Econ question

[lurkingowl]

As part of my Economics fixation, I've been considering off-and-on whether I'm really an economic conservative, and what that might mean. No real resolution. But, towards that end, Sandra and I had a conversation yesterday about Capital Gains

Comments

[ygolonac]

I think #4 is the main reason why most people that have this position have it.

[merlinofchaos]

The fallacy of the argument in general is that investment as we know it today isn't really investment anymore

[lurkingowl]

I agree. Sandra made that point as well, that most "investment" really isn't driving growth. There may have been a time when that was true, but not today.

Even accepting that investment drives growth directly, I don't understand why that's any better than consumption (which also drives growth.)

[cerebralpaladin]

So, I don't really understand all of the ramifications of how the capital markets tie in to investment, but it's not necessarily the case that secondary markets (i.e. buying stocks or bonds that already exist) doesn't drive things in the same way that direct investment does. For example, consider the bond market. Sure, if I buy some Ford bonds, I'm probably buying them from somebody else who already bought them from Ford, not actually giving Ford direct access to new debt. But the state of the secondary market has a huge effect on the cost of new debt (if people buy Ford bonds and drive up their price, thus reducing the effective interest rate paid, then Ford can sell new bonds at or around that lower interest rate; if people sell bonds and the price goes down, Ford has to pay more interest on any new debt

[cerebralpaladin]

So, I certainly don't have conservative views on this, but I can explain some parts of these arguments

[cerebralpaladin]

Two other comments

[lurkingowl]

I absolutely despise the hedge fund exemption. That is (a while back) where this train of thought started. Hedge fund managers shouldn't be getting taxed as capital gains. Then, a while later, wait, why is anyone getting a tax break on capital gains?

I'm very wary of imputed income, because it has the potential to force every interaction to be taxed. Have a good night in chatting with friends? Better than a movie? That's $200 of imputed entertainment income.

I'm not horribly opposed to pushing policy view taxes. The market can usually work around them and find the right balance. I just want to be clear about what policy, and what nominal good we're going for. I can't really see one in capital gains. Especially in this recovery where we need to save less and spend more to get things rolling.

[lurkingowl]

Double-taxation is the closest think to a real argument I see in here. That's a general issue with corporate tax rates. But it doesn't seem like the argument most people with this position are making.

Inflation is a potential argument too, but it's very specific. It feels very similar to arguing that money spent on food and housing is necessary, so we should deduct that. It's possible, but much more specific than the breadth of "capital gains should be taxed at half the rat of other income."

It's always hard to figure out the difference between a foundational position and someone just talking their best interest, which make this rough. :(