There is indeed the law, and at the end of the day that is what determines what you must pay.
The very wealthy have long supported income tax structures that treat capital gains very differently than employment income, with much higher rates being applied to employment income. For the most part, the very wealthy do not receive much employment income. This means that as a percentage of income (all types added together), people who primarily earn via capital gains pay far less tax than those who primarily earn via employment.
It is an understandable position to say that this tax structure is unfair and that the very wealthy are not paying what they should pay. You can disagree with it but it is not a difficult position to understand.
It's not quite so understandable to me that somebody would believe that position to be an inherent truth ("truly owe") rather than just a position.
Capital gains taxes have historically been lower to encourage the investment of capital. This might be good or bad policy. Many economists say it's good policy.
That's true, but in this case, Washington State has no income tax. The capital gains rate here isn't an unfair rate that privileges the wealthy, it's an additional tax burden on the wealthy.
"7% over $250,000" is just as arbitrary as 1% or 15% or 37.9%
and that this arbitrariness and vagueness is the crux of the fair share rhetoric. it has no base unit, it has no understanding of the existing tax environment, it has no ability to comprehend anything except an exemption from questioning why we are being screwed at all, only requesting that we are all being screwed equally, which is not a goal remotely supported by any form of consensus in legislatures.
I agree: the word “owe” is a problem here. The thrust of the article is that the tax structure has historically charged a lower rate of tax on the wealthy than the poor. By definition that means the wealthy could pay exactly what they owed without paying a reasonable share, and now with this change they owe more which makes it more fair.
But saying people didn’t pay what they owed and also calling them tax-dodgers implies they are criminals, which is likely incorrect for most of them and an unhelpful misdirection. If obeying the law isn’t “good enough” the fault is with the law, not the citizens.
Laws are constrained by what kind of legislation is ethical and practical to enforce.
It cannot come as a surprise to you that lots of efforts go into finding loopholes and technicalities that lets rich people pay much less tax than the lawmakers intended.
The difference is the "spirit" of the law versus its practical application.
It's the kind of silly moralizing language used by partisan hacks. You owe what the law says you owe and not a penny more (or less). Most people, regardless of socioeconomic status, pay what they owe, or at least what their CPA/H&R Block/TurboTax tells them they owe.
The wealthy should pay more tax, and the government should also learn to spend the money more effectively.
The whole bit about most voters wanting the ultra rich to pay more tax is hilarious. Of course they do.
If you believe the government is more effective than the people in spending your money you should want tax increased for everyone. If not you should want it lowered. Simple as that. Hand wringing about whose money is taxed is irrelevant.
Suppose you believe the government is not good at spending your money. Let’s say half of every dollar is wasted. Why would you want rich people to be taxed more?
Suppose you believe the government is better at spending your money such that the economics of scale give the government an additional fifty cents for every dollar in value in the form of social services. Why would you lower taxes for poor people? Definitionally they would be better off paying more in taxes and then receiving whatever benefit the government then produces for them.
The status quo is the worst of all the worlds because rich people effectively pay less tax than the middle class, and the government is wasting much of our money.
This argument makes no sense. Even if the government is not efficient with money we still want it to be funded because they provide services that make no sense for any one person to provide. In that context taxing high income more still makes sense, even if the efficiency is not high, more input still leads to more output.
That's not necessarily true, it depends how inefficient the government is. for example, in my city the city controls trash pickup and tried to social engineer more composting/recycling by cutting trash pickup days to once every two weeks instead of every week. A private enterprise has sprung up offering the second pickup for the same price the city charges. They are able to provide that in the vastly less efficient setup of only a few people on each block using them, the city being dicks and not letting them collect from the city provided trash cans, etc. That tells you for this service the correct thing for the city to do is fire all the inefficient people they are employing and support private enterprise in gaining the efficiencies from automation and a bigger market and providing an even lower cost service. I suspect there are tons of services the city provides that are extremely inefficient as above.
More input implying more output is a poor model, because there is rule of law in the middle.
input -> rule of law -> output is a more correct model. Maybe RuleOfLaw(Taxes) -> [Output distribution] is better.
When rule of law is weak, the powerful arbitrarily exercise their power to shift the output to them. When rule of law is strong the output is used for the public benefit.
