Re: "if a tax on unrealized gains were adopted, investors would be in a world of pain. I would expect a massive shift away from equities into tax-advantaged investments, such as government-issued securities."
Indeed, and might be exactly the intent of some of the people behind the recent spendathons, as such a flight would partially disguise the debt-service costs that might otherwise cramp their desires for even more expansive and expensive government.
I used to oppose, but now support, taxing unrealized capital gains, but only after some threshold. $500k was good for houses when the median before tax income was $50k. I would support something like it, at about 10 times the prior year's median wage, so it goes up each year with wages (or not??)
The % increase in wealth for the top 10%, or top 1%, should be less than the increase in the median wage (50%) - a criteria which has NOT been met nor even attempted. Joel Kotkin noted: "California also suffers the widest gap between middle- and upper-middle-income earners of any state."
This linked to an article looking at the top 75% vs 50% as the "wage gap" between the upper middle and the middle.
"Last year’s upper crust wages ran 72% greater than the median in California,"
The article was very forthcoming with numbers:
"it’s median wage was 10th highest nationally at $42,430, by this pay measurement."
This CA median was lower than the national median, but it's 75th % was high, as
"the sixth-highest wage last year — $73,110 — at the 75th percentile. That’s a significant premium to the 50-state median of $58,805"
The 2019 article notes CA is not alone:
"This wage gap ranks larger in the 20 states that did not support President Trump in the 2016 election. Blue states in 2018 averaged a 61% median-to-75th-percentile gap vs. 55% in the 30 red states."
Now that many of the rich want to promote lies and oppose free speech against those lies, I'm getting on board the "tax the rich, more" train. I remain on the "smaller gov't" train, but realize that most voters choose, and vote for, the Bigger gov't benefit (+ higher tax) over less gov't benefit and less tax. Significant thanks to the rich supported indoctrination about how gov't benefits are morally superior to individual responsibility.
Reps, if they ever win again in elections where Dem deep state administrators are allowed to cheat, should use levers of State Capacity to increase the incentives to those who work for less than the median, so as to have them make more.
Better metrics are also good. The 75% - 50% "wage gap" is better than Gini, but I'd prefer a 90%-50%, or 1%-50%. It would be nice for some public intellectual to be talking more clearly and persuasively over what metrics are better to measure, and why.
A few comments on inflation and capital gains taxes:
1. Taxing unrealized capital gains would be an accounting and administrative nightmare for individual taxpayers and the IRS. It's already cumbersome enough to keep track of gains and losses. Imagine paying taxes in a year of unrealized gains only to sustain losses in a subsequent year. Would the IRS return some or all of the previously paid taxes or credit taxes paid against future tax liabilities?
2. Many mutual funds avoid realizing capital gains year in and year out because the fund companies manage their funds with this (secondary) objective in mind. In fact, in the case of Vanguard, index mutual funds and parallel index ETFs are merely different share classes of the same, unified underlying portfolio. Both mutual funds and ETFs can avoid realizing capital gains for many, many years if not indefinitely.
3. Indexing capital gains for inflation, and indexing other tax rules for inflation (e.g. tax brackets), would be the right thing to do. However, doing so would require explaining to voters why wages and salaries should not also be indexed for inflation for tax purposes. The main reason is that wages and salaries are akin to dividends or interest on capital assets in this regard. If it were taxed, gains and losses on *human capital* (the present value of future earnings) should be indexed for inflation.
In fact, the capital gains tax favors labor in one respect: human capital gains are never taxed because one cannot buy or sell human capital. (Slavery and indentured servitude are, thankfully, outlawed.). Only the flow of labor income in a given period is taxable in that period. Imagine if the government were to tax unrealized human capital gains. Oy vey!
The Democrats' idea of taxing capital gains that have not yet been realized would put a premium on investment assets that were hard to value, because they were unique or they had no liquid market (collectables, art works). These are also advantageous for evading gift/estate tax.
The exit tax on expatriates established by FATCA does indeed tax unrealized gain (by creating a "deemed sale" at FMV of everything the expat owns on the day before he leaves). Attorney Robert Barnes believes this is illegal, since the 16th Amendment does not authorize a federal tax on property rather than income.
The capital gains tax rates, which are lower than the regular income tax rates, are intended to compensate for the fact that the tax is assessed on nominal gain rather than real gain. Reagan briefly abolished them and the change was not popular. If capital gain were to be taxed at the regular rates, taxpayers should demand that the basis of long-held property be increased by an inflation factor before figuring gain or loss.
Re: "if a tax on unrealized gains were adopted, investors would be in a world of pain. I would expect a massive shift away from equities into tax-advantaged investments, such as government-issued securities."
Indeed, and might be exactly the intent of some of the people behind the recent spendathons, as such a flight would partially disguise the debt-service costs that might otherwise cramp their desires for even more expansive and expensive government.
