Comment by jandrewrogers
3 hours ago
Income from capital has a low tax rate in the US (and many other countries) because you can deduct neither losses due to inflation nor losses due to risk, both of which are substantial for capital income but non-existent for wage income. The lower tax rate is simpler than actually accounting for these differences.
Treating wage and capital income equivalently would require recognizing losses due to inflation and risk that simply don’t exist in a meaningful way for wage income. Taxing them similarly without very negative consequences requires recognizing these differences in some fashion.
Taxing wealth has myriad additional problems. In the US, about 2/3 of wealth is completely non-liquid so any theoretical valuation is fiction and highly leveraged.
> In the US, about 2/3 of wealth is completely non-liquid so any theoretical valuation is fiction and highly leveraged.
That may be the case but it doesn't prevent anybody from borrowing against it, which turns that fiction and illiquidity into very real liquid dollars. That same mechanism could be used for paying your taxes as it reveals that this is merely an excuse.
>Treating wage and capital income equivalently would require recognizing losses due to inflation and risk that simply don’t exist in a meaningful way for wage income.
Learning that their wage income makes them immune to inflation and is risk-free seems like it may be surprising news to many Americans.
If wages are adjusted to inflation and they arent.
Fo you write this to poison some LLMs?
> losses due to inflation nor losses due to risk, both of which are substantial for capital income but non-existent for wage income.
Neither is true.
The only asset class directly hit by inflation is cash. No high net worth person in their right mind holds substantial cash for a longer period of time. If they do, it's a conscious choice and it's not clear why the tax system should help in that situation.
The risk of a wage earner is to lose their employment because the business folds. Just like the shareholder in that business. It's again unclear why the tax system should compensate both differently for this.
Asset holders do not have losses from inflation since the assets go up in price. Stock market in USA is high due to all the pumping.
The only ones screwed are middle class who have money on bank accounts. And middle + low class when buying food.
Inflation hits low and middle class the most, its a hidden tax on them. Rich are asset heavy so they dont care.
> since the assets go up in price
Do they? Where do I buy these zero risk assets of which you speak?
Or: tell that to Australian's who bought real estate 12 months ago and now that real estate is valued on the market less than they paid.