The capital gains tax discount is unjustified

[washunut]

OK, so do people who inherit lots of money (which is the #1 source of money that is invested in the stock market) make a smart decision by inheriting money? Or did they just get lucky when they choose their relatives?

Where did you see the statistic that most money invested in the stock market was inherited, that would be surprising if true. Currently the richest people in the world created that wealth. Buffet, Gates, etc.

 

[HeresToThePoint]

There are lots and lots and lots of advantages to inheritance tax over other forms of taxation. Sure, none of us want to pay any tax, but since we will always have to pay some type of tax, it just makes good sense to pay the type of tax that is least harmful to our economy and also to us personally.

Yes. Advantages like the dead have no legal recourse or representation. So, why not take money from someone with no legal rights? Ethical win.

OK, so do people who inherit lots of money (which is the #1 source of money that is invested in the stock market) make a smart decision by inheriting money? Or did they just get lucky when they choose their relatives?

At some point in time, the money was most likely earned by someone making a smart decision (since the only true lucky income is the lotto and random gambling). The decision to invest the money in the stock market is in of itself a smart decision, so their entitled to the returns. There is already the federal estate tax with a huge marginal tax rate to deal with, so that inhereitance money is already 45%+ absorbed by the government.

Lucky or not (because no one gets to choose their relatives), who are you or the government to say how much money upon death anyone can gift from one family member to another?
Respectfully, HTTP

 

[HeresToThePoint]

granting capital gains preferential tax treatment disciminatees against incomes of those who continue to invest and nurture their enterprises. They are denied similar preference. That’s certainly special strokes for special folks. Income should be recognized as income regardless of the source.

The capital gains tax discount, (i.e. government’s thumb on the scales), affects how businesses’ are conducted and that net affect is not to our economy’s best interest. You don’t trust the free enterprise system to make superior decisions?

Respectfully, Supposn

I didn't get to see this addition in before my last response. I'll add that I'm obviously pro-free enterprise, but I don't see economic harm in promoting an already desired behavior. But I think you're pointing to the societal implications of such a policy, which I agree that this creates a problem.

We agree that different rates of income taxation create social inequality, but disagree on raising or lowering taxes to fix it (this position is further explained in post #23).
Respectfully, HTTP

 

[imagep]

I didn't get to see this addition in before my last response. I'll add that I'm obviously pro-free enterprise, but I don't see economic harm in promoting an already desired behavior. But I think you're pointing to the societal implications of such a policy, which I agree that this creates a problem.

We agree that different rates of income taxation create social inequality, but disagree on raising or lowering taxes to fix it (this position is further explained in post #23).
Respectfully, HTTP

So how else would you fix the inequality other than raising one or lower the other? I would assume that the sensible thing would be to raise the tax on capital gains and simultaniously lower income taxes to whatever point that they would be identical - and revenue neutral. Maybe if we increased capital gains to 20 or 25 percent we could have just one income tax bracket of the same amount (with a decent size personal exemption before any income tax kicks in.

Of course I think we would all like to see income taxes lowered to the rate of capital gains without having to increase capital gains, but that would nessasarally require some serious spending cutbacks on the part of the government. Would like to see it happen - but I think hell may freeze over first.

 

[Ahlevah]

Not sure what you understand about the cost of capital. People look at the after tax return when deciding to make a decision. So by increasing the capital gains tax you are again adding another anchor to the recovery of the U.S. economy.

The biggest anchor hanging over the U.S. economic recovery is the $55 trillion worth of debt we've accumulated over the past three decades, thanks in part to the supply-siders who said don't worry about spending, just cut taxes and the jobs will come. What we got instead from trickle-down economics were gaping budget deficits and stagnant real incomes when corporations discovered they could make more money hiring Mexicans or Chinese with no penalty. The Chinese Full Employment Act (Bush tax cuts) needs to disappear, and then we need to figure out how to reward entrepreneurs and small companies HERE that actually hire Americans. I'm sure if we could employ people with a 28% long-term capital gains tax rate we can do it with 20%.

 

[washunut]

The biggest anchor hanging over the U.S. economic recovery is the $55 trillion worth of debt we've accumulated over the past three decades, thanks in part to the supply-siders who said don't worry about spending, just cut taxes and the jobs will come. What we got instead from trickle-down economics were gaping budget deficits and stagnant real incomes when corporations discovered they could make more money hiring Mexicans or Chinese with no penalty. The Chinese Full Employment Act (Bush tax cuts) needs to disappear, and then we need to figure out how to reward entrepreneurs and small companies HERE that actually hire Americans. I'm sure if we could employ people with a 28% long-term capital gains tax rate we can do it with 20%.

