Would this help the economy, or kill it? (USA)

I'm still more worried about the possibility of a central digital currency... the end of freedom.

In reply to Curtis73 (Forum Supporter) :

I like your goal (which I interpreted as "make sure everyone is paying their fair share").  I'm not sure that's the right mechanism to achieve the goal, but its heart is in the right place.  Ultra high speed trading 1000x times a day on the same equity back and forth doesn't really help the end consumer, or the pensioner/401k person that invests over 30 years and doesn't day trade.  Taxing them a bit might help get a handle on the large commercial wall street banks, but might not. 

Another common form of tax evasion is what I call the Elon Musk method:  get 99% of your compensation in stock shares.  So you are sitting on a huge tax bill that only comes due when you sell, except you NEVER sell.  Because those shares are worth billions, banks will loan you money for all your day to day expenses, and in fact you can write off the interest on those loans against any income you do have.  Then, you die, and leave your billions to your inheritors, and now the tax bill should come due, except those shares' cost basis resets to present day valuation (step-up basis).  So the billions get handed down with minimal taxes ever being paid, certainly nowhere near the 20-50% W2 schmucks pay.  This is what leads to generational wealth and corruption.  I would like to see either a 2-3% annual wealth tax or very high estate tax (30%+) on amounts over $100,000,000, without a step-up basis like we have now.  Not because "grah government good/bad/social programs/taxation is theft", but as a societal brake on the 1% eventually owning everything.  While paying considerably less taxes than the rest of us to do so. 

In reply to Fueled by Caffeine :

codrus (Forum Supporter) said:

Taxes always hurt the economy.

A free market economy functions efficiently by using the price system to communicate information about what kinds of goods are needed and the relative priorities of them.  Any tax on transactions disturbs that communication by creating disincentives to engage in the taxed transactions, which screws up the efficiency.

 

Yeah. All that interstate commerce on privately held toll roads.  Working. Out great. 
 

or the privately funded army corps of engineers that dredge the Mississippi so that barges can go down. 
 

He said that taxes hurt the economy, not that we don't need some taxes and some services. The original question was whether taxing stock transactions would hurt the economy. The answer is yes. You tax what you want less of. More taxes on stock trading means less investment. Less investment harms the economy. 

triumph7 said:

I'm still more worried about the possibility of a central digital currency... the end of freedom.

No no no. That's not the goal at all.

The goal is for each major corporation to have its own digital currency that does business in.

In reply to Flynlow (FS) :

Another common form of tax evasion is what I call the Elon Musk method:  get 99% of your compensation in stock shares.  So you are sitting on a huge tax bill that only comes due when you sell, except you NEVER sell.  Because those shares are worth billions, banks will loan you money for all your day to day expenses, and in fact you can write off the interest on those loans against any income you do have.  Then, you die, and leave your billions to your inheritors, and now the tax bill should come due, except those shares' cost basis resets to present day valuation (step-up basis).  So the billions get handed down with minimal taxes ever being paid, certainly nowhere near the 20-50% W2 schmucks pay.  This is what leads to generational wealth and corruption.  I would like to see either a 2-3% annual wealth tax or very high estate tax (30%+) on amounts over $100,000,000, without a step-up basis like we have now.  Not because "grah government good/bad/social programs/taxation is theft", but as a societal brake on the 1% eventually owning everything.  While paying considerably less taxes than the rest of us to do so. 
 

You seem to be confusing stock with money. It's not money. It can be sold for money, at which time it is taxed. It's perceived value can go up and down until the time at which it is sold. A stock is a portion of a business. A business owner holding their stock is just like a mechanic owning their shop. You don't tax the fact that they own their shop as income. The shop owner can take a salary, which is taxed, or chose not to and reinvest it into their business. They would then be taxed when they sell the business, and on any salary they choose to take in the future, hopefully larger due to the investment. 
 

To the original question: if the goal is to simply add taxes, it would certainly hurt the economy (it's called CAPITALism for a reason) as it would likely reduce investment at least some.

If for no other reason, the instant "penalty" of taxes, especially on something that might not make you money will certainly have a negative effect.

If the goal is to replace taxes, with a similar level in a different place. I would think the primary effect (in addition to the above), as noted, would be in high speed trading.  I have heard, that volume of trading has a use, but I have no idea why, and that may just be an excuse by those who make money off of it (?)

Boost_Crazy said:

In reply to Flynlow (FS) :

Another common form of tax evasion is what I call the Elon Musk method:  get 99% of your compensation in stock shares.  So you are sitting on a huge tax bill that only comes due when you sell, except you NEVER sell.  Because those shares are worth billions, banks will loan you money for all your day to day expenses, and in fact you can write off the interest on those loans against any income you do have.  Then, you die, and leave your billions to your inheritors, and now the tax bill should come due, except those shares' cost basis resets to present day valuation (step-up basis).  So the billions get handed down with minimal taxes ever being paid, certainly nowhere near the 20-50% W2 schmucks pay.  This is what leads to generational wealth and corruption.  I would like to see either a 2-3% annual wealth tax or very high estate tax (30%+) on amounts over $100,000,000, without a step-up basis like we have now.  Not because "grah government good/bad/social programs/taxation is theft", but as a societal brake on the 1% eventually owning everything.  While paying considerably less taxes than the rest of us to do so. 
 