So the efficiency of taxes depends greatly on the integrity of the legal system and therefore integrity of the legal system must come before the expectation of the usefulness of taxes.
When the legal system has no integrity, money siphoned from taxes to private interests increases the power of those private interests which further hurts the legal systems integrity. So more (general population) taxes in the context of weak rule of law is damaging to society.
If you want to increase rule of law (reduce arbitrary exercises of power), then the less powerful must become more powerful (unions), the more powerful must become less powerful (tax the rich or ask the french), or the institutions of society itself must ensure that there are consequences for arbitrary exercises of power (the people in power choose to exercise it responsibly), or a culture that respects rule of law must pervade (only possible through education).
It’s not strictly necessary for the government to provide everything that might interest more than a single person, so the premise of your rebuttal is already flawed.
I have no clue how people are ok with the government squandering away hard earned money. If people would like to donate to the government they are free to do so. Otherwise demand effective use of the tax or minimize collection.
To put it another way, should all of your income be taxed and you simply receive some sort of stipend from the government? Why or why not? Low efficiency is a problem because the alternative is population driven allocation which is definitionally superior in such a scenario.
> If you believe the government is more effective than the people in spending your money you should want tax increased for everyone. If not you should want it lowered. Simple as that.
This is apples and oranges. I'm not going to go build roads or missile defense systems with my money (thought I might donate to science). There's no direct comparison between how "the people" spend their own money vs. what you can do with taxes, and it's definitely not "as simple as that"
Private companies managed to build railways just fine, until the govt in its infinite wisdom (with which I totally agree by the way, but most people in the pro-govt camp, who want more rail now, don't) decided to undercut them with a massive tax-funded highway system.
And roads (or defense) are about as an extreme example as it gets due to the complexity of acquiring a very long, very narrow plot of land. So, it's possible a govt might be a bit better than market at providing roads, although I'm not 100% convinced. For most things, govt is just an inefficient, thieving monopoly.
Yes it is. Money is a resource allocation mechanism. Suppose people were not taxed at all. Do you think there wouldn’t be roads?
Roads are a good example of how when you go to 0 to 1 it’s a great investment and thus good justification for taxes. At some point though there are diminishing returns.
How the government spends it is a massively less important consideration than preventing the rich from having it.
Money is power, and too much power in too few hands is a real threat to national security and the integrity of a republic.
If the big banks can say "bail me out or else" or any of these billionaires can say "If you try to hold me accountable I will make it hurt," how much freedom from tyranny do we really have?
And is the government itself some platonic entity? This comment is deeply ironic - we are afraid of the concentration of power in the hands of some rich people, so we are going to give more power to the most massive and heavily armed entity in human history, barely accountable (beyond extremes) given that most actual ruling is done by bureaucracy and even the "choice" between parties is not very meaningful, and increasingly controlled by one man via executive action.
The rich have a much lower marginal utility per dollar than the poor. My goal at least is to maximize utility, so increasing taxes on those who enjoy dollars less is the correct decision.
You're assuming the value per dollar a poor person gains from their money is equal to what a rich person gains.
I want progressive taxation precisely because I think rich people are less able than others to spend their resources in a way that brings net benefit to the world.
It's important to remember that not all dollars have equal value. If you're broke, $10 has significant value. If you're Bezos, it's effectively worthless. So when we decide how much to tax whom, we have to take this effect into consideration.
> Suppose you believe the government is not good at spending your money. Let’s say half of every dollar is wasted. Why would you want rich people to be taxed more?
No, because definitionally the money was better spent by the rich people. Note: I am not saying that this is the case, but the constructed scenario already supposes that.
That’s definitely an issue, but I would be happy with the government just spending less of it. Like less than is brought in as revenues. Excess can be rolled over with equivalent tax cuts or moved to an endowment or trust with an independent, non-partisan management structure that pays an annuity. Failure to stay under revenues would come directly out of public servant salaries, campaigns, benefits, and retirement programs.
Anything having to do with revenues or budgets typically will not identify the way comparison operators are being used. Rick people typically pay a lower effective tax rate than middle class, because, as many have noted, increases to wealth come from capital gains, illiquid appreciation, and less from income. Middle class has nearly 100% of any increase come from taxable income. The total dollar amount paid by high earners is definitely higher, but as a percent of total income, it should be lower (if you’re doing it right).
