The question is too confusing to answer. I would love to see the income tax and capital gains tax fall by the wayside, but those kinds of taxes would have to be replaced by something, and that kind of change stirs up a hornet’s nest.
Be careful. Do you want to see Democrats take the House and veto-proof control of the Senate?
Sixty-two percent of Americans are invested in stocks. But if you don’t sell it, it isn’t income. You could invest for income, but then you’d pay taxes on that income which means you won’t get the compounding effect.
The reason billionaires don’t pay income taxes is they use their stocks as collateral and take out a loan to fund their purchases. That way they don’t have income to tax and their investments keep growing.
If I was given the option to not pay taxes monthly from my income, but pay it later once per year in April, I'd have more left over. But I'm very systemic with my money (always put X amount each month into investments, and always spread out among many mutual funds in many asset classes).
So by April when it's time to pull money out of investments to pay the tax, even if my overall portfolio balance is down because of a market downturn, there's always at least a few funds that are up. Of course, the average across many years would be my overall balance is up too (the market goes up more than it goes down).
But I could see some people not saving up throughout the year to pay the tax. So those people might be in trouble. From what I hear, though, from 1099 gig workers who make that mistake, the punishment is ugly and teaches them to save up the next time.
Regards,
Many forms of investment do not produce “income” as such, but price appreciation that goes unrealized until sold.
Wage earners must use a large portion of their earnings to live on (rent food, clothes, health, everything else), so they can’t invest the total earnings that the current system is based upon.
High income stocks, REITs, etc. return 4-5%. Higher than that indicates high risk and gimmicks (everyone can’t make money off selling puts and calls); such investments often suffer value erosion. Let’s go nuts and say the income produced an average of 10% annual returns consistently. Under your scenario, the government would be taxing far less than 10% of the amount it taxes (mostly) employment plus investment earnings now. That won’t pencil, even if the rate was 100%. If the tax rate for this new regimen was brutally people will have no incentive to invest at all. This concept would not work.
Wrong question.
The right question is why do you think the government is entitled to anything from your income?
If they are safe good investments, I’d go with investments.
Yes.