You seem to be confusing stock with money. It's not money. It can be sold for money, at which time it is taxed. It's perceived value can go up and down until the time at which it is sold. A stock is a portion of a business. A business owner holding their stock is just like a mechanic owning their shop. You don't tax the fact that they own their shop as income. The shop owner can take a salary, which is taxed, or chose not to and reinvest it into their business. They would then be taxed when they sell the business, and on any salary they choose to take in the future, hopefully larger due to the investment. 
 

But you do tax the mechanic owner that owns their shop in the form of property tax.  You tax their gross revenue on proceeds from the shop's output. 

A step-up basis in stock share ownership means that it can be sold for money without paying on decades of appreciation.  I am not confusing anything.  I am trying to eliminate a loophole in the tax code that has spawned a class of on-paper billionaires that are making society worse.  The mechanic that owns his own shop isn't affected by this change, at all.  It targets about 700 people in the US. 

In reply to Flynlow (FS) :

But you do tax the mechanic owner that owns their shop in the form of property tax.  You tax their gross revenue on proceeds from the shop's output. 

Every business pays property tax. Elon Musk pays property tax. We aren't talking about the physical property, we are talking about ownership of the business itself. We aren't talking about the proceeds of the business either, just the actual value of the business. That is what stock represents. Stock isn't based on proceeds, otherwise it would be worthless while the business is growing while operating at a loss. 
 

A step-up basis in stock share ownership means that it can be sold for money without paying on decades of appreciation.  I am not confusing anything.  I am trying to eliminate a loophole in the tax code that has spawned a class of on-paper billionaires that are making society worse.  The mechanic that owns his own shop isn't affected by this change, at all.  It targets about 700 people in the US. 
 

Loophole is a made up term. Search the tax code for "loophole," you won't find it. There are reasons for each part of the code, many of which we would both likely agree or disagree with. But they aren't there on accident. How does it affect you, and why exactly are you seeing to change it? Any evidence that they are making society worse? Have you considered any of the unintended consequences that your proposed changes would cause? 

In reply to Boost_Crazy :

All fair points.  I cherry picked Elon Musk to be snarky, and as a contrast to someone ~equally wealthy, like Bill Gates, Warren Buffet, or Mark Cuban . 

To me, if there is a way to pay nearly zero tax on billions of dollars of appreciation, that is a loophole.  I understand that loophole /= illegal.  That is why I was suggesting a revision to the tax code. 

(Disclosure: links were quick Google searches, I didn't want to spend my whole evening digging up all the original articles from when the stories were new)

It is affecting me when someone like Elon Musk buys twitter and destroys it for the lolz, refusing to pay the people that built it what they've earned, or refuses to pay rent on his buildings because he thinks he can get away with it, and it sends up warning flags to me when he tries to skate local laws while building factories, largely relegating him to third world locations like China, because it says we as a society will tolerate those behaviors if you're rich enough.  That's not a society I want to be a part of.  Just like we have patio rules here, so does society.  Don't be evil, and try to leave things better than you found them, are two good starting points.

After picking on Elon, I feel obligated to offer other examples.  I worry our media is not giving the whole truth when they have a financial incentive not to, such as Jeff Bezos buying the Washington Post wholesale, after demonstrating the lengths he will go to avoid unions, do you think there is an anti-labor bias at this paper?  What about pushing a return to office mandate to prop up commercial real estate?  Looking at Zuckerburg, does his ability to control what you see give him an outsized portion of control of information?  Or Elizabeth Holmes attempts to avoid prison, even after being found guilty in a court of law? 

Boost_Crazy said:

Have you considered any of the unintended consequences that your proposed changes would cause? 

As a counter-point, have you considered the consequences of continuing on our current path unchanged for another 30 years?  It is a fairly new set of societal rules for our country, only dating back to ~1980 and tax laws and changes correlating with "trickle down" economics:

I think limiting any one individual's (or family/dynasty, like the Kennedys) voice & control over society is a positive thing.  And returning to the thread title/OP, I think that is net benefit to the economy, not just society.  I worry I'm veering offtopic and towards patio territory, so I'm going to take a day or two off. 

Interesting but never gonna happen.  The money behind it would just buy all the politicians.  It would affect IRAs but not enough to cause an issue.  

In reply to Flynlow (FS) :

You want the average person to be prosperous while not allowing for some to be too prosperous, according to your own standards. While I understand the general sentiment, I know that it is not reasonable, and attempts to limit prosperity for some most often, if not always, result in limits to prosperity for all. You can post graphs all day long showing that the rich get richer, but you fail to take into account that all have a better quality of life. This also ignores the large number who switch lines on your graphs throughout their lives. We could run a society in which the graph is flat for all, but I guarantee that would result in a lower quality of life for all. 
 

