Stocks and bonds are time machines for money

This is obnoxious, arguing against taxes on capital gains:

. . .consider twin brothers who each make $100,000 in wage income. Most people would regard these two people as equally well off, even if one freely chose to consume his income now, while the other chose to consume later. . . .

The mistake people make is forgetting that the present value of $120,000 worth of consumption 20 years in the future is the same as $60,000 today. And in a sense that should be obvious, as both brothers are free to spend their money when they choose in the no-tax situation, so obviously the thrifty brother would not be economically “better off” merely because he chose a different year to consume his income. Both are equally “wealthy”, where wealth is the present value of lifetime consumption.

Invest in the stock market or in bonds through mutual funds, and you can expect to double your money in 10 years or so. (Why the author refers to 20 is beyond me, since it implies a very low rate of return, under 5%.) How to understand this increase in wealth? For the orthodox economist, it can be seen as compensation for the "opportunity cost" of not spending the money now, but instead waiting for several years. And so, as it says above, the "present value" of the spending-in-the-future is actually just the same as the spending it now; it's just a matter of taste which of the options one chooses. Returns to investment--interest on loans and profit distributed through dividends and stock price increases--are thus just the mechanism that transforms money-now into its equivalent in money-in-the-future. Stocks and bonds are time machines for money.

In typical fashion for neoclassical economics, this makes a sudden and totally unexplained jump from, "Returns on investment could be thought of as the compensation of the opportunity costs for delayed consumption" to the statement that "Returns to investment actually are . . . etc." There is no impulse whatsoever to ask whether the little theoretical story he tells about the two twins actually describes any significant proportion of those who receive capital gains income, or whether, instead, what portion is compensation in the form of stock options or the primary form of income for capitalists and rentiers.

I should note that the writer does go on to make some very reasonable arguments on tax policy, saying in effect that whatever form it takes compensation for work or the primary income of an investor should be taxed as regular income. So, really, he admits that much of what is currently taxes as "capital gains" doesn't fit his story, and so is exempt from his argument for not taxing it.

But leaving that aside, the fundamental issue is that dividends and interest do not neutrally convert money-now into money-later. They are, instead, shares of the social product of the economy and so financial assets (stocks and bonds) represent not times machines for money but claims on such shares of the social product--typically either claims on the flow of profit from capitalist enterprise or on tax power of the state. The problem with not taxing capital gains is that it would in effect turn the distribution of profit through interest or dividends into a way to insulate that income from ever having to contribute to the social functions undertaken by the state. This already happens with the special low rate on capital gains.