If you work for a living, America taxes you at double the rate of wealthy investors with "unearned income"


#1

Originally published at: https://boingboing.net/2019/02/05/unearned-income.html


#2

There is a common argument on the right that too much democracy is bad because the masses of common folk will vote for entitlements and turn the country into a lazy bunch of freeloaders.

The wealthy making money from doing nothing, then using that wealth to game the system in their favor is the counter argument.


#3

Really? This post has been up a whole ten minutes and no “well actually” types are here comforting the comfortable and afflicting the afflicted?


#4

fear not
chin up
have patience
etc.


#5

I was too young to vote when Reagan was elected, but I was old enough when they cut the capital gains rate to know it was a really really bad idea.


#6

What a scam
on the working man.
Capital that’s working
should be taxed.

(also waiting to hear a symphony of violins
for the Job Creators)


#7

Well, actually, it is just good common sense that if you give poor people money, you destroy their motivation and make them “takers.” At the same time, if you make rich people pay their share, you destroy their motivation and they become “takers.” So the only solution, painful as it may be, is to take whatever the poor have to keep them motivated, and give it to the rich so they remain motivated. Does that clear it all up for you? :innocent: (/s)


#8

#9

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#10

http://piketty.pse.ens.fr/files/AlvaredoGarbintiPiketty2015.pdf


#11

What I want to know is why loto wins and gambling wins are taxed as normal income, and investment returns are taxed as unearned income. It seems exceptionally inconsistent to me.

I think there should be a separate rate for investment income, and it should be lower than the highest income brackets; and there should be some “behind the back” methods for transferring what would be earned income to capital gains, as long as the money is in the capital market for at least 6 months or more. However, I think the current 15% flat tax is probably a bad idea; possibly, it should be graded for individual investors so that after you get a couple of million in profit you start paying more in taxes… like 25% versus 70% over 10MM.


#12

The idea is sound in that IN THEORY money invested to create capital gains was money already taxed once before. The money was additional earned income that was being reinvested to make more money. And it benefits everyone doing so…if you have a spare 1,000 or 1,000,000 you get a minimal hit on money made from investing it (yes it helps the rich more…but it does help all).

The issue is…things have changed. And the laws and rules should change to reflect that. Even in 1980 there were middle income households that had a little spare money to buy some stocks or invest in other ways. But today in 2019…that demographic just doesn’t exist. And to the article’s point there are too many living off inherited wealth now. So you are talking about money that was never truly taxed to begin with at a reasonable rate.

Additionally…I would not just champion AOC’s push for marginal taxes at 70% again…I’d lower the starting amount from $10m and I would include taxing the hell out of capital, inherited, and estate gains over the same value too. So let’s say the marginal tax rate was $5m…you inherit or make capital gains anything more than $5m and you get the shit taxed out of it. You can afford it.

Which, coupled with lowering our effective tax rates and also increase average wages to acceptable levels, would leave the rest of us in better position to no longer live pay check to paycheck and perhaps even invest a little ourselves, whether that’s in retirement vehicles, brokerage, stocks, etc.

In other words…ALL SHIPS WOULD RISE. But you and I know full well that isn’t what a select group wants to see happen.


#13

I just saw a clip where someone said that the worst lie of trickle down economics isn’t that making the richer richer makes everyone better off; it’s that making the poor richer makes everyone worse off.

Not that you are actually arguing this point, but I find it utterly insane. I get paid by my employer and pay income tax on that money. Then I spend that money on a store and there is sales tax on that money. Then the store uses that money to pay it’s employees and they pay income tax on that money. Then they spend it, etc. Those taxes go to pay government employees who pay taxes, etc.

All money is taxed countless times. Complaints about being taxed twice are either stupid or self-serving lies.


#14

I think you miss the point, it’s not about taxing your money repeatedly, it’s about taxing my money repeatedly. The latter is evil, the former is expected. (again, /s if there is any confusion over my own position.)


#15

We have ISAs (Individual Savings Accounts - which can be cash or shares) in the UK - tax free but capped at £20,000 per year.
This helps the squeezed middle continue to save.


#16

Agreed…I am not arguing that it is a sound practice…just that the idea of not taxing money that was already taxed would make sense if it existed in a vacuum. Your example has a counter…the taxes your paying are for the goods/services, not on the funds you used to purchase said goods/services.

It is insane for those with a crap ton more money than they ever need find the must unbelievable arguments to keep more of it. The mental gymnastics of greed are real and to your exact point…self serving lies.


#17


#18

I think the idea of taxing money is intrinsically wrong. What should be taxed is activity.

Such that income derived from labor is taxable at x% rate (whatever formula that’s agreeable) and income and/or wealth that is derived from financial activity is also taxed at y% rate - not just whether that activity resulted in capital gains or losses as it works now.

Financial activity can be defined as either active or passive but really boils down to the activities used to generate that money. Example: a tax on stock trading would target the activity that created the so-called passive income.

We already pay taxes on physical goods and services but only at the point of acquisition/liquidation. Same concept should apply on all financial instruments bought and sold. It’s the action that’s taxed, not the object.


#19

Hey guys, there’s a great gulch where we can all go live without these damn commie taxes! Don’t y’all want to go live in this awesome gulch with me?


#20

This is why I agree with you that it should change - in a way that identifies and separates the two (earned vs. inherited). It’s not hard for taxing authorities to determine the difference, because they track all of the activity between employers, employees, financial institutions, and states where estates are handled.

After watching over a third of my working income go to taxes & federal programs, I’m hoping to avoid going through that again. A good bit of what remained went to state, local, earned income, sales, and property tax. People in the working class who managed to save anything after all that shouldn’t be penalized for it when they are in no position to earn more to make up the difference.