Anti-tax groups have long followed the 'Starve the Beast' strategy (and their opponents are completely incompetent and fall for it every time):
1) Cut taxes
2) Point out the resulting deficit, say we're spending
too much, and cut services
3) Repeat
A different way to think about this would be to say that a lower tax rate for capital gains is a trick (incentive) to get the wealthiest people to invest their wealth in the market, which provides capital for people trying to grow the economy and provide jobs, rather than spend their wealth on luxuries for themselves. In this way, we have an economy focused more on the needs and wants of regular people, and less on producing what wealthy people want.
Can you spot a flaw in that line of reasoning?
I vaguely remember Adam Smith talking about directing the vanity of the rich towards spending great amounts of money on proper objects in exchange for recognition. 4:00 https://www.youtube.com/watch?v=ejJRhn53X2M
You forgot the most important part. Let me add it for you: "Low capital gains tax incentivizes investment..., while creating a job market, [and, more importantly, providing goods and services that are beneficial to society as a whole]."
> The former creates more liquid assets (stock) with no clear connection towards meeting the needs of regular people. The latter creates more solid assets with no clear connection towards meeting the needs of regular people.
These claims are demonstrably false. Paper assets provide no tangible benefits. You cannot eat a stock certificate, nor can you use it to heal an infection, nor can you ask it to repair your refrigerator. To receive a tangible benefit such as these, you must consume a good or service. And what is the economy but a machine that produces the goods and services that the people within it consume? Therefore, it is the mix of goods and services consumed (which equals that produced) that determines how society benefits. And, as you've already admitted, a low capital gains tax incentivizes the wealthy to buy paper assets instead of luxuries for themselves. But luxuries are real goods and services, aren't they? In other words, doesn't that policy incentivize wealthy people to consume less and, therefore, claim a reduced share of economic benefits? Consequently, doesn't an increased share of economic benefits go to "regular people"?
(I think that's a good way to analyse any policy - the 1st order effects are the ones you can count on; the Nth order effects are just BS that magically costs nothing, but gets others to go along - 'the people will pay for this stadium for my privately owned franchise (1st order) and it will bring business to the community (2nd order).' That's repeated over and over, and the 2nd order effect is well known to not happen, but it sometimes gets enough votes from those uneducated in the issue.)
I think in the 1980s the Reagan administration called it 'trickle-down economics', such an incredibly revealing name!
Can you offer a substantive argument that getting the wealthy to invest their wealth instead of spending it on themselves is a policy that benefits only the wealthy and makes life worse for everyone else?
https://www.oecd.org/en/data/indicators/general-government-s...
BTW Swiss public spending is lower (32 per cent), and Swiss sidewalks and roads are uniformly nice. At the same time, Germany is at 48 per cent and it has a big problem with aging infrastructure, railways, bridges etc. Swiss rail authority regularly refuses delayed German trains at the border in order not to cause chaos in the reliable Swiss railway network. Given the 32 vs. 48 per cent of public spending, you would expect it to be the other way round, but it isn't. The mapping between the volume of public spending and quality of public services is not that simple.
Maybe the problem in the US is that too much money gets siphoned away by various legal or illegal means. Famously, whenever places like California or NYC try to build something like a new subway line or a new high-speed rail, their project budgets balloon into absolutely insane volumes, much higher than comparable projects in France, Italy or Japan, and the main reason is that various special interests need to be satisfied, from the construction unions to various NIMBYs.
With such a flawed model of public spending, higher taxes will only result in higher waste.
And the US is inefficient at building some things (subways) and probably more efficient at others. Again, it's cherry picking unless we have broader data.
> With such a flawed model of public spending, higher taxes will only result in higher waste.
As I said in the GP, there is waste (inefficiency) in everyone and everything, and larger organizations unavoidably have more. The cherry-picked examples don't prove the US and every local goverment in it are somehow less efficient, but certainly there is inefficiency.
But the statement "higher taxes will only result in higher waste" is logically wrong: higher taxes (and assumed higher spending) will lead to more waste - unavoidable for anyone and any org - but also more productivity; you can't have one without the other. E.g., if 15% of every dollar is wasted then higher taxes increase both waste and output. The US does have roads, schools, healthcare, sewers, etc., and even some urban light rail, paid for by taxes. The money does produce things, and many of those things can only be accomplished with taxes.
On the basis of what your comment, the US should cut all taxes because they are all waste. That's probably not what you mean but that's what some anti-tax groups say and what they do - cut everything regardless of outcome, which is what has been done on a national level recently. The simplistic answers are dangerous and not useful.
Nope, I didn't express a conviction that this is a linear function from 0 to 100. My statement should rather read as "If, at current, the American public sector is unable to provide good roads and sidewalks while redistributing 40 per cent of the domestic GDP, I find it hard to believe that the situation would improve much if it redistributed 45 per cent instead."
Good roads and sidewalks aren't that expensive. The Romans and the Incas could maintain them with a more primitive economy, and a well-run modern city should have no old potholes anywhere.
I was kinda shocked, when working in South Africa, to find that the roads and sidewalks there were often in much better shape than ones I'd seen in the US. And from the other side, the only place I've ever seen roads as patched and potholed as ones in US cities was in rural Russia.