As I’m sure many here know, as more wealth is accumulated, it becomes easier to accumulate wealth in ways middle income and lower just can’t access. Whether that’s through tax advantages accounts, tax structures, or even just capital gains growing faster than incomes. It’s also easier to get lower interest rates, fees, purchase at prices approaching wholesale, etc.
let that sink in for a moment..
even with all the legal tax evasion schemes the top 1% is still paying half of all income taxes with the measly amounts they actually register as income. the system is simply broken
Not sure why you were downvoted. Using taxes as a form of punishment thrown around all over the place. Taxes should be for funding the government not for punishing the people.
Yes, let's not be prejudiced against people experiencing wealth. Lol.
Just because a law was not broken does not mean that the system was just. Surely everyone here can agree that following the law does not equal goodness/righteousness/justice/whatever word you prefer to use. The tax laws in Washington were particularly regressive, as WA state has no income tax. With no income tax, WA state has historically had to use other taxes to pay for things. The result is that lower income workers feel a greater burden than higher income workers. Which is to say nothing of the very wealthiest individuals who may technically make little to no income at all, but are very clearly wealthy.
This new tax law brings in money by taxing profits generated from investments. Why is that any more unfair than other tax? Like, sure, if you're a libertarian that hates all taxes, then whatever. But what makes this tax worse, in your eyes, than any other tax?
What I would like to know is what the justification for capital gains being taxed at a considerably lower rate than other income is. Why treat it preferentially?
Capital gains taxes are not treated preferentially, or at least the lower rate does not reflect that, this is a common misunderstanding. Ideally, you want the tax rates on all sources of income to be roughly the same net of risk and inflation so that you don't bias investors into any particular type of activity when chasing rates of return.
For wage income, inflation losses are negligible in most countries. Similar for short-term capital gains, which is why those are commonly taxed at wage income rates. Unlike wage income, capital has substantial risk (i.e. you can't deduct most losses). For long-term capital gains, the drag of inflation becomes a large percentage of the total nominal return. If you taxed long-term capital at the same rate as income, no one would make long-term high-risk investments because the expected rate of return on investment, net of taxes, would be lower than short-term rent-seeking type investments!
If you want people in your country to invest in high-risk tech ventures at least as much as e.g. buying rental apartments, you have to make the expected investment returns net of taxes, inflation, and risk to be similar.
You could make capital gains the same as income tax if inflation and risk was deductible against income. In practice, this would create enormous headaches for governments (massive increase in revenue volatility), so instead they tax it at a lower rate that loosely approximates what the tax rate might look like on average if you were allowed to deduct inflation and risk.
> Now do houses. Why is the first $500k of real estate appreciation untaxed?
Because it encourages liquidity in the housing market. If people had to pay taxes on the sale as soon as the house appreciates anything, a lot more people would hold on to the house and never let go.
It's a ridiculous phrase especially when you're talking about taxes. It's just meant to rile up proletariat so they can be mad at those big bad billionaires over something else (or more accurately, the same thing again).
Wasn't the Seattle allure 0% state taxation? Seems uncouth to backtrack on it. If we're discussing fairness it's worth contrasting how the tech industry in Seattle or its significance were prior to this.
“Owe” is an important word meaning a legal obligation. If the law says you owe nothing then you owe nothing. That doesn’t mean the law is just! It means we need to fix the law.
There's absolutely no reason to not tax capital gains as ordinary income. It is the single most blatant, regressive feature of our entire tax system that wealthy people can receive their income at a significantly lower marginal rate with zero deductions for FICA.
If it was taxed as ordinary income, this tax would be illegal in Washington.There was a whole legal battle about whether or not this was an income tax or not. I suspect it might still end up with this tax being repealed.
I believe the given reason for a capital gains tax is to promote investment.
Edit: I was mistaken about income taxes being banned by the state constitution.
> Income taxes are banned by the state constitution.
This is incorrect. Income taxes are only required to be flat. Many other states of all political persuasions have flat income taxes, Washington as a single-party state has chosen not to implement a similar tax.
>I believe the given reason for a capital gains tax is to promote investment.
Right. That's the regressive nature of it. Benefitting the investor class at the expense of social programs.