Also, a bit of a spoiler alert for the future based on the history that we are living right now. Do you know where much of that productivity came from and why the benefits aren't passed on to the median income? Because robots and computers don't ask for raises or health care, or sue their employers. Or go on strike. Now, it's not all doom and gloom, we have a lot of cool stuff that we didn't have before that is much more affordable. Can you predict what the productivity and income lines will do with wider adoption of AI and automation? 
 

Every month my company cuts a check to Fidelity on my behalf for 401k contributions.  Most of those dollars are MY money that I am electing to save for retirement, a smaller portion is the matching funds the company contributes.  The majority of my 401k contribution for me goes into stocks.   For the .gov to tax that stock purchase (MY savings and MY retirement) goes against everything.  Then, a few times a year I move MY money from one fund to another. Taxing each of these will only hinder and de-incentivize people saving for their retirement.  People already don't have enough for their retirement as it is and for the .gov to tax it even more.   Pitchforks in the streets.  NFW.  

IMO stock transactions should be taxed as income tax

 I think there is a real misconception about the role stocks play in our economy. Detractors point to huge companies and billionaires. But a purpose of offering stock is to allow cash strapped companies that want to grow raise funding through investors. Funding that they otherwise could not secure, which can allow them to compete with billionaires running huge companies. Sure Bezos is painted as the big bad billionaire now, with his huge company crushing the competition. Remember when we was going up against brick and mortar businesses that owned the market? Who could upset Sears and their decades of catalog business? He used investors to build his business. If you bought his stock early- which pretty much all of us could have done- you would have over 100x what you invested. What did you blow your money on in 2002? How much would that be worth now had you bought Amazon stock instead? 

In reply to ProDarwin :

IMO stock transactions should be taxed as income tax
 

That makes less sense that the original proposed transaction tax. At least that transaction tax would be for an actual transaction. How do you justify taxing income on something that is not income? Can we then tax people who are not working income tax for the work that they should be doing? 

I think most investment banking (per friends of mine who are devs in the field) is all high speed trading now, like "thousands a second" high speed- so slowing it via a tax system would absolutely hurt it and the american economy.

In reply to Flyinlow (FS):

Frankly at that point, I'd advocate for just making billionaires illegal and forcing the excess wealth into other enterprises; research keeps pointing towards happiness and one human's productivity peaking over $400 million in personal value. Also, excellent question about generalized equality on that post.

CrustyRedXpress said:

Jesse Ransom said:

Reducing speculation on fluctuations and rumors and increasing the connection to intrinsic stock value is an idea i like, though I'm not certain about this mechanism, to put it mildly.

 And that's closer to the patio than I am comfortable standing, no matter how important the topic.

Concur on both accounts. Well put.

The only system I can think that has attempted to account for this issue of panic buying/selling is the Federal Reserve and bitcoin; the former really only controls the interest rate, liquid cash and a few public and set-in-stone rules (especially with how business is done and when SHTF), and the latter failed so miserably it effectively has displayed why the reserve exists. But like many others, I lack the time and some of the education to truly eludicate on the topic.

In reply to Boost_Crazy :

My bad I should have said income from stocks should be taxed as income.  Not capital gains.

Sales tax on stock transactions would put a stop to high-frequency trading which should make the stock market more stable and profitable for everyone else involved. It's ridiculous to be holding onto stocks for a fraction of a second to suck the profit out of buyers and sellers moving on human timescales.

And there we have it. A limit on how much anyone can make. Today, $400m. 5years $20m. 10 years $200k. Once you uncork that genie what you end up with is a true socialistic economy that has been proven over and over to not work. 
 

thats the root of our issues here. We have people that want to take other peoples money because they don't think they are getting enough. We have others saying and showing that you can make what you want to make and succeed. These tow ideals are Fire and Water and cannot be reconciled. You can't expect those that have worked hard to get ahead and build a life to be fine with someone that hasn't coming in and taking "their share". 
 

we are lucky that the do'ers have our numbered the takers up until now. Sadly I feel like it won't be long before the takers ruin it for everyone. Hell I've been close to saying berkeley it let uncle sugar take care of me. Why work so damn hard? 

In reply to bobzilla :

Don't forget, I'm greedy for wanting to keep as much of what I've earned as I can, but they're not greedy for wanting more of what I've earned, they deserve it for some reason?

This kind of thought doesn't hurt the uber-rich. They have smarter lawyers than the idiots that write our legislation. They will have a workaround before the next tax season and be right back to business as usual. 

Pass it. Then watch what your retirement accounts do. 

(4) Taxman (Remastered 2009) - YouTube

You earn money; its taxed.  You buy something, the sale is taxed, and also the manufacturer was taxed for selling it.  His material supplier was taxed.  Et Cetera.     The skim is real.

Toyman! said:

This kind of thought doesn't hurt the uber-rich. They have smarter lawyers that write our legislation.

Fixed that for you.

when have taxes helped....