Why can't we go back to the Eisenhower tax code?

[Rjjr77]

A wealth tax seems good in principle, but doesn't really work, because some people's wealth is less liquid than others'. For example, real estate is less liquid than stocks.

And of course capital gains are productive for the economy. When people sell stock, they now have much more disposable income, and can buy more products. Nobody holds stock just for the hell of it.

Capital Gains should be taxed at zero.

If people want to tax large holding groups and hedge funds raising the capital gains tax wouldn't be the right move, the move would be to tax individual trades. Consider it like a fantasy football league, you can make as many add/drops as you like but after a certain number you have to pay to do it.

[Shadows]

Basically, all countries used to have super-high top marginal tax rates and then all countries scrapped them once we figured out it actually decreases revenue through incentive effects.

The Laffer curve has been pretty discredited over the last few decades.

The countries that scaled back income tax rates in the 80s all saw substantial declines in income tax revenue (that of tens had to be recouped through regressive taxes like VAT). Furthermore, there is no clear link between reductions to the top rate of tax and economic growth rates post 1975.

The Laffer curve has not been discredited. You may not agree with placement on the curve but the Laffer curve is still accepted by economists as factual. This is a problem with the general misunderstanding of economics, the Laffer curve states that 100% and 0% taxation will bring about no revenue. The point is to find the maximum spot on the curve, some may think it's higher, others lower., but the theory of the curve itself is correct.

The Laffer curve was never considered a serious issue by a large share of top economists. In many ways, Laffer borrowed it partly from Kuznets curve & gave a simplistic explanation. The problem is  there is no other hypothesis on the table, so some people still tend to follow it.

It depends on many things - For one availability of like for like substitute. I tax cigarettes too high & lose revenue etc because people give up smoking or switch to substitutes. It depends on elasticity or in-elasticity of the goods, for one you need some amount of Electricity/Power, beyond a point you can't slash it even if the rates go up.

It depends on tax havens for individual payers & corporates later. As long as Tax havens & Swiss banks exist, individuals will always park money in them even if the Tax rate is 40% or 50%. The only change is if the tax revenue is close to 0% because these are large volume transactions & thus even a 5-10% would be serious money. There are significant chances that tax evasion will be similar with wildly varying rates.If you look @ tax evasion data, tax evasion has gone up with falling income tax which is the biggest indictment of the Laffer curve Let's say future investment - Depends on the economy & purchasing power of people (for me to invest) & a range of other factors. With a 50% tax, I may invest more than with a 40% tax. There are a myriad of complex factors involved.

In short, there is nothing to prove that too high or too low a taxation rate will not provide ideal revenue. In many cases, people cut taxes but the revenue is made up through economic growth because the economy is in a certain growth phase with or without Tax cuts & would make those numbers anyway. There is certainly potential "Opportunity" cost of tax losses which in many cases aren't considered.

[Shadows]

A wealth tax seems good in principle, but doesn't really work, because some people's wealth is less liquid than others'. For example, real estate is less liquid than stocks.

And of course capital gains are productive for the economy. When people sell stock, they now have much more disposable income, and can buy more products. Nobody holds stock just for the hell of it.

Capital Gains should be taxed at zero.

If people want to tax large holding groups and hedge funds raising the capital gains tax wouldn't be the right move, the move would be to tax individual trades. Consider it like a fantasy football league, you can make as many add/drops as you like but after a certain number you have to pay to do it.

That would be a disaster from a pure economic & moral way. For one, in that case I would want the nation state to disband & abolish all income taxes - Let there be anarchy. I have investments in equities too. But it is absurd for someone to work hard & pay taxes & for some uber rich people to earn billions just sitting on equity & pay 0 on equity income - It is absurd, unjust & beyond stupid.

A form of a transaction tax can't replace Income tax - That is like a sales tax or an indirect tax not an income tax. Corporations pay VAT & then Corporate Income tax. Besides Indirect taxes are considered economically worse, they are regressive in nature & they will form an entry barrier for many people. The "INDIRECT" tax has to be substantial to make up for the revenue.

From a pure economic growth perspective, it is an absolute disaster. Capital Gains is disproportionately enjoyed by uber rich with very high income. They have the lowest Marginal Propensity to Consume (MPC), the more money they have instead of the middle class, the lower the Consumption function of GDP is & the lower GDP growth will be. It is always better if 10,000 people had that money.

Capital Gains brings decent amount of money & is easy to administer. If anything, Capital Gains & a small Financial Transaction tax should be used to raise revenue (& they will due to the sheer volume) for funding infrastructure, education, managing debt, etc.

[Rjjr77]

A wealth tax seems good in principle, but doesn't really work, because some people's wealth is less liquid than others'. For example, real estate is less liquid than stocks.

And of course capital gains are productive for the economy. When people sell stock, they now have much more disposable income, and can buy more products. Nobody holds stock just for the hell of it.

Capital Gains should be taxed at zero.

If people want to tax large holding groups and hedge funds raising the capital gains tax wouldn't be the right move, the move would be to tax individual trades. Consider it like a fantasy football league, you can make as many add/drops as you like but after a certain number you have to pay to do it.

That would be a disaster from a pure economic & moral way. For one, in that case I would want the nation state to disband & abolish all income taxes - Let there be anarchy. I have investments in equities too. But it is absurd for someone to work hard & pay taxes & for some uber rich people to earn billions just sitting on equity & pay 0 on equity income - It is absurd, unjust & beyond stupid.

