I agree and disagree. I do think people would be incentivized to find a store of value that doesn't meet whatever definition of wealth the IRS uses. I think no matter what your definition is, there will be a way to game the system and the wealthy will do so aggressively.
I don't necessarily think it leads to purchasing status symbols. Depreciation already kind of incentivizes that, so I don't think there's anything fundamentally game-changing there.
Because the stock may still appreciate at 6% annually.
And, depending on what is actually done with the money that Congress has decided to appropriate, it may be redistributed to consumers who will buy more of whatever that publicly traded company produces, or pay off the national debt, or do other things that can increase the health and growth of the economy. (Or not.)
Why work as an average american is the government will take 22% of it?
Probably because trading stocks will still leave you with a lot more money than if you threw a tantrum, took your toys home and hid your money under your mattress - no plan that I've seen has investors paying capital gains at the level of their equivalent income - investment is still heavily subsidized.
Capital gains happen on money that has already been taxed as income. Capital Gains tax is less because it's round 2 of the taxation game.
Also taxing assets on their capital means people will not invest in capitally intensive projects. For example building a new housing complex returning 3% per year (after inflation) is 33% less interesting with an additional 1% wealth tax (on the capital) ...
It's very possible to get capital gains on something that has not been already taxed as income.
For example: say you purchased 100 shares of Tesla stock a decade ago and sold it today for lots of capital gains. But Tesla has never posted an annual profit on a tax basis, and thus the "income" underlying the shares you sold was not taxed.
In fact, the capital gains rates were never about avoiding double taxation. It was simply a giveaway to Republican donors by the Reagan administration.
You probably mixed up capital gains and dividends. The logic behind giving dividends special rates (including a 0% rate for certain inter-corporate dividends) is that the corporation paying the dividend has already paid an income tax on those profits, so the shareholders should not be subject to full tax on the shares of the profits they receive, but should still pay some tax to account for the benefits of using the corporate form.
Capital gains is not a wealth tax. The money in your mattress will also be taxed. Why stay in America if the government not only take 22% of what you earned, but also 2% of what you have.
> Why buy a stock if Biden will take 1% of it annually? May as well just buy rapidly depreciating status symbols instead
Because the stock will allow you to avoid paying taxes. By investing revenue in investment, as a company, you can avoid paying tax on the money. So if you're a small or medium sized business, you have two choices:
1) Cash out and buy a rapidly depreciating status symbol with the money, but get taxed on it at a higher rate.
2) Reinvest the money in growing your business.
At least that's what I understood from OPs reasoning.
Edit: Also spending money in depreciating status symbols is also a contributor to the economy.
> depreciating status symbols is also a contributor to the economy
Yes, for a single iteration, but it's a vicious cycle of shrinking the pie.
versus creation of new (true) assets makes the pie bigger. A bigger pie means the tax slice grows and there is more to go around. I agree that, for example, Bezos having $300Bn locked up in non-taxable is not ideal too. Ideally that would have been taxes as an "income" as it grew.
Maybe something like the required minimum distribution from 401k would be a good solution?