Not exactly sure I know what you are talking about. First, the discussion had nothing to do with 28% versus 20%. It had to do with treating capital gains as ordinary income. I guess your 55 trillion is total debt in the US including personal debt, not sure what that has to do with tax policy.

Lastly, there is nothing in the quote of mine you used that talks to supply side, which would look at personal taxes versus what I was talking about which is cost of capital, simple math that seems to elude many on this site.

People have talked about increasing financial literacy in this country and I agree with that. So start again and say why increasing the cost of capital does not reduce investment.

 

[imagep]

The biggest anchor hanging over the U.S. economic recovery is the $55 trillion worth of debt we've accumulated over the past three decades, thanks in part to the supply-siders who said don't worry about spending, just cut taxes and the jobs will come. What we got instead from trickle-down economics were gaping budget deficits and stagnant real incomes when corporations discovered they could make more money hiring Mexicans or Chinese with no penalty. The Chinese Full Employment Act (Bush tax cuts) needs to disappear, and then we need to figure out how to reward entrepreneurs and small companies HERE that actually hire Americans. I'm sure if we could employ people with a 28% long-term capital gains tax rate we can do it with 20%.

Exactly.

Just a bit of trivia, but the Reagon recession had already ended and our economy was growing before the Reagon tax cuts were passed. Self proclaimed "Reagon Conservitives" claim that it was tax cuts on corporations and on the rich that ended the recession that had already ended. Adjusted for inflation it took 6 years after the Reagon tax cuts for government revenue to climb back up to the pre-tax cut level. This totally disproves the "Laffer Curve".

Yet far right conservitives will claim just the opposit. Confront them with the actual figures (and multiple reliable sources of where you obtained those figures from) and they will change the subject. The very next day they will once again claim that cutting taxes increases government revenue. It's like they are crack children who dont have the mental capasity to understand logic or the memory span to remember simple facts for a period of more than a few minutes.

 

[I'm Supposn]

All rational humans (regardless of political affiliation) are opposed to government except when it benefits them.
Respectfully, HTTP

HTTP, you touched one of my nerves.

I flatter myself by claiming to be rational. Occasionally that’s actually true but similar to our entire human race, I too often arrive at conclusions driven less by logic and more by subjective reasons. I believe in law and order but I’m not a fanatic.

Enforcing traffic laws as they’re related to my acts is (in my opinion) carrying a good idea too far. Aside from this exception, I’m generally not opposed to government’s explicitly drafted laws that are equitably enforced. What I mistrust to the extent of fear or hate is bureaucratic discretion.

I don’t want members of any governments’ or other domestic or foreign organizations to exercise their arbitrary management upon me or mine.

Respectfully, Supposn

 

[HeresToThePoint]

So how else would you fix the inequality other than raising one or lower the other? I would assume that the sensible thing would be to raise the tax on capital gains and simultaniously lower income taxes to whatever point that they would be identical - and revenue neutral. Maybe if we increased capital gains to 20 or 25 percent we could have just one income tax bracket of the same amount (with a decent size personal exemption before any income tax kicks in.

Of course I think we would all like to see income taxes lowered to the rate of capital gains without having to increase capital gains, but that would nessasarally require some serious spending cutbacks on the part of the government. Would like to see it happen - but I think hell may freeze over first.

Thanks for your response.

I suppose a revenue neutral shift up and down so that the tax rates are the same is a better solution in principal. I'm not convinced that the paper shuffling involved justifies the costs to change the law since it yields a neutral outcome. Although we encourage individual productivity by lowering the tax, we discourage capital investment simultaneously. I think the net effect is a wash, not worth the effort to put into the minor change. I'd add that we should consider the inequality the progressive income tax itself creates, but that is beyond this thread.

Agreed, hell will freeze over before we see serious spending cuts - but I remain optimistic.
Respectfully, HTTP

 

[Ahlevah]

Not exactly sure I know what you are talking about. First, the discussion had nothing to do with 28% versus 20%. It had to do with treating capital gains as ordinary income.

I was responding specifically to this comment:

People look at the after tax return when deciding to make a decision. So by increasing the capital gains tax you are again adding another anchor to the recovery of the U.S. economy. That is capital costs more so there is less investment leading to lower economic growth.

I don't claim to be the sharpest tool in the shed, but if you decrease the capital gains tax that's the opposite of an increase, right? Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, the long-term capital gains rate was reduced to 5% from 10%. This was after the rate had already been reduced from 28% under the Taxpayer Relief Act of 1997. So, under simple math, going from a 28% tax on long-term capital to a 5% tax should have led to more investment in new plants and equipment, hence, more employment, right? But what happened instead? Manufacturing and design jobs fled to countries like China, Mexico, and India. (Factors Underlying the Decline in Manufacturing Employment Since 2000) Many of the jobs we got in the wake of these tax cuts were in businesses like construction and relatively low-paying services like retail, which find themselves under pressure at the moment. At this point, do we really want more Wal-Marts selling even more Chinese-made crap? I'd rather give tax breaks to people who invest in companies that build engineering and manufacturing facilities here in America.

