Calpundit touched off a liively debate in the comments section (complete with a thorough debunking by Jane Galt) with his call for more taxation on “millionaires.” One thing that got to me about this: “millionaires” is a deceptive term when you talk about taxation; we don’t generally tax wealth (with the exception of the estate tax), we tax income or capital gains. And a person with a high income in one year or a large amount of capital gains in one year is not always going to be “rich” over the course of their lifetime. The obvious example of this is a senior citizen who liquidates her investments in a one-shot deal, maybe to pay for a big medical bill, or a grandchild’s college, or heck, even to get her son a good criminal defense lawyer. Is she “rich”? Or what about an illiterate guy who makes $500K a year for his three-year NFL career, and retires at age 26 with bad knees and no useful skills?
4 thoughts on “Taxes and the Rich”
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Is this an endorsement of the inheritance tax??
Not necessarily. For the most part, I don’t have a problem with the inheritance tax from a moral standpoint (except to the extent that it breaks up family businesses & farms and the like). I’m skeptical of the tax on economic grounds, although really there are better places to cut taxes.
On the other hand, someone who inherits a piece of a big estate may also not be rich.
Crank, what are your thoughts on the elimination of taxation on dividends? I’m generally in favor of tax cutting, and it certainly seems like double taxation, but I’m not sold on the argument that it would do much to spur growth. Wouldn’t a cut in cap gains get more bang (both economically and politically) for the buck?
Long term, yes. Short term, a dividend cut seems likelier to give a shot in the arm to the stock market.
The real case for the dividend cut is (1) any time you can eliminate a tax completely, you do it, and (2) it removes a disincentive to paying dividends, which can be an important signal of reality in financial statements.