A form of a transaction tax can't replace Income tax - That is like a sales tax or an indirect tax not an income tax. Corporations pay VAT & then Corporate Income tax. Besides Indirect taxes are considered economically worse, they are regressive in nature & they will form an entry barrier for many people. The "INDIRECT" tax has to be substantial to make up for the revenue.

From a pure economic growth perspective, it is an absolute disaster. Capital Gains is disproportionately enjoyed by uber rich with very high income. They have the lowest Marginal Propensity to Consume (MPC), the more money they have instead of the middle class, the lower the Consumption function of GDP is & the lower GDP growth will be. It is always better if 10,000 people had that money.

Capital Gains brings decent amount of money & is easy to administer. If anything, Capital Gains & a small Financial Transaction tax should be used to raise revenue (& they will due to the sheer volume) for funding infrastructure, education, managing debt, etc.

You can tax income without taxing capital gains, and no it wouldn't be a disaster by any means from an economic standpoint, if anything we'd see less money placed in safer investments and more money in capital production. Consumption is an important factor in GDP growth, but eliminating capital gains and replacing with transaction taxes wouldn't in any way be regressive, you drastically mistake the type of people who make the trades that would be taxed.

Increased capital leads to GDP growth, just as an increased consumption. Capital = expansion.

If you want to make a morality argument, fine, not everyone shares your views on morality but you have a right to your mores, but don't make an economic argument, cause it isn't there.

[Shadows]

A wealth tax seems good in principle, but doesn't really work, because some people's wealth is less liquid than others'. For example, real estate is less liquid than stocks.

And of course capital gains are productive for the economy. When people sell stock, they now have much more disposable income, and can buy more products. Nobody holds stock just for the hell of it.

Capital Gains should be taxed at zero.

If people want to tax large holding groups and hedge funds raising the capital gains tax wouldn't be the right move, the move would be to tax individual trades. Consider it like a fantasy football league, you can make as many add/drops as you like but after a certain number you have to pay to do it.

That would be a disaster from a pure economic & moral way. For one, in that case I would want the nation state to disband & abolish all income taxes - Let there be anarchy. I have investments in equities too. But it is absurd for someone to work hard & pay taxes & for some uber rich people to earn billions just sitting on equity & pay 0 on equity income - It is absurd, unjust & beyond stupid.

A form of a transaction tax can't replace Income tax - That is like a sales tax or an indirect tax not an income tax. Corporations pay VAT & then Corporate Income tax. Besides Indirect taxes are considered economically worse, they are regressive in nature & they will form an entry barrier for many people. The "INDIRECT" tax has to be substantial to make up for the revenue.

From a pure economic growth perspective, it is an absolute disaster. Capital Gains is disproportionately enjoyed by uber rich with very high income. They have the lowest Marginal Propensity to Consume (MPC), the more money they have instead of the middle class, the lower the Consumption function of GDP is & the lower GDP growth will be. It is always better if 10,000 people had that money.

Capital Gains brings decent amount of money & is easy to administer. If anything, Capital Gains & a small Financial Transaction tax should be used to raise revenue (& they will due to the sheer volume) for funding infrastructure, education, managing debt, etc.

You can tax income without taxing capital gains, and no it wouldn't be a disaster by any means from an economic standpoint, if anything we'd see less money placed in safer investments and more money in capital production. Consumption is an important factor in GDP growth, but eliminating capital gains and replacing with transaction taxes wouldn't in any way be regressive, you drastically mistake the type of people who make the trades that would be taxed.

Increased capital leads to GDP growth, just as an increased consumption. Capital = expansion.

If you want to make a morality argument, fine, not everyone shares your views on morality but you have a right to your mores, but don't make an economic argument, cause it isn't there.

That is pretty ridiculous an argument. GDP = C + I + G + NX. The argument about investment would boost the Investment function of GDP primarily & not consumption (there will be some benefit of Function C but the biggest benefit will come from I).

Increased Capital DOESN'T lead to GDP Growth - That is a flat out dumb argument & no sane Economist ever argues this.

The 1st Assumption is that No Capital Gains = More appreciation in Equity Value/Investment in Equity Markets (Let's not complicate with Debts or Derivatives here). For one, assuming rational investments, investing in equity market will depend on future profits which is meaningless without demand for that product. If people don't have enough money to spend on Good A or Service B, it is redundant & meaningless for all the equity capital to be available.

Secondly, replacing income tax on Capital Gains ye a transaction tax would mean that prices of transactions will rise, by your "MUH Free Market" logic, an increase in prices (assuming elastic goods), would lead to a decrease in transactions & the market. Thirdly, it is regressive & takes money from low & mid value transactions.

So billionaires who earn a huge deal of money will be exempt from Capital Gains but to make it budget neutral every small & medium size trade has to recovered through very high. That is a huge disincentive for new comers & low value transaction holders.

Capital Gains tax is a personal tax & not even a Corporate Income tax where you could argue Corporates are over-leveraged, need more money to invest, etc. It is a flat out gifting of millions of $ to extremely wealthy people.

And that is very bad for the economy considering uber rich people have a much lower Marginal Propensity to Consume (MPC).That determines the "C" Consumption Function of GDP & GDP multiplier.

Now just to add as someone who has looked at Capital Gains over various developed & emerging countries, there are countries who have no tax on Long Term Capital Gains & it has done nothing to boost economic growth & had no benefit of this exemption. This is Plain Research. Why don't you study the Capital Gains tax of large economies ?