But there are government programs to help out if you do get laid off.....something like unemployment benefits...food stamps......job assistance....training....

Yes and that's super great. Hurray socialism, hurray new deal!

Of course having that net is a lot better than just being homeless and starving to death, but to compare it to my hopes and dreams of my career as an ambitious American is frankly insulting and I hope you realize you are dealing with a strawman if you think the average person thinks like that.

The analogy is not intended to establish the entire framework of taxation and distribution of wealth. Rather, it is only intended to examine the horizontal equity of the situation, or the idea that people with similar abilities to pay should pay similar levels of tax. You can examine vertical equity afterwards.

I don't see why it would. If you have Keynesian concerns, firstly you could implement it when the economy is overheating (it seems little known that Keynesian theory does not advocate more consumption all the time). Secondly, there's no reason you couldn't use other forms of Keynesian stimulus.

Huh?

Only point I'm making, there is no such safety net for investors....

They use less government resources when out of work.

I'm not following. How is this taxing consumption? And how is it taxing consumption progressively? Seems like it's just progressively taxing labor.

Yeah, I don't see any reason to give tax advantages to riskier behaviour. But what I don't want are tax disadvantages to riskier behaviour, that is, paying taxes on the risk premium. Capital taxes do that.

What time value of money? We're not dealing with interest here. You're trying to equate working with investing. In investing you're forgoing present consumption in hope of a future gain. When you work you're compensated for your labor, you're not giving up anything.

If you lose everything investing, aren't you eligible for social safety net programs? (except unemployment, of course)

Unless I am not understanding what you mean, then risk premium here is income. So taxing it is not a "disadvantage" any more than taxing ordinary income is a disadvantage. Or taxing poker player profits. Or taxing commission. etc

This math sucks. Bob's consumption is not two dollars, it's one and a half dollars. (He made $1 and earned $.50). His tax rate is 33.3%. He does not pay wage tax on the capital gain, ONLY ON THE FIRST DOLLAR.

And this math sucks also. Bob's effective tax rate is $.55/$1.50 ~= 36.6%.

Capital gains are NOT taxed twice. The money you INVEST is already taxed, and is NOT TAXED AGAIN. This "double taxation" meme is an intellectually and analytically cynical piece of crap logic.

Oh, btw, all work product is a capital gain, and all capital gains are work product. Differentiating one transaction from another because the cash is plowed into some other artificial representation of cash instead of somewhere else is just wealthy people trying to invent some ridiculous excuse to get away with mo money.

Capital gains is income. All income should be taxed equally, unless there is some overriding national reason to do otherwise. And given that there is no correlation between GDP growth and capital gains tax rates (yeah, none), there is no national reason, ergo, tax it. Tax it all.

If by "rebut", then you mean "concede the point", then sure. It's not double taxation.

This steven landsburg guy is pretty lolbad.

Optimal choices in a vacuum are not always optimal choices outside of a vacuum.

Capital gains is taxed as income for the simple reason that the government needs revenue to cover expenditure and the richest people get paid through capital gains. Similarly the reason income is taxed instead of expenditure is because the rich invest income a lot more because they dont live payday to payday.

Long story short just because something is "optimal" for an economy but it means the poor gets hosed makes it right. Progressive taxation is the perfect example of this in action. If person A makes 100k a year and person B makes 100k a year both should be taxed at the same rate regardless of how they made that money. If person A makes 100k a year and person B makes 10k a year then person A should pay a higher rate of tax because of the diminishing value of money, in essence person B is given a break in recognition of being worse off than person A.

You might want to re-read the whole thing again. You missed the point.

This doesn't make any sense. The government could just impose a higher tax rate on consumption to reach the same revenue target, obviously.

But the government has a duty of care that includes not punishing the poor to help the rich which is exactly what taxing capital gains at zero and using some form of consumption tax would do.

This is what I mean about how its "better" in a vacuum of working out what is better for the economy but it is immoral.

Why isn't the VAT tax considered double taxation? We've already paid taxes on that money.

You can make the tax progressive.

EDIT: @neg3sd Of course having an income tax and a VAT is double taxation. The VAT/progressive consumption tax/payroll tax/however you implement it would be a substitute for the current income tax.

Only half way thru thread so far, seems to be summed up thusly:

Start with faulty assumptions, claim high ground. OP is particularly unironic when he complains about snark and one-liners and them engages in snarky one-liners.

This is lol. Bob pays 50¢ labour tax and 5¢ Capital Gains Tax on income of $1.50. Total burden of taxation <<<<< 52.5%

Not necessarily. Nich is talking about some kind of progressive consumption tax. I'm not sure how that'd work but it's not theoretically impossible.

Wow, my memory is bad. I thought I remembered an NPR Planet Money podcast where they got a panel of economists from across the political to agree on this.

http://www.npr.org/blogs/money/2012/...liticians-hate

So of the money that's newly untaxed, Alice consumes it all and Bob invests it all? Seems to be a crucial assumption. What if you treated both the same? Alice and Bob's initial consumption stays level $0.50 and $0.00 respectively. Both invest that extra couple quarters from being in tax free world into the same "double your money" that Bob found. Then using your math of real world money / opportunity cost money:

In a world without taxes Alice makes $1.50. In a world with 50% labor tax and 10% capital gains tax Alice makes $.50. Total burden of taxation: 66.7%

In a world without taxes Bob makes $2. In a world with 50% labor tax and 10% capital gains tax, Bob makes $0.95. Total burden of taxation: 52.5%

It already happens with sales tax exemptions on necessities in US and subsidies on fuel in Europe.

This effectively amounts to a progressive consumption tax scheme where excise consumption is taxed at higher rates.

The frugal millionaires and billionaires will be taxed at very low rates still under this scheme but they'll be investing their money instead of wasting money on another useless Tesla that hurts the environment more than it helps.