Americans Lose Faith That Hard Work Leads to Economic Gains, WSJ-NORC Poll Finds

IMO there's two economies, maybe divided by those who participate in the stock market and those who don't. We, Americans, have largely given up trying to improve the lives of people not in the first group. Economies are living, breathing entities and we're just grinding poorer people for fuel so richer people can have another house, another boat, another company. A lot of regular joes are really stressed out about paying rent. The loss in faith is warranted.

This isn't based on economic theory or anything, it's just a political choice we have made as a country. We've chosen to reward those who move money around and trade capital more than we reward those who labor. And this at a time when, supposedly, the country is trying to increase its ability to build things.

I thought this specific fact worth mentioning.

To make the tax incidence on wages and capital gains equivalent, you must first deduct losses due to inflation and risk. For wages, inflation and risk round to zero. For long-term capital gains inflation and risk are large and often the majority of the "gain". Short-term capital gains are already taxed like wages.

In the US, unlike some other developed countries, there is a very limited ability to deduct losses due to inflation and risk from long-term capital gains. Consequently, if they made the tax rate the same as wages then the tax incidence on capital gains would be much higher than wages.

As a policy matter in the US, they fix this large difference in tax incidence by reducing the tax rate instead of adjusting the cost basis for inflation and allowing full deductibility of losses.

If you pencil out the implications of these two policies, I suspect you'd find that you like the way the US does it better. Making risk and inflation deductible to equalize tax incidence enables a lot of financial structuring.

Inflation should be low and we should make it in the interests of the rich that it stays so.

The prevailing opinion of a lot of progressive economists is just the opposite: standard policy for 40 years post-Volcker was to run with low inflation, loose money and slack labor markets, and probably all this did was keep wage growth depressed.

The brief inflationary period in 2022-2023 was fantastic for low-income workers, it was the only serious growth in real wages they'd seen in a half-century. But voters revolted and probably guaranteed we'll go back to the low inflation, high unemployment policy for another generation at least.

My opinion is that inflation is generally a bad idea but the thing that really matters is inflation volatility. The market will adjust for whatever the inflation rate is (unless its extreme) but volatility just results in loss.