doubling the size of a tax quadruples its social cost, so it’s better to have lots of small taxes rather than a few big taxes
I doubt that’s the case. Compliance costs scale roughly linearly with the number of different taxes.
Compliance costs with filing taxes in the US were roughly ~200 billion in 2018 for a tax revenue of ~3300 billion.
The solution you propose also sounds really complicated when people have to optimize the timing of when they make capital gains with times when the risk-free rate is low.
The solution you propose also sounds really complicated when people have to optimize the timing of when they make capital gains with times when the risk-free rate is low.
When you sell assets you deduct the amount you paid for them. The proposal is to multiply that basis by the total amount of risk-free interest that would have accumulated over the intervening period, which can be calculated by looking up a single number in a table. I agree that using the risk-free rate when you sell would be insane.
(From the perspective of tax optimization, I think this is much simpler than the status quo. From the perspective of tax accounting, this mechanism takes the place of the distinction between long-term and short-term capital gains, and is radically simpler than that.)
I doubt that’s the case. Compliance costs scale roughly linearly with the number of different taxes.
Compliance costs with filing taxes in the US were roughly ~200 billion in 2018 for a tax revenue of ~3300 billion.
The solution you propose also sounds really complicated when people have to optimize the timing of when they make capital gains with times when the risk-free rate is low.
When you sell assets you deduct the amount you paid for them. The proposal is to multiply that basis by the total amount of risk-free interest that would have accumulated over the intervening period, which can be calculated by looking up a single number in a table. I agree that using the risk-free rate when you sell would be insane.
(From the perspective of tax optimization, I think this is much simpler than the status quo. From the perspective of tax accounting, this mechanism takes the place of the distinction between long-term and short-term capital gains, and is radically simpler than that.)