The GP said that income should be taxed as little as possible. That doesn't necessarily mean taxes, period, should be as little as possible. One could just tax things other than income.
From an economic standpoint, it makes sense not to tax income because income is production, and taxing production reduces the incentive to produce, which is the last thing we need. If we have to tax something, it makes more economic sense to tax consumption, for example with a national sales tax.
> The general ailments and downtrends in American society started right around the time when taxation (especially the corporate kind) started getting cut and we moved away from the gold standard for our money.
I don't think this historical narrative is correct. First, the two things you mention did not happen at the same time; tax cuts, at least if we are talking about income taxes, more or less started with Reagan in the 1980s, but the US went off the gold standard in 1933 under FDR. (Technically the US still claimed to support converting dollars to gold internationally until 1971, but that's a relatively minor change compared to what happened in 1933.)
Second, "general ailments and downtrends" is very broad and I don't think one can pin down a particular time when they started.
Third, as I believe pg pointed out in one of his essays, US government tax revenue as a percentage of GDP has varied very little over decades even while tax rates have varied a lot.
> Perverse financial incentives are ruining everything
I don't disagree with this as a general statement, but I think the tax code is a fairly minor contributor to the perverse financial incentives as compared with the government (via the Fed) printing money. Historically, monetary debasement has always led to civilizational decline.
_Earned_ income should correspond to productivity.
But unearned income enjoys a dramatically lower tax rate (the capital gains rate is lower than income rate, and capital gains are not subject to FICA/self-employment taxes)
The capital gains rate is lower because the way capital gains are calculated causes nominal price increases due to inflation to be counted as an increase in the value of the asset. This is a pretty dumb way to do this -- just calculate the capital gain in inflation-adjusted dollars instead -- but the current system isn't inherently to the advantage of capital gains. For long-held low-risk assets it typically goes the other way because so much of the "gain" is only on paper but gets taxed anyway. And short-term capital gains are taxed at a higher rate.
What you are calling "unearned income" can still represent production indirectly, since it is income from passive investments, which are supposed to give returns based on creating wealth. It is true that that isn't always the case, however, particularly when such investments can include various sorts of derivatives and other zero-sum transactions.
That said, if no income were taxed at all, any disparity between how the various kinds of income were taxed would go away.
That seems a very elegant solution to the problem of fair income taxes. Just don't tax income, that way you can't have a disparity in income tax.
What should we tax instead? Capital seems to me a viable choice. It would be a lot more work for everyone, though.
My proposal (in the GP of the post you responded to) was to tax consumption, i.e., a national sales tax or something like it.
> Capital seems to me a viable choice.
What would count as "capital"?
Whatever the answer is, this would seem to me to have the same issue as income taxes have: you would be taxing production instead of consumption, hence lowering the incentive to produce.
From an economic standpoint, it makes sense not to tax income because income is production, and taxing production reduces the incentive to produce, which is the last thing we need. If we have to tax something, it makes more economic sense to tax consumption, for example with a national sales tax.
> The general ailments and downtrends in American society started right around the time when taxation (especially the corporate kind) started getting cut and we moved away from the gold standard for our money.
I don't think this historical narrative is correct. First, the two things you mention did not happen at the same time; tax cuts, at least if we are talking about income taxes, more or less started with Reagan in the 1980s, but the US went off the gold standard in 1933 under FDR. (Technically the US still claimed to support converting dollars to gold internationally until 1971, but that's a relatively minor change compared to what happened in 1933.)
Second, "general ailments and downtrends" is very broad and I don't think one can pin down a particular time when they started.
Third, as I believe pg pointed out in one of his essays, US government tax revenue as a percentage of GDP has varied very little over decades even while tax rates have varied a lot.
> Perverse financial incentives are ruining everything
I don't disagree with this as a general statement, but I think the tax code is a fairly minor contributor to the perverse financial incentives as compared with the government (via the Fed) printing money. Historically, monetary debasement has always led to civilizational decline.