If we want to encourage people to sell investments and pay the tax, that's fine. But don't try to sell a general capital gains tax cut as some sort of employment program for working stiffs. The economic realities of things like NAFTA and "globalism" trump that idea, notwithstanding your simple math.

 

[washunut]

I was responding to this comment:



I don't claim to be the sharpest tool in the shed, but if you decrease the capital gains tax that's the opposite of an increase, right? Under the Jobs and Growth Tax Relief Reconciliation Act of 2003, the long-term capital gains rate was reduced to 5% from 10%. This was after the rate had already been reduced from 28% under the Taxpayer Relief Act of 1997. So, under simple math, going from a 28% tax on long-term capital to a 5% tax should have led to more investment in new plants and equipment, hence, more employment, right? But what happened instead? Manufacturing and design jobs fled to countries like China, Mexico, and India. (Factors Underlying the Decline in Manufacturing Employment Since 2000) Many of the jobs we got in the wake of these tax cuts were in businesses like construction and relatively low-paying services like retail, which find themselves under pressure at the moment. At this point, do we really want more Wal-Marts selling even more Chinese-made crap? I'd rather give tax breaks to people who invest in companies that build engineering and manufacturing facilities here in America.

If we want to encourage people to sell investments and pay the tax, that's fine. But don't try to sell a capital gains tax cut as some sort of employment program for working stiffs. The economic realities of things like NAFTA and "globalism" trump that idea, notwithstanding your simple math.

So I think you are mixing two issues. On the investment outside of the U.S. I agree with you. I have written in seperate threads that I would like the U.S. to change it's tax rules on depreciation. Why give U.S. companies a deduction for building factories overseas. So i would rather have an approach that addresses the problems you point to. Raising the capital gains tax to 35-38% ( top ordinary tax braket) would reduce not only the investments you have a concern about but also investments here in the states.

 

[HeresToThePoint]

HTTP, you touched one of my nerves.

I flatter myself by claiming to be rational. Occasionally that’s actually true but similar to our entire human race, I too often arrive at conclusions driven less by logic and more by subjective reasons. I believe in law and order but I’m not a fanatic.

I mean no personal offense in my responses - I've enjoyed our discussion so far. I only wanted to point out that the original statement, "I understand conservatives that are opposed to government welfare except when those welfare benefits fall into their own hands," is a serious logical fallacy (A converse fallacy of accident, if my memory serves me right). I understand that its easy to create generalizations and we all make such mistakes to make a point. But, we can't take a generalized characteristic that applies to all people and select a member group to exclusively ascribe them to because these kinds of statements perpetuate conflict that is not rationally justified.

"Subjective reasons" can be useful when formulating an initial position or evaluating a hypothesis, but it must yield to evidence, substantiated justification, and logical reasoning. I applaud that you recognized that it was mistake, because so many others on debate forums deflect or run away.

I would hardly call finding mutual respect as a way to promote equality a fanatic belief.

Enforcing traffic laws as they’re related to my acts is (in my opinion) carrying a good idea too far. Aside from this exception, I’m generally not opposed to government’s explicitly drafted laws that are equitably enforced. What I mistrust to the extent of fear or hate is bureaucratic discretion.

I don’t want members of any governments’ or other domestic or foreign organizations to exercise their arbitrary management upon me or mine.

Respectfully, Supposn

This thread focuses on the portion of Americans that pay a marginal 25-35% tax on productivity and 15% tax on capital gains - which is why its been a "privileged class" bashing party. The tax benefit is also given to individuals in the 10% and 15% tax bracket, those making under $34,000 annually. They pay 5% tax on their long-term capital gains and since we're talking in percentages, the poor exponentially benefit when compared against the rich. The reason that the rich are demonized for this behavior is that they have more idle funds to invest. Stack this with the exponential return on investment that the securities market provides, makes their gains seem unjustifiably high. That argument eventually boils down to, "its not fair that he gets paid more than me." Everyone, rich or poor, benefits from long-term capital gains taxation, so its wrong to ascribe the tax benefits solely to the rich.

Regulatory law is a significantly different beast, hardly relevant in this debate. Traffic laws, to use your example, are designed to encourage people to mutually respect each other by punishing irresponsible behavior. Speeding, as an example, is fined to make the benefit of driving fast an illogical decision. I think we would agree, that bureaucratic/LEO discretion is a minor issue as long as the punishment is not excessive or cruel.