I used to oppose, but now support, taxing unrealized capital gains, but only after some threshold. $500k was good for houses when the median before tax income was $50k. I would support something like it, at about 10 times the prior year's median wage, so it goes up each year with wages (or not??)
The % increase in wealth for the top 10%, or top 1%, should be less than the increase in the median wage (50%) - a criteria which has NOT been met nor even attempted. Joel Kotkin noted: "California also suffers the widest gap between middle- and upper-middle-income earners of any state."
This linked to an article looking at the top 75% vs 50% as the "wage gap" between the upper middle and the middle.
https://www.ocregister.com/2019/04/23/california-has-no-1-wage-gap-between-middle-income-pay-and-what-wealthy-earn/
"Last year’s upper crust wages ran 72% greater than the median in California,"
The article was very forthcoming with numbers:
"it’s median wage was 10th highest nationally at $42,430, by this pay measurement."
This CA median was lower than the national median, but it's 75th % was high, as
"the sixth-highest wage last year — $73,110 — at the 75th percentile. That’s a significant premium to the 50-state median of $58,805"
The 2019 article notes CA is not alone:
"This wage gap ranks larger in the 20 states that did not support President Trump in the 2016 election. Blue states in 2018 averaged a 61% median-to-75th-percentile gap vs. 55% in the 30 red states."
Now that many of the rich want to promote lies and oppose free speech against those lies, I'm getting on board the "tax the rich, more" train. I remain on the "smaller gov't" train, but realize that most voters choose, and vote for, the Bigger gov't benefit (+ higher tax) over less gov't benefit and less tax. Significant thanks to the rich supported indoctrination about how gov't benefits are morally superior to individual responsibility.
Reps, if they ever win again in elections where Dem deep state administrators are allowed to cheat, should use levers of State Capacity to increase the incentives to those who work for less than the median, so as to have them make more.
Better metrics are also good. The 75% - 50% "wage gap" is better than Gini, but I'd prefer a 90%-50%, or 1%-50%. It would be nice for some public intellectual to be talking more clearly and persuasively over what metrics are better to measure, and why.
Bryan Caplan's list (prior: https://betonit.substack.com/p/what-the-hell-is-going-on-with-the?s=r)
didn't include income inequality, but was pretty good:
Core Inflation Rate
LFP (Labor Force Participation - already much better than unemployment) plus
LFP - prime age, and LFP - 65+
US Money Supply (M0 - we're all supposed to know M1 & M2 different definitions)
Apr 7, Richard Hanania wrote about being on substack:
https://richardhanania.substack.com/p/why-you-should-be-on-substack?s=r
A few comments on inflation and capital gains taxes:
1. Taxing unrealized capital gains would be an accounting and administrative nightmare for individual taxpayers and the IRS. It's already cumbersome enough to keep track of gains and losses. Imagine paying taxes in a year of unrealized gains only to sustain losses in a subsequent year. Would the IRS return some or all of the previously paid taxes or credit taxes paid against future tax liabilities?
2. Many mutual funds avoid realizing capital gains year in and year out because the fund companies manage their funds with this (secondary) objective in mind. In fact, in the case of Vanguard, index mutual funds and parallel index ETFs are merely different share classes of the same, unified underlying portfolio. Both mutual funds and ETFs can avoid realizing capital gains for many, many years if not indefinitely.
3. Indexing capital gains for inflation, and indexing other tax rules for inflation (e.g. tax brackets), would be the right thing to do. However, doing so would require explaining to voters why wages and salaries should not also be indexed for inflation for tax purposes. The main reason is that wages and salaries are akin to dividends or interest on capital assets in this regard. If it were taxed, gains and losses on *human capital* (the present value of future earnings) should be indexed for inflation.
In fact, the capital gains tax favors labor in one respect: human capital gains are never taxed because one cannot buy or sell human capital. (Slavery and indentured servitude are, thankfully, outlawed.). Only the flow of labor income in a given period is taxable in that period. Imagine if the government were to tax unrealized human capital gains. Oy vey!
The Democrats' idea of taxing capital gains that have not yet been realized would put a premium on investment assets that were hard to value, because they were unique or they had no liquid market (collectables, art works). These are also advantageous for evading gift/estate tax.
The exit tax on expatriates established by FATCA does indeed tax unrealized gain (by creating a "deemed sale" at FMV of everything the expat owns on the day before he leaves). Attorney Robert Barnes believes this is illegal, since the 16th Amendment does not authorize a federal tax on property rather than income.
The capital gains tax rates, which are lower than the regular income tax rates, are intended to compensate for the fact that the tax is assessed on nominal gain rather than real gain. Reagan briefly abolished them and the change was not popular. If capital gain were to be taxed at the regular rates, taxpayers should demand that the basis of long-held property be increased by an inflation factor before figuring gain or loss.