"value" here is referring to the potential to generate new income, not to store already-acquired wealth for later. Wealth can be invested to generate interest.
Let's say you can get a risk-free 5% return on capital and the average wage for labor is $80k. If you have $1.6M, then you can generate $80k in income every year without lifting a finger and without diminishing your principle. The richer you are, the more "free income" you get. Very rich people never have to work and they still get richer faster than the average laborer working full time. That's bad for society.
This is not an inherent feature of capitalism. A progressive capital gains tax regime can correct this. There has to be some return on capital, because otherwise it would be impossible find investors and secure loans when you need it, but that return should not be enough to mean the rich don't have to work at all and still get richer. The travesty is that effective capital gains taxes are often lower than income taxes in America, making this problem especially pronounced.
Your "reset" concept sounds like a wealth tax, not a capital gains tax. Alas, I'm not an economist either, but I believe wealth taxes are much more controversial than capital gains taxes among economists.
Let's say you can get a risk-free 5% return on capital and the average wage for labor is $80k. If you have $1.6M, then you can generate $80k in income every year without lifting a finger and without diminishing your principle. The richer you are, the more "free income" you get. Very rich people never have to work and they still get richer faster than the average laborer working full time. That's bad for society.
This is not an inherent feature of capitalism. A progressive capital gains tax regime can correct this. There has to be some return on capital, because otherwise it would be impossible find investors and secure loans when you need it, but that return should not be enough to mean the rich don't have to work at all and still get richer. The travesty is that effective capital gains taxes are often lower than income taxes in America, making this problem especially pronounced.
Your "reset" concept sounds like a wealth tax, not a capital gains tax. Alas, I'm not an economist either, but I believe wealth taxes are much more controversial than capital gains taxes among economists.