Estate taxes have a tendancy to hit farmers very hard as they tend to be land rich and cash poor. Capital gains I am all in favor of, but taxing investment income too heavilly tends to contribute to unemplyment. Of course luxury taxes are also an old standby- cars worth over $60,000, Yachts, houses wourth over $450,000, etc get extra taxes applied...
Originally Posted by silveroak
Income indexing as per Savayan. Also yes, luxury taxes have always been a good idea.
Further, I advocate reducing taxes on productive investment income that is derived from primary markets and venture capitalization. Secondary market taxes should definitely be increased as relatively little social/economic benefit is derived from that form of investment income. In otherwords, if you're rich, investing in a productive user of capital, and a _real_ job creator rather than shuffling money, you get a credit (and one that's improved over current allowances), otherwise you don't. Further, it only makes sense to fully tax investment income when it is a primary income source, especially when those in question can more than easily afford it without any kind of material lifestyle reduction.
of course another aspect of the question is why you really want wealth equality vs. income equality or standard of living equality. Right now the wealth tends to be concentrated into the hands of people who have made a profession out of managing it- redistributing it could easilly lead to less effective management, or you get issues like prefered stock versus common stock, and of course when you encourage people to invest without understanding tehir investments you get Bernie Maddoff and stock market crashes... there was an old stock trader who pulled everything out of the stock market right before the crash leading to the great depression- my great grandfather asked him how he knew and he said he knew it was time to get out of the market when he got a stock tip from his shoe shine boy. Because once teh amateurs were getting heavilly invested the whole thing was going to go sideways.
Kind of like when congress decided to incentivize loans for low income home ownership and teh subsequent effects on teh real estate and credit markets.
First, it's important to note that I support improved income _and_ wealth equality. Why is wealth equality important? Because wealth is a creator of income, and it compounds and self-perpetuates, creating a recursive loop. Income eventually can become wealth, but it takes time and fiscal management. When wealth gets too concentrated, capitalism breaks down as monopolies and oligopolies naturally form from the consolidation.
Speaking to concern about malinvestment, other countries feature vastly more equitable distributions of wealth and income and, as a rule, have _more_ stable markets. I see no threat whatsoever in a more equitable distribution of wealth and income, and there are no facts that I can see which suggest your concern about inefficient allocation as a consequence is founded.
I advocate tax deductions for poor/middle class financial advice/consultation/management to better inform and allocate the capital of average investors, and improve their financial literacy.
Lastly, with the exception of tax reductions to venture capital gains, tax incentives remain exactly the same for the poor and middle class.
In summation, saving incentives have increased, not speculation incentives barring perhaps venture capital investments. However, I sincerely doubt some additional tax incentivization on that asset type is going to have a meaningful and systemic impact on the investment habits of the poor-middle class (who have improved access to financial expertise).
On the subject of congress incentivized/federally guaranteed loans/mortgages, these were, via GSEs and CRAs, a contributing albeit very tertiary factor, _not_ the primary causation of the 2007-8 crisis.