Let's reverse that for a second. I could do a whole hell of a lot of investing in myself with the extra 20 grand a year in my pocket that being taxed at a capital gains rate and not paying FICA would leave me with.
Readit News
I don’t know what to make of this statement. I pay what the law says I have to pay. Is that not what I “truly owe”?
There is indeed the law, and at the end of the day that is what determines what you must pay.
The very wealthy have long supported income tax structures that treat capital gains very differently than employment income, with much higher rates being applied to employment income. For the most part, the very wealthy do not receive much employment income. This means that as a percentage of income (all types added together), people who primarily earn via capital gains pay far less tax than those who primarily earn via employment.
It is an understandable position to say that this tax structure is unfair and that the very wealthy are not paying what they should pay. You can disagree with it but it is not a difficult position to understand.
It's not quite so understandable to me that somebody would believe that position to be an inherent truth ("truly owe") rather than just a position.
Capital gains taxes have historically been lower to encourage the investment of capital. This might be good or bad policy. Many economists say it's good policy.
It's stating opinion as fact.
Deleted Comment
"7% over $250,000" is just as arbitrary as 1% or 15% or 37.9%
and that this arbitrariness and vagueness is the crux of the fair share rhetoric. it has no base unit, it has no understanding of the existing tax environment, it has no ability to comprehend anything except an exemption from questioning why we are being screwed at all, only requesting that we are all being screwed equally, which is not a goal remotely supported by any form of consensus in legislatures.
But saying people didn’t pay what they owed and also calling them tax-dodgers implies they are criminals, which is likely incorrect for most of them and an unhelpful misdirection. If obeying the law isn’t “good enough” the fault is with the law, not the citizens.
It cannot come as a surprise to you that lots of efforts go into finding loopholes and technicalities that lets rich people pay much less tax than the lawmakers intended.
The difference is the "spirit" of the law versus its practical application.
Depending on your definition of fair, of course.
Just because you found a tax loophole doesn't mean you're fulfilling the ethical obligations that motivated the law.
The whole bit about most voters wanting the ultra rich to pay more tax is hilarious. Of course they do.
If you believe the government is more effective than the people in spending your money you should want tax increased for everyone. If not you should want it lowered. Simple as that. Hand wringing about whose money is taxed is irrelevant.
Suppose you believe the government is not good at spending your money. Let’s say half of every dollar is wasted. Why would you want rich people to be taxed more?
Suppose you believe the government is better at spending your money such that the economics of scale give the government an additional fifty cents for every dollar in value in the form of social services. Why would you lower taxes for poor people? Definitionally they would be better off paying more in taxes and then receiving whatever benefit the government then produces for them.
The status quo is the worst of all the worlds because rich people effectively pay less tax than the middle class, and the government is wasting much of our money.
input -> rule of law -> output is a more correct model. Maybe RuleOfLaw(Taxes) -> [Output distribution] is better.
When rule of law is weak, the powerful arbitrarily exercise their power to shift the output to them. When rule of law is strong the output is used for the public benefit.
So the efficiency of taxes depends greatly on the integrity of the legal system and therefore integrity of the legal system must come before the expectation of the usefulness of taxes.
When the legal system has no integrity, money siphoned from taxes to private interests increases the power of those private interests which further hurts the legal systems integrity. So more (general population) taxes in the context of weak rule of law is damaging to society.
If you want to increase rule of law (reduce arbitrary exercises of power), then the less powerful must become more powerful (unions), the more powerful must become less powerful (tax the rich or ask the french), or the institutions of society itself must ensure that there are consequences for arbitrary exercises of power (the people in power choose to exercise it responsibly), or a culture that respects rule of law must pervade (only possible through education).
I have no clue how people are ok with the government squandering away hard earned money. If people would like to donate to the government they are free to do so. Otherwise demand effective use of the tax or minimize collection.
To put it another way, should all of your income be taxed and you simply receive some sort of stipend from the government? Why or why not? Low efficiency is a problem because the alternative is population driven allocation which is definitionally superior in such a scenario.
Not when people are involved
This is apples and oranges. I'm not going to go build roads or missile defense systems with my money (thought I might donate to science). There's no direct comparison between how "the people" spend their own money vs. what you can do with taxes, and it's definitely not "as simple as that"
And roads (or defense) are about as an extreme example as it gets due to the complexity of acquiring a very long, very narrow plot of land. So, it's possible a govt might be a bit better than market at providing roads, although I'm not 100% convinced. For most things, govt is just an inefficient, thieving monopoly.
