alt Hacker NewsNo, that's been a common proposal from economists pretty much since people started examining how economies work. Some places do have a capital gains tax of zero. Switzerland is one of them, and Switzerland is economically more successful than the rest of Europe.
Tax is one of those issues where there are actually correct and incorrect answers, thanks to many hundreds of years of active experimentation and relatively simple/robust theory. But people ignore the correct answers for social reasons.
The correct answer on tax is:
1. Figure out how much money the state needs to supply the services that are in-scope for it to an acceptable level of quality.
2. Aim to raise that much in taxes.
3. Optimize deadweight costs. That is, configure taxes to minimize the level to which the activities being taxed are discouraged and driven either out of existence or abroad.
If you do this sort of thing then you get Georgeism, you get zero capital gains, I think you get zero taxes on businesses, and a bunch of other policies I can't remember right now. The results can be economically very efficient i.e. they make everyone better off. However, almost nowhere uses them because there's nothing in the above three items about social engineering, and governments use taxation largely as a tool of social engineering. And in particular to please leftist voters who use the tax system to penalize wealth for its own sake, and to reward groups of client voters. Many governments also have a lot of trouble defining what's in scope for them and then working backwards to needed tax revenues; they prefer to raise as much tax as they can manage without totally crushing their economies and then find ways to spend it.
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The Switzerland model is unique in several ways, both in its history, which cannot be replicated, and in embracing of...questionable financial services.
It's unclear that the model can be replicated generally, let alone whether it should. Importantly, there may not be sufficient demand for banking services like the Swiss provide.
Your three step plan says nothing about how much should be taxed at the personal vs corporate income level, or on the gap between capital gains and labor income taxes.
I'm not arguing for higher tax revenue overall. I don't believe in that, but I also wouldn't even need to make the argument even if I believed in it.
The simpler, more defensible argument is that taxes on capital gains must be much closer to income taxes. Historically they were, even in the US, and we seemed to be fine.
An ideal LVT would tax the full economic rent of the land, but that's unlikely to happen. We don't want to overshoot 100% because that would cause land abandonment.
So in theory, LVT could collect more tax than the state needs to fund services. If that happen, it would be distributed as a Citizen's Dividend.
I am skeptical that we wouldn't be able to find a productive use for government spending, but that's a discussion for citizens of a Georgist state to have.
Also, Georgist policies would discourage the existence billionaires and other people with extreme wealth simply because a lot of their wealth came out of economic rent.
In the US we just cut taxes, increase spending, and borrow the deficit without a thought to how to pay it back.
I’m not sure why all these economists bother arguing theory when obviously they should just go to you for the solutions. It’s all so simple afterall.
> Some places do have a capital gains tax of zero. Switzerland is one of them, and Switzerland is economically more successful than the rest of Europe. Tax
Switzerland is a bad example because they tax capital more directly. In the form of a wealth tax. https://en.wikipedia.org/wiki/Taxation_in_Switzerland#Wealth...
GP said setting taxes on capital to zero was a bad idea. Switzerland has only set capital gains taxes to zero. It still taxes capital.