Occupy Wall Street

[GenuineRisk]

Originally Posted by slotdirt

Honest question: do you understand the difference between income earned by salary or wages (subject to the federal income tax) and income earned off investments (subject to capital gains taxes)? Further, do you understand that capital gains taxes are significantly lower than income taxes in order to encourage capital investment? Lastly, the only ways to make Warren Buffett pay more than 17.4 percent in taxes is to give him a larger salary (his is $100k and has been for 30 years), eliminate deductions, or to tax capital gains at a significantly higher rate. Pick your poison.

Which would make sense if that's how it worked in the real world, but it's not. Because most stocks aren't initial public offerings, where the money goes to the company, theoretically to be used to expand; in fact, they're traded on the secondary market between private individuals and organizations that have no interest in their sliver of ownership of the company besides whether they can make a financial profit on eventually selling the stock. It's the difference between financial investment and economic investment. Most trading is a financial investment, which doesn't do the economy any good, unless the Warren Buffets of the world are taking their profits to build things. Which they aren't; they're buying more secondary market stocks and pocketing the profits.

So taxing capital gains as income isn't poison at all. It's far more fair than the current system. If the gov't wants to make an exception for IPOs, and tax them at a lower rate to encourage the company to further expand , fine, but once the stock has changed hands, it's not encouraging anything other than more profit-making with no intent to put that money back into the economy.