Roads are a good example of how when you go to 0 to 1 it’s a great investment and thus good justification for taxes. At some point though there are diminishing returns.
Money is power, and too much power in too few hands is a real threat to national security and the integrity of a republic.
If the big banks can say "bail me out or else" or any of these billionaires can say "If you try to hold me accountable I will make it hurt," how much freedom from tyranny do we really have?
Deleted Comment
Meaning a person who argues economic theory and not purely from neo-liberal ideology.
I want progressive taxation precisely because I think rich people are less able than others to spend their resources in a way that brings net benefit to the world.
So they can spend half of it well?
That’s definitely an issue, but I would be happy with the government just spending less of it. Like less than is brought in as revenues. Excess can be rolled over with equivalent tax cuts or moved to an endowment or trust with an independent, non-partisan management structure that pays an annuity. Failure to stay under revenues would come directly out of public servant salaries, campaigns, benefits, and retirement programs.
That’s just not true. The top 1% of earners pay close to half of all income tax.
Furthermore, how do you account for the ones who don't "earn an income" and simply live off bank loans until they die?
https://www.businessinsider.com/american-billionaires-tax-av...
As I’m sure many here know, as more wealth is accumulated, it becomes easier to accumulate wealth in ways middle income and lower just can’t access. Whether that’s through tax advantages accounts, tax structures, or even just capital gains growing faster than incomes. It’s also easier to get lower interest rates, fees, purchase at prices approaching wholesale, etc.
Taxes as punishment for having wealth.
Were laws broken? Doubt it, at least not at scale. Leave people with money alone!
Just because a law was not broken does not mean that the system was just. Surely everyone here can agree that following the law does not equal goodness/righteousness/justice/whatever word you prefer to use. The tax laws in Washington were particularly regressive, as WA state has no income tax. With no income tax, WA state has historically had to use other taxes to pay for things. The result is that lower income workers feel a greater burden than higher income workers. Which is to say nothing of the very wealthiest individuals who may technically make little to no income at all, but are very clearly wealthy.
This new tax law brings in money by taxing profits generated from investments. Why is that any more unfair than other tax? Like, sure, if you're a libertarian that hates all taxes, then whatever. But what makes this tax worse, in your eyes, than any other tax?
For wage income, inflation losses are negligible in most countries. Similar for short-term capital gains, which is why those are commonly taxed at wage income rates. Unlike wage income, capital has substantial risk (i.e. you can't deduct most losses). For long-term capital gains, the drag of inflation becomes a large percentage of the total nominal return. If you taxed long-term capital at the same rate as income, no one would make long-term high-risk investments because the expected rate of return on investment, net of taxes, would be lower than short-term rent-seeking type investments!
If you want people in your country to invest in high-risk tech ventures at least as much as e.g. buying rental apartments, you have to make the expected investment returns net of taxes, inflation, and risk to be similar.
You could make capital gains the same as income tax if inflation and risk was deductible against income. In practice, this would create enormous headaches for governments (massive increase in revenue volatility), so instead they tax it at a lower rate that loosely approximates what the tax rate might look like on average if you were allowed to deduct inflation and risk.
Because it encourages liquidity in the housing market. If people had to pay taxes on the sale as soon as the house appreciates anything, a lot more people would hold on to the house and never let go.
Deleted Comment
State taxes were 0% - They paid 0%
It's just nonsense propaganda.
I believe the given reason for a capital gains tax is to promote investment.
Edit: I was mistaken about income taxes being banned by the state constitution.
This is incorrect. Income taxes are only required to be flat. Many other states of all political persuasions have flat income taxes, Washington as a single-party state has chosen not to implement a similar tax.
Right. That's the regressive nature of it. Benefitting the investor class at the expense of social programs.
Let's reverse that for a second. I could do a whole hell of a lot of investing in myself with the extra 20 grand a year in my pocket that being taxed at a capital gains rate and not paying FICA would leave me with.
Non-uniform income taxes are banned by the state constitution. A flat tax on all income, regardless of amount, would have been legal.