[qeternity]

> the problem is not missing regulation, the problem is the rich decide on regulation and this regulation helps keep them rich.

Ok - so the rich have decided on regulations which are not the ones that are best for everyone. So…missing regulations? By definition, if we have the wrong regulations, then we’re missing the correct ones.

Capital gains taxes are lower for a specific reason: the capital that was initially invested was already taxed. These laws benefit average people much more than they do the rich on a relative basis. Go model out a retirement portfolio that is taxed/compounded at ordinary rates vs capital gains rates.

What people really want is higher capital gains for rich people which is fine, but you fundamentally misunderstand why they’re lower in the first place, which is double taxation.

[dragonwriter]

> Capital gains taxes are lower for a specific reason: the capital that was initially invested was already taxed.

That is not a sensible reason for capital gains (which apply only to gains) to be taxed lower, since the gains have not already been taxed.

It also doesn't explain why the reduced rate (compared to “regular” income) applies to long-term gains, since the original capital was taxed regardless of whether the gain is long or short term.

The best fairness-grounded argument I’ve seen for reduced LTCG taxes is that, in a progressive annual income tax system treating gains earned over multiple years but realized at the end as single-year income at full tax rates overtaxes compared to what would have occurred if the income was spread out over the time it took to accumulate before realization, unless the recipient would already have been at the max marginal rate every year before the gains at issue were considered.

This is a valid point, but allowing free voluntary advance tax recognition of income and deferring tax recognition after realization for windfalls (say, spreading amounts above the middle actual realized income of the last three years over up to ten subsequent years) deals with that problem more comprehensively (not just for capital income) without undertaxing those who would be at the maximum marginal rate even without the particular long-term gain, or who are continuously rolling out long-term gains year after year repeatedly.

Favorable LTCG rates are a way to use a poor approximation of fairness for middle-class earners with occasional long-term gains to sneak in wildly favorable treatment forn the super-rich, instead of just treating income fairly all around.

(There's also a trickle-down economics argument for low capital gains rates, that is not fairness-grounded: “we want to encourage the already rich to invest and make more money, because positive side effects of this will trickle-down on the lower socioeconomic classes”.)

[krageon]

The original capital is not taxed, capital gains is.

[qeternity]

Where do you think the original capital came from? When you buy shares of AAPL, you paid ordinary rates on income which you used to buy the shares.

[int_19h]

And? You don't pay capital gains on that. You pay it on the increase relative to the original cost to you (which you payed with already-taxed money). Why shouldn't the increase be taxed same as any other income? Or more, actually, since it's not earned by productive labor?

[qeternity]

Capital gains arises (on average) when a company grows and thus makes more money. Corporations pay corporate tax on those profits. Why should my share of those profits be taxed again at the individual level?

Additionally, the higher the capital gains tax, the higher the expected returns have to be. Lower capital gains incentivizes riskier investment, which, within reason, is a net positive for society.

[int_19h]

Your share of those profits is dividends, not any gains from increased value of the underlying asset.

And I don't think we need to incentivize even more investment, given where things are at the moment. All it does is concentrate more market in the hands of the same people (who already have enough money to throw it around). It doesn't actually benefit the society as a whole, unless your metric for that is some mindlessly averaged metric like GDP.

[christophilus]

The original capital almost certainly was taxed. It was earned as income, or via sales, both of which were probably taxed.

[stonepresto]

https://www.irs.gov/individuals/net-investment-income-tax

[coryfklein]

I think we're pretty far beyond "double taxation" at this point. I think my money gets taxed at least 3-5 times in the various stages it passes through my use.

[int_19h]

> Capital gains taxes are lower for a specific reason: the capital that was initially invested was already taxed.

That's an excuse, not a meaningful explanation. When I pay sales tax at the store, the money I pay it with has already been taxed when I was paid my wages.

These laws benefit the ultra-rich more so than everybody else for the simple reason that most of the former' income is capital gains, while most of the income for average people is wages.

[chalst]

Capital gains taxation is not double taxation: it is taxation only on the increase in value of assets.

CGT generally has the same rate as income tax: the reason why the rich are better off earning through capital increases than wages is that they get to decide when the capital gains happens, which means that their wealth managers and tax accountants can optimise their affairs to minimise tax.

The fundamental misunderstanding is yours.

[dragonwriter]

> CGT generally has the same rate as income tax

If by “CGT generally” you mean “short-term capital gains tax”. But, that's not true of long-term capital gains that kick in at a year and a day of holding the asset.