On this episode of Common Sense Soapbox, Florida Man finds the capital gains tax unfair, as it punishes his financial acumen. Although Sarah argues it forces the rich to pay their ‘fair share,’ Seamus explains it’s anything but — especially when it comes to inflation.
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CREDITS:
Written by Sean W. Malone, Seamus Coughlin, and Lou Perez
Animated by Seamus Coughlin
Produced & Edited by Sean W. Malone
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Capital Gains Taxes Destroy Wealth
Capital gains taxes have long been a topic of debate among economists and policymakers. While some argue that these taxes are necessary to promote equity and fund public expenditure, others believe that they do more harm than good. This article will argue that capital gains taxes actually have a detrimental effect on the economy, as they destroy wealth and discourage investment.
Capital gains taxes are levied on the profits made from selling an asset, such as stocks, real estate, or businesses, that has appreciated in value since its purchase. The purpose of these taxes is to redistribute wealth from those who have benefited from asset appreciation to the broader society. However, this redistribution comes at a cost, as it inhibits economic growth and reduces incentives for investment.
One of the main reasons why capital gains taxes destroy wealth is their impact on investment. When individuals or businesses face high taxes on their capital gains, they are less likely to invest in long-term ventures. Capital gains taxes reduce the return on investment and increase the risk associated with such ventures. As a result, entrepreneurs and investors are discouraged from taking risks, starting new businesses, or expanding existing ones. This lack of investment stifles economic growth and reduces job creation opportunities.
Furthermore, capital gains taxes discourage individuals from selling their assets. When faced with a significant tax liability on their capital gains, individuals may choose to hold onto their assets rather than sell them. This behavior undermines the efficient allocation of resources and can lead to a misallocation of capital. Instead of selling assets and reinvesting in more productive ventures, individuals may hold onto underperforming assets solely to avoid the tax burden. This hampers productivity and slows down economic development.
Moreover, capital gains taxes create a lock-in effect. This effect occurs when investors are deterred from selling their assets due to the potential tax liability. As a result, capital becomes tied up in unproductive assets and is not allocated to its most efficient use. This lock-in effect not only reduces liquidity in the market but also prevents individuals from reallocating their resources to more productive investments. Ultimately, this undermines economic efficiency and hinders wealth creation.
Additionally, capital gains taxes disproportionately affect middle-class investors and small businesses. Wealthier individuals and corporations have more resources to employ tax planning strategies and mitigate their tax liability. On the other hand, middle-class investors and small businesses often lack the expertise and financial means to navigate complex tax laws. Consequently, they bear a higher burden of capital gains taxes, which further widens the wealth gap.
In conclusion, capital gains taxes destroy wealth by reducing incentives for investment, discouraging asset sales, creating a lock-in effect, and disproportionately burdening middle-class investors and small businesses. While the redistribution of wealth may be a noble goal, it is essential to consider the unintended consequences of such policies. Instead of focusing on redistributive measures, policymakers should aim to foster an environment that encourages investment, promotes economic growth, and expands opportunities for wealth creation. This can be achieved by reducing or eliminating capital gains taxes, which would have a positive impact on long-term economic prosperity.
We should have a capital gains tax.
Most people don't even have enough money to invest
Eliminate the income tax
Your love, and worship of Mammon is disgusting.
Maybe socalism and capitalisｍ all turn into communism when run unchecked.
Well put together as always.
Taxation is extortion, políticans are parasites
Capital gains taxes are fucking me hard this year. I, like many americans, are being punished for making good decisions.
minimum wage helps cause inflation too.
Wealth should be destroyed, less wealth and more resources means less inflation
Capital gains tax is the best way without an outright wealth tax to get the wealthy to pay into the system properly. The wealthiest people don't earn their income from a taxes paycheck, they earn it on returns from massive investments.
If anything they need to be taxed more.
Wow, I hadn't realized that yet. The tax eats away at your investment even if you only managed to break even.
That's why inflation is theft
You just described my exact situation
Okay, but what about people who can't afford to make an investment portfolio? Studies have shown that up to 70% of a poor U.S. citizen's income is spent on food, housing, and transportation. And after they cover their basic expenses, on average, low-income U.S. citizens who only make $15,000 to $20,000 a year are left (on average) with just $1 a day. That doesn't just make it harder to get by day-to-day — it also makes it harder to save money so they can live more comfortably in the future. What hope do they have?
This isn't an argument against capital gains taxes, it is an argument for taking inflation into account when calculating profits before you subject those to capital gains taxes.
nice
This is insanely true. I get depressed so hard when i get taxed on all the ways that I'm trying to pull myself out of poverty
thats why i spend most of my money on payday. buy gold and ammo whe its cheap. f the system
Capital gains is still income. You are only taxed on GAINS from investing, not the entire value of the sale, and, at least in the U.S., the tax rate on capital gains is typically lower than income tax, so it effectively reduces the tax burden of people that make most of their money through investing. You can also write off capital losses, which significantly reduces the risk. ALL wealth is devalued by inflation, you lose nothing by investing money that you would not have otherwise spent if you make a gain on it, and as long as you're investing reasonably intelligently, you will make a gain.
