The Tax Chain
If you work, you make money. That money is taxed as income tax.
If you buy something, you pay a sales tax.
If by chance that thing you purchased increased in value (let’s pretend it’s a baseball card) and you decide to sell it, you will pay a capital gains tax.
If you invest that money, the corporation then does work, they pay corporate taxes.
If they pay you dividends on your stock, they have to pay a dividend tax.
If you sell sell your stock for a higher price than you purchased them, you will pay a capital gains tax.
Let’s say you’re angry at rich people. Let’s say you believe that low capital gains taxes and low dividend taxes are unfair to the poor.
If you raise capital gains taxes, what to do stockholders and people who own valuable things do? They’re less likely to sell them. They’ll just hold onto what they have and wait until the perfect moment to sell. In the meantime, that money doesn’t flow in the economy and sits stagnant.
If you raise dividend taxes, what do corporations and their shareholders do? They’re less likely to pay out dividends. They’ll just hold onto their profits and wait until they make so much that they have to pay out. In the meantime, that money doesn’t flow in the economy and sits stagnant.
The point is that you need money to move from one entity to another so that you can tax them. If money doesn’t move, you don’t collect taxes. This country needs tax dollars to operate or else the economy goes bad.
Think of a dollar as a unit of labor. If someone hoards all the labor, the economy goes bad. If the government has no labor, the government goes bad.
Think of a dollar as a kilocalorie or a joule. If an organism doesn’t use energy, it can’t get more energy, and it will die.