Capital gains are theoretical. You do not have that as money, but the state does want it as money. They are not what someone paid for your assets, they are what someone THINKS someone else might pay. Most smaller companies cannot be sold easily, and of course, the government is unwilling to take that as the valuation being zero (because what someone is willing to pay right now is in fact zero). And the government is unwilling to take any risk (they take cash only). So they're taxing money you do not have available to spend, and may not have at all.

Think of it as taking a $10k diamond with you. It's worth something, but ... maybe next year artificial diamonds double the size of your diamond start costing $500, and your diamond's value goes to $550. The difficulty is that the government demands "10%", which is $1000 in taxes on the "value" of your diamond now.

So for a big range of company sizes it's effectively a tax on nonexistent assets. This would not be the case for a huge (let's say revenue of 500k or more) company.

But the government chooses not to tax those big companies.

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Wobbles42 6 days ago | parent | next [-]

Perhaps the simple solution is to give those small business owners the option of selling their business to the government at whatever price the government feels it is worth.

Any claim of valuation is really only meaningful as a purchase offer.

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FredPret 6 days ago | parent | next [-]

Or, and hear me out here, we cut state spending to sustainable levels so the government doesn’t have to regard us as walking dollar signs

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spwa4 6 days ago | parent [-]

The problem is that the government is financed by a ponzi scheme based on selling very steep GDP growth, very steep increases in the labor force. In other words, the German government as it functions today is financed by having sold the increased income in labor taxation of the next 10 to 30 years to the banks so they could spend it already. Only ... that income doesn't exist.

The labor force is shrinking (especially if you look at it in terms of how many hours of labor are performed, irrespective of who does it, or when). In other words, the German government has sold the labors of Germans for about the next 15-25 years ... and Germans aren't able to actually do the work that has already been sold. Someone is about to get very badly burnt, and so there is a big fight who takes the loss. The government has the guns, doesn't want to pay, in fact they want big companies to keep delivering their goods. So those government guns will be aimed ... at workers. The only ones they can be aimed at without BIG consequences for the people with the guns.

So, now, under current taxation, the government has to more than triple any increases in taxation, which they need to just maintain current services. Once to pay for what the government needs. Once to pay back the principle of the loans they already made. Once to cover the interest on those loans (because 20 years loans on average at about 3%, let's say total interest coast over the length of the loan is about 100%). And on top of that they have to add what they need to pay extra due to labor force shrinking. In other words, elected representatives are going to find that they both have to do A LOT extra in new taxes for any initiatives and even if they raise taxes the effect of that will not nearly be what they expect.

And taxation on labor is already essentially 50%, so obviously percentage increases are going to be incredibly unpopular. Plus there's the additional difficulty that the problem is not money. It is that the very real assets behind money (ie. work, performed by a human) are becoming scarcer, while the drain on those resources (the welfare state, ie. old people) is increasing.

For the next 20 years, minimum (the time it takes to go from newborn to productive citizen), the government has to shrink the services they provide, at least in terms of labor. And since people aren't about to have another baby boom, it's going to be longer. Oh, and I would much appreciate if the German government managed to do this without putting the Nazis back in power.

And this is a worldwide phenomenon, modified by immigration and modified by a few years depending on the exact country, so you can bet your firstborn quite a few parties are going to get elected on the message "we'll just steal it from our neighbors militarily", like the Palestinians are doing. But this approach is on the cusp of becoming really, really popular worldwide. So it's not really that Trump is causing 100 wars worldwide, it's having a totally unsustainable system: either people need to be accept a lot less than they currently have, or they can go to war and make it FAR worse. Needless to say, it is a certainty they'll want to go to war.

And btw, as I pointed out, this is not a money problem. It is a problem of labor resources. It is about the amount of labor, not the division. So every system has the same problem: nothing can be solved by switching from/to capitalism, socialism, fascism, communism, ... as no system is able to create labor, only redivide who labors and who gets the rewards. None of these systems increase the amount of labor and so the welfare state is doomed under every system.

TLDR: the government has to spend about 50% less per 20 years. Not in terms of money, but in terms of actual people working for government (including hospitals, schools, eldery homes, ...). 50% of government jobs have to disappear for every 20 years this lasts, and at least once.

You would think this would make the government invest a massive amount in AI and robotics, anything required, in the last years they can maintain spending without extreme pain. But, of course, nothing remotely like that is happening.

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FredPret 6 days ago | parent [-]

The real problem is a social contract that was sold to people long ago without any secure funding source.

Now those social services (free healthcare, retirement benefits) are baked into entire populations' expectations and life planning. Give it 20-30 years, then these services can neither be provided nor paid for.

Our only real hope is tech progress unlocks much faster economic growth, even with dwindling numbers of people.

	▲	Workaccount2 6 days ago \| parent [-]
		Despite tech and AI being pretty much the only lifeline Europe has to get itself out of the pit it dug (population collapse while simultaneously promising the world to retirees), they are still strangling the nascent tech scene. In 30 years are we going to have a European economy that is entirely dependent on foreign AI and robots to prop up a society of old people?

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spwa4 6 days ago | parent | prev [-]

So you want to implement taxation by having the government offer money to people? I understand the sentiment "money where your mouth is", but ... seems unlikely to be very useful to keep government spending up.

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Uvix 5 days ago | parent | prev [-]

Capital gains aren't theoretical. A capital gains tax is levied when gains are realized by selling an asset. (e.g. I receive a dividend on a stock, or I sell a stock or my house for more than I paid for it.)

I think you're confusing a capital gains tax with a wealth or asset tax.