This video is nonsense, and made by someone who either has no idea what they're talking about, or who is intentionally trying to mislead people into supporting a stupid idea.
nOOOOO the baby gator D:
Very good!
Every time I hear the phrase "pay their fair share", I always ask "Who determines what is fair?".
if my money is taxed via income tax than remove sales tax
the rich do not pay near enough. capital gains is a scam for the rich. 4Q!
Does the government really need more money when they spend it stupid
Brilliant.
I LOVE the idea that a government that has no money of its own and somehow always finds the most wasteful way to spend every penny they steal from you should be given more money to waste
Given the fact that most tax jurisdictions tax dividends, I have to disagree on this one. Otherwise dividends will be converted into capital gains, which results in tax evasion.
Looked at my bank's investment ISA (Lloyds) you actually have to put down a fair chunk of change to get any return whatsoever on the lower risk options. When I put £3k in just to test, it actually predicted a loss after five years.
There is basically no incentive for people with low incomes to do anything but spend today. Neither your savings or investments will protect against inflation, you can only spend before it is eroded.
To add insult to injury the UK government argued against pay rises to keep up with inflation, saying it will make inflation 'worse' if people have more money to spend. So they're basically ordering people to just be poorer.
No word about all the money they printed of course.
Using your income to generate more income is still income and should be counted as such also the government allows for ira's hsa's 401k's and 403b's to have money gained through capital gains not be taxed twice by either paying less taxes on the front end or paying less taxes on the back end while i do agree with argument that the irs should take into consideration the rate of inflation and its impact on capital gains income is still income and needs to be taxed as such
"… and where's the incentive to risk investing?" That's the point… destruction of the US Economyn so we can be enslaved and dependent.
There also “unrealized” Capital gains.
I question if any tax destroys wealth since taxes are fees for the the service of government. That certainly doesn't mean people get their money's worth. It is a direct tax and therefore unconstitutional.
You're not supposed to feed gators to the taxman, you're supposed to feed the taxman to the gators!
Hey guys, how are you doing with your investments? I know the market has been crazy lately.
So when you say investing… you mean in public corporations? It's stock owning a % of a company? If so and you sell your 'assets' in the company like a company may sell land they decide they no longer need would also get taxed right? I do not understand your argument. Do people who invest in private companies also not pay taxes on their returns? I'm all for less taxes, but at some point we need to fix the corrupt system to better reward the people who do the ACTUAL work.
Why is it that C.E.O.(s) of Budweiser lose them literally BILLIONS of dollars after hiring trash marketing people, and/or approving trash marketing, yet they're not F'ing GONE at the least or in jail for not meeting their financial responsibilities… They probable made enough in 1 year to retire 5 lifetimes, yet the people ACTUALLY making the beer and doing the ACTUAL work probable make enough to retire after freaking 30 years… if they don't get fired for some BS reason.
Dumb argument. The problem in your scenario is NOT the capital gains tax… it's the INFLATION!
The person who doesn't invest gets hit with the inflation too, you know? You want to apply inflation to one side of the equation but not the other.
Both investors and non-investors alike feel the exact same inflation effects, so that is nothing but a red herring.
Everyone needs to watch this video and realize how the government steals from us in so many different ways — the most pernicious being inflation.
Duh. The elite weaponize the plebs against the kulaks at the ballot box because "muh 1%"
Capital gains tax is unfair but it isn't as unfair as taxing unrealized gains like quite a few democrats want to do. Imagine taxing money you don't have… when you can possibly have less when you actually cash out.
So is capital gains just a sales tax? Or…
just wanna say RIP to Florida Man, who has taken the form of Ryan Mallet recently, who… fucking drowned. I thought that kind of thing only happened to you when you were bad at SMASH, but I guess it applies to Football too…. (here's hoping Florida Man at least returns soon, and doing something wacky again….)
Hear me out: Starters in Pokemon.
Their stats are pretty much second only to legendaries. They're designed to stay in your party through the whole game.
capital gains, to sit on your ass and just get paid for it. When people leave the money in the bank account and be able to live a comfortable life sitting on your ass is at best lazy and unproductive and at worst parasitic and degenerate.
To be quite honest I'm alright with short term capital gains tax to discourage financial speculation and also because I view the stock market in particular as just a way of transferring wealth but not necessarily a source of it's creation. I don't like income tax because it punishes the creation of wealth through means that better society as a whole.