock market investment without looking at dividends? I mean given how cheap it would be for a billionaire to pay shills for this sort of thing, and how terribly damaging an increase in CGT would be for them.
Actually giving you the benefit of the doubt frankly you really SHOULD sell this sort of posted logic as a service. LAAS the next big HN thing perhaps? :D
Sure, if you invested in 2002 then your returns might be 2.5x today and the inflation lower, and the tax rate might be 20% (or whatever, I'd have to redo the numbers)
If you invested in 2000, however, you'd make 40% on your investment, lose money to inflation and THEN pay capital gains tax. You'd be getting taxed for losing money.
So I picked a more neutral date like 1998 where it wasn't a bubble yet, but not close after a crash. I didn't include dividends because I'd have to add those constantly as the divident yield from S&P 500 changes from month to month. It's around 2% (actually under 2% for the majority of the last 15 years), though, so that does change the numbers.
I would say then the inflation is around ~2%, dividends around 2%, stocks grew around 4%, so around 6% year-to-year nominal profit which you would pay 0.9% capital gains tax, and 4% real profit which is 22.5% capital gains tax (0.9/4 = 0.225)
Consider the following: A single individual with $200,000 salary with two personal exemptions would pay $45,000 in total taxes which is the same overall rate even though the marginal rate is 33%
So a rich individual who doesn't work, but only sits on $5,000,000 that yield him $300,000 a year (and that 5M loses $100,000 of purchasing power a year) would pay the same federal taxes as an individual who just works for his $200,000
The only way to make a long term gains tax fair is to allow you to spread it out over the time it took you to make the gain. And even then it isn't really fair.
If you make a company and sell it in three years for 50 million, why is it fair that you only keep 5 million?
Of course. By the time you're selling it, most of the actual value is being created by people beneath you.
I believe that's called wage fixing, and is illegal.
As americans we are trained to forget that it is possible to have collective norms that are enforced by law. And indeed there are many who believe that all government regulations are ipso facto immoral; while conveniently forgetting the government granted monopolies and subsidies that make them wealthy. "Ayn Rand fuck yeah, but don't touch my soybean subsidies." 'merica!
Government regulations can easily be illegal. Happens all the time.
This seems reasonable, and I don't disbelieve you, but do you have any pointers to studies that back-up this conclusion?
Dan Ariely talks about this in his research, how important the comparison issue is. People feel more rewarded being the highest paid and undervalued being the lowest paid. As long as all numbers are above a comfortable base income, this comparative element overwhelms any actual significance of the absolute amount of money.
The rise in CEO pay actually correlates partly with transparency. People thought reporting the pay would shame the waste, but it resulted in CEOs paid more reasonably feeling undervalued, and that drove their pay up.
There needs to be systematic rejection of this nonsense, like all companies agreeing together to pay more reasonably and otherwise pay employees reasonably.
The real best answer is probably a more progressive income tax (ideally with a Universal Basic Income funded by a negative income tax). Then CEOs can brag about how much more taxes they pay than others given how much higher their salary is, but we don't have to have so much waste and inequity.