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Taxation of Carried Interest

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Re: Taxation of Carried Interest

#91

Post by Declanomous »

WalterBright wrote: post #79
Declanomous wrote: post #74

Earlier quoted context omitted.

I'm familiar with the theory, but I think economic theories that only looks to maximize economic productivity while ignoring philosophical or ethical concerns are idiotic. If you don't take into account what is being produced and why , you are left with a line of tautological reasoning that more productivity is good because more productivity is good. The reason this is idiotic because there are a lot of ways to maxim…

Capital gains taxes resulting in less efficient resource allocation does not imply that it is instead allocated in an ethical way, nor distributed more equitably, or any of the other notions mentioned. Having a more efficient economy means there's a surplus that enables resources to be expended on environmental and social concerns. Hungry people don't care about those things. There's a reason poor countries tend to b…

I never said that less efficient resource allocation would result in more utility. That's a straw man. My claim is the argument that more efficient resource allocation would result in greater utility is almost certainly false in a hypothetical situation where capital gains tax is eliminated.

What evidence have we ever seen that allowing wealthy individuals to make more money results in increased utility? There is literally no reason to believe that any of the marginal increase in resources would be expended on environmental and social concerns.

The only reason you could justify eliminating capital gains is if you literally believe all government is evil.

Re: Taxation of Carried Interest

#92

Post by noobermin »

Swizec wrote: post #75
forapurpose wrote: post #68

Earlier quoted context omitted.

I've heard that. In your experience, does that match the hypothesis that it's just a tactic of the right to divide voters - turn the working class against each other (on racial and rural-urban lines too)?

I think “the right” flames it up, but my family was very liberal, even socialist, yet still felt this way. When the taxman takes so much it feels he’s stealing from your children’s mouths you’re gonna complain. Fundamentally people in this situation, in my experience, don’t really care who is in power because they see them all as the same sort of enemy: the rich and powerful oppressing the working poor and pandering…

There is a bit of human nature in there perhaps, but from the beginning, subdivision into groups has always been a means for the wealthy to maintain their power. Here is exhibit A[0].

That it persisted to the point it became culture is one thing, but from its inception, subdividing the working class into groups (one of them being black and white) has been a means for the elite to maintain control. The KKK also had a similar start, being funded in part by former wealthy plantation owners fearful of white and former slave alliances during reconstruction.

The subdivisions into class (middle class vs. working poor) is very similar.

[0] https://en.wikipedia.org/wiki/Bacon%27s_Rebellion

Re: Taxation of Carried Interest

#93

Post by millstone »

WalterBright wrote: post #84
millstone wrote: post #83

Earlier quoted context omitted.

Every point you make applies equally well to labor: 1. The higher the labor tax rate, the fewer people will work. 2. Higher labor tax rate makes for less efficient economics because workers will prefer lower-paying (less stressful) jobs. 3. Wage tax brackets are not indexed for inflation. Given these, why should the tax code prefer capital ownership to labor?

1. only if they have alternatives to work. 2. are you sure about that? Lower paying jobs tend to be more stressful. 3. they are last time I looked, though those things change over time

This sounds like the gross argument that it's more efficient to tax labor because they have no recourse. The rich can move, hire lawyers, etc. to avoid taxes, so more it's efficient to focus on the hapless poor!

The rebuttal is to simplify the tax code as to eliminate loopholes, such as preferential income taxation.

You're right and I was mistaken that tax brackets are indexed for inflation. I'd support indexing capital gains if it eliminated their preferential taxation.

Re: Taxation of Carried Interest

#94

Post by millstone »

harryh wrote: post #73
valuearb wrote: post #71

Earlier quoted context omitted.

Problem is that capital gains aren’t all gains, they include inflation. I’m all for a transition to ordinary income if you index the basis of investments to the inflation rate.

Imagine how much more heated debates about the accuracy of the government CPI calculation would be if the number formed the basis of a bunch of people's tax bills. Oh man oh man!

I think Americans have this today via Social Security!

Re: Taxation of Carried Interest

#95

Post by hippich »

noobermin wrote: post #86
hippich wrote: post #72

Earlier quoted context omitted.

> If we are talking about equal sacrifice, they did not pay the most, they paid as much as anyone else. I am talking in absolute numbers. There is plenty of research on who is paying the most taxes. A just random result from google - http://www.pewresearch.org/fact-tank/2017/10/06/a-closer-loo... " A Pew Research Center analysis of IRS data from 2015, the most recent available, shows that taxpayers with incomes of $2…

That's income taxes, the poor pay other taxes too. Also, the poor comprise the people who cut your hair, clean your yards, make your food, essentially provide for those making over 200K. Just because we don't provide the means to live to them like we do for other people doesn't mean they aren't important and don't equally sacrifice.

I am genuinely interested in seeing something about "total taxes paid" (including sales tax, which hits the hardest low-income folks) but I could not find such research.

