There absolutely is a way to weight risk... bond ratings do it all the time. I never suggested that doing so for the purpose of capital gains makes any sense.
My goal on tax policy would be three fold, and by priority: 1) economic prosperity, 2) governmental revenue, and 3) fairness. I think it has to be set that way. If revenue is the #1 goal, it can neglect long term impacts. If fairness is totally ignored, you end up with tax cheats and a lack of motivation. But if you are encouraging economic prosperity, the other two goals are more likely to be met. Just like every video game ever that involved taxes... you have to keep a balance to obtain any goal.
Again, I bring up inheritance because it makes a good example. A stark comparison. I had no idea the tabloids were interested in the capital gains taxation of inherited multi-generational wealth. I missed that article in the Inquirer.
Double taxation was established long ago in exchange for perpetual life and limited liability. That was the trade off. Now that "corporations are people too" and have the right to freedom of speech, political dissent, they commit crimes and are punished, and every thing else - it is even harder to argue that they shouldn't be taxed. They are separate and distinct legal entities that benefit from our schools, roads, and military influence.
Yes, the US corporate tax rate is higher than most. Even the effective corporate tax rate is fairly high (but well short of the "list" price). But our capital gains tax is lower, our income tax is lower, our property taxes are lower, our inheritance taxes are lower. If you look at the percent of GDP that is collected by all levels of government in the form of taxes, the US is far down the list at 27%. Most of our peers are in the 32% range.
There are few countries that would be considered industrialized nations below the USA on the tax scale. And, it should be noted, our taxes don't cover our expenses.
Running a first world country with a global military is expensive. Someone has to pay for it.
And I stand by my position that less favorable treatment of capital gains would cause Buffet to stuff a mattress with billions of dollars. Currently, he risks $1 Billion expecting a 20% return with a 20% effective tax rate, leaving him with a $160mil realized gain. If we modified the capital gains to 30% (a number similar to income tax), he has a realized gain of $140mil. As a result Buffet is going to stuff the $1 Bil in a mattress instead of grabbing the $140mil (Ayn Rand warning). Ergo, raising the capital gains tax is unlikely to dissuade most investing activity (you'll note we didn't see a huge influx of new investor activity in 2003 when we slashed capital gain rates).
In that a marginal increase in the capital gains rate is unlikely to significantly influence the flow of capital, it would be unlikely to change the labor market significantly. Historically, the labor market doesn't track the capital gains rate in any way. And it has a negative correlation to the highest income tax bracket. In fact, some economist have argued that a high tax rate increases investment (thus encouraging employment) since the value added from profits are reduced.
I also acknowledge that foreign investment is important. Its good to be the host country where people park their assets. And tax rate does play a role in those decisions, but so does stability, rate of return, etc. etc. etc. I don't thing the way to win that game is to race to the bottom and have the lowest possible taxes. It eliminates a key benefit of hosting the wealth to begin with.
I point out again, that same logic applies to the workforce. At 30% it isn't worth going to college and earning lots of money. So I will just stuff my talent in the mattress and not work because taxes are too high.
My basic statement is this: our current tax policy favors passive investor income over earned income.
Interesting statement. Good discussion. Sorry to disrupt the Trump thread with an intelligent conversation.
