[Dylan16807]

> past gains

To focus on "past": I don't think deferring the gains for a couple years is a big deal. It's not a handout because he'll still be paying the same taxes if he doesn't end up reinvesting the money. It just offers him some more time to set up a business, instead of having to do it same-year.

To focus on "gains": If you don't like the entire idea of reinvested money not counting as profits, oh boy that's a big objection, and it's not that way because of corruption.

[Retric]

Sign me up for some interest free loans then. Deferring capital gains is a huge windfall.

Reinvesting money getting special treatment provides zero benefits to the economy. It falls under the fallacy that rich people can avoid investing their fortunes, inflation already makes that a nonstarter. The only result here is a handout.

[AnthonyMouse]

Business expenses are tax deductions because business taxes are on profits and profits are calculated as revenue minus expenses.

Taxing businesses on revenue rather than profits doesn't work because it would bankrupt every business with slim margins, which is most of them, while effectively cutting taxes for the ones with the thickest margins and creating a massive tax subsidy for vertical integration.

> It falls under the fallacy that rich people can avoid investing their fortunes, inflation already makes that a nonstarter.

If all someone cared about was avoiding inflation they could just buy a stack of precious metals. Moreover, the return from typical passive investments (e.g. S&P 500) significantly exceeds the rate of inflation.

The preference for investment is as opposed to spending. If inflation is at 3% and someone is getting a 10% return from stocks, they can avoid real value loss while still spending up to 70% of the nominal profits. But we'd rather people build factories and develop new drugs and technologies than buy second private jets and third personal mansions.

[Retric]

> Business expenses

Investment isn’t a business expense.

> If all someone cared about was avoiding inflation they could just buy a stack of precious metals.

Capital gains of precious metals “yield” drops you below inflation.

> But we'd rather people build factories and develop new drugs and technologies than buy second private jets and third personal mansions.

Someone needs to do that for your hypothetical 10% S&P gains. Giving handouts to wealthy people hardly discourages them using a private jet, just the opposite.

[AnthonyMouse]

> Investment isn’t a business expense.

Investment is the thing where you pay a business expense today expecting a return in the future.

> Capital gains of precious metals “yield” drops you below inflation.

This is a defect in the tax code. Taxing inflation as a capital gain is ridiculous.

> Someone needs to do that for your hypothetical 10% S&P gains.

And then those companies get a tax deduction. Or in many cases they do make those returns without doing those things, because a lot of those companies have high returns by buying off regulators to constrain competition and then charging high margins to captive customers, which is another thing we don't like to promote over the ones actually making productive investments.

> Giving handouts to wealthy people hardly discourages them using a private jet, just the opposite.

The tax isn't deferred on the money used for personal consumption.

[Retric]

> Investment is the thing where you pay a business expense today expecting a return in the future.

Investments like land aren’t necessarily consumed. You can reasonably deduct when an actual expense happens, but buying steel etc to be used next year doesn’t guarantee it is actually used rather than sold.

> Taxing inflation as a capital gain is ridiculous.

It’s a useful feature to discourage the exact wasteful approach you proposed.

> The tax isn't deferred on the money used for personal consumption.

Money is fungible, you hand me money to buy land and I can redirect money I would have spent to buy something else.

[AnthonyMouse]

> Investments like land aren’t necessarily consumed. You can reasonably deduct when an actual expense happens, but buying steel etc to be used next year doesn’t guarantee it is actually used rather than sold.

In many cases you're buying something intending it to be consumed, even if it hasn't been yet, and have to buy it ahead of time because you have to get it installed or connected or forged etc. before it can start being used.

If you then sell the steel instead of using it, the sale price gets added to your income and the cost was already deducted previously, so that cancels the previous deduction and you're back to paying the tax on it.

> Money is fungible, you hand me money to buy land and I can redirect money I would have spent to buy something else.

In order to get a tax deduction for buying land to build a solar farm, you have to buy land to build a solar farm. You can't spend that money on something else and still get that tax deduction. You can spend other money on something else, but the amount of money you have available to spend on other things has gone down, and the point is to increase your incentive to build the solar farm, which it is effective in doing.