And I am certainly not saying hair cutting is not important. For once, without proper haircut CEO of the company will not be able to raise money to do a new project which potentially can employ a lot of people and pay a lot of taxes.

Re: Taxation of Carried Interest

#96

Post by [deleted] »

hippich wrote: post #90
harryh wrote: post #77

Earlier quoted context omitted.

It depends. But, in general, no. Startup employees generally get equity in the form of stock options. In order for employees to get preferential tax treatment on these options they have to exercise these options at the time they are granted (which can require a large outlay of cash) and then hold them for at least one year. Due to the cost and risk of this exercise, most employees do not do this. Instead they wait to…

sounds like a pretty bad deal... I am glad I never accepted stock options in lieu of compensation. EDIT: after reading more about it, it actually makes sense. What really employee is getting is an "option" similar to one can buy for publicly traded companies. And whatever option price is already reflected in employees tax situation - it is an actual expense which lowers tax base by the cost of this option. Now - the…

[deleted]

Re: Taxation of Carried Interest

#97

Post by harryh »

millstone wrote: post #94
harryh wrote: post #73

Earlier quoted context omitted.

Imagine how much more heated debates about the accuracy of the government CPI calculation would be if the number formed the basis of a bunch of people's tax bills. Oh man oh man!

I think Americans have this today via Social Security!

True, and that definitely causes plenty of rumbles.

Just thinking it would get 10x worse if it also formed the basis of cap gains taxes.

Re: Taxation of Carried Interest

#98

Post by thaumasiotes »

beat wrote: post #54

The correct solution to this problem is to abolish the distinction between capital gains and ordinary income (ie wages), and abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate. Capital gains is why Mitt Romney can make 200 times as much as I do in a year, and pay half my effective tax rate. This is broad across the economy. It's a fundamentally immoral…

> abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate.

That's not the double taxation argument. After abolishing the corporate income tax, you still have to pay the personal income tax.

The double taxation argument is that money now is better than the same amount of money later ( https://en.wikipedia.org/wiki/Time_value_of_money ). But the concept of the capital gains tax is that someone who defers spending their money must pay an additional tax despite not receiving additional value. Their larger amount of later money is the same money-value at a higher tax rate.

> the idea that there is one set of rules for the rich and another for everyone else is already stressing our nation.

Question: are you aware of any nation at any point in history which was large enough to have "the rich", but which did not apply different rules to the rich in the sense you're talking about?

This may not be a major source of societal stress.

Re: Taxation of Carried Interest

#99

Post by harryh »

thaumasiotes wrote: post #98
beat wrote: post #54

The correct solution to this problem is to abolish the distinction between capital gains and ordinary income (ie wages), and abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate. Capital gains is why Mitt Romney can make 200 times as much as I do in a year, and pay half my effective tax rate. This is broad across the economy. It's a fundamentally immoral…

> abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate. That's not the double taxation argument. After abolishing the corporate income tax, you still have to pay the personal income tax. The double taxation argument is that money now is better than the same amount of money later ( https://en.wikipedia.org/wiki/Time_value_of_money ). But the concept of th…

You are incorrect about what is often referred to as a "double taxation argument."

https://www.investopedia.com/terms/d/double_taxation.asp

Double taxation often occurs because corporations are considered separate legal entities from their shareholders. As such, corporations pay taxes on their annual earnings, just like individuals. When corporations pay out dividends to shareholders, those dividend payments incur income-tax liabilities for the shareholders who receive them, even though the earnings that provided the cash to pay the dividends were already taxed at the corporate level.

Re: Taxation of Carried Interest

#100

Post by Declanomous »

harryh wrote: post #80
Declanomous wrote: post #74

Earlier quoted context omitted.

I'm familiar with the theory, but I think economic theories that only looks to maximize economic productivity while ignoring philosophical or ethical concerns are idiotic. If you don't take into account what is being produced and why , you are left with a line of tautological reasoning that more productivity is good because more productivity is good. The reason this is idiotic because there are a lot of ways to maxim…

Economic theories do take into account what is produced and why. No one thinks that we should devote 90% of our economy to paperclip production even if that meant we would be producing more total stuff than otherwise. When people talk about economic efficiency they actually are talking about utility. Economic theory can also address questions of equality. There are efficient ways to redistribute income and there are…

My topic statement was thus:

> Economic theories that only looks to maximize economic productivity while ignoring philosophical or ethical concerns are idiotic.

I did not claim that economic theories cannot address philosophical or ethical concerns, I claimed that economic theories which do not take these in to account are idiotic.

I am not an economist, but I took quite a few economics classes in college. I am confident that I know enough to say that eliminating the capital gains tax is not a policy that would be pursued by someone looking to address concerns of regarding equality or the environment.

The economic theory that supports the elimination of capital gains tax is one that focuses on maximizing productiveness above all else. It's the type of policy you come up with if you got your hands on a macro 101 textbook and you forgot other people exist.

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