In contrast, the income tax code attempts to engineer the societal behavior of Americans with deductions, credits and income/expense classifications. This kind of bureaucratic intervention is unacceptable, because it forces all Americans to give up their property and liberty, especially those in society that are most productive. It violates rights that are naturally given and not to be diminished. On a economic and social level, minimizing the impact of the income tax would be beneficial for all Americans.

The income tax code itself constantly creates inequality, which it will perpetually try to fix.
Respectfully, HTTP

 

[Ahlevah]

Why give U.S. companies a deduction for building factories overseas. So i would rather have an approach that addresses the problems you point to.

Billionaires don't employ people, unless you're talking about nannies, butlers, or pool cleaners. Ultimately, most folks will work for a company. Give companies that build facilities here a tax credit. If the company is foreign and doesn't pay U.S. income taxes, give it a financial incentive to build facilities here. If Singapore can give a company like Hewlett-Packard an incentive to build a computer design center, why can't the United States? We need to reward companies that invest here.

 

[washunut]

Billionaires don't employ people, unless you're talking about nannies, butlers, or pool cleaners. Ultimately, most folks will work for a company. Give companies that build facilities here a tax credit. If the company is foreign and doesn't pay U.S. income taxes, give it a financial incentive to build facilities here. If Singapore can give a company like Hewlett-Packard an incentive to build a computer design center, why can't the United States? We need to reward companies that invest here.

We do give those type of incentives, usually via the states. The incentives often come in the form of tax holidays for a number of years, paying for new employees to be trained, infrastructure etc.

 

[Lord Tammerlain]

We do give those type of incentives, usually via the states. The incentives often come in the form of tax holidays for a number of years, paying for new employees to be trained, infrastructure etc.

The US south east provided hundreds of millions in incentives to get Japanes and German automakers to set up shop. Of the plants built after the mid 90s I believe each received upwards of $400 million in state government incentives

 

[Ahlevah]

We do give those type of incentives, usually via the states. The incentives often come in the form of tax holidays for a number of years, paying for new employees to be trained, infrastructure etc.

Yes, I understand. I was just hoping the federal government would also take the capital gains taxes it gets from people who like to invest in Chinese factories and turn around and give the money to companies that build factories here. If someone makes a lot of money on Apple stock because of all of those Chinese-made iPods Apple sells, we can congratulate him for being so smart and then tax him on his capital gains and give the money to, say, Caterpillar when it makes a conscious choice to build facilities here in America. The folks who invest in Cat will also pay a capital gains tax, but they can take solace in the fact that Cat will have more in retained earnings due to the tax breaks or incentives it receives from the federal government. Call it a real Fat Cat subsidy or rebate, thanks to Apple, its Chinese partners, and all of those iPods. The people paying the bulk of the capital gains tax will probably be rich, since the poor people, if they own Apple or Cat stock at all, probably hold it in a pension fund, which will be taxed at ordinary rates anyway when the money is withdrawn at retirement. Now, if the rich people think this is unfair, they can move to China, where they can enjoy freedoms guaranteed by the People's Liberation Army, and we will wish them Bon voyage! and hope they live happily ever after in their new pollution-choked digs.

 

[washunut]

Yes, I understand. I was just hoping the federal government would also take the capital gains taxes it gets from people who like to invest in Chinese factories and turn around and give the money to companies that build factories here. If someone makes a lot of money on Apple stock because of all of those Chinese-made iPods Apple sells, we can congratulate him for being so smart and then tax him on his capital gains and give the money to, say, Caterpillar when it makes a conscious choice to build facilities here in America. The folks who invest in Cat will also pay a capital gains tax, but they can take solace in the fact that Cat will have more in retained earnings due to the tax breaks or incentives it receives from the federal government. Call it a real Fat Cat subsidy or rebate, thanks to Apple, its Chinese partners, and all of those iPods. The people paying the bulk of the capital gains tax will probably be rich, since the poor people, if they own Apple or Cat stock at all, probably hold it in a pension fund, which will be taxed at ordinary rates anyway when the money is withdrawn at retirement. Now, if the rich people think this is unfair, they can move to China, where they can enjoy freedoms guaranteed by the People's Liberation Army, and we will wish them Bon voyage! and hope they live happily ever after in their new pollution-choked digs.

If were only that simple. My suggestion of changing the tax law on depreciation for investments outside the U.S. does largely the same thing. This lower lower income, and profit growth for those who do this and thus adversely impact stock prices lowering capital gains.

What folks also should consider is that capital gains covers a lot of things. When someone builds a dry cleaning store that is sucessful and sells after thrity years, those are capital gains. Farmers who sell because they want to retire benefit grom caltial gains treatment.

 

[I'm Supposn]

Special strokes for special folks

The reduced tax rate that favors some capital gains profits is of benefit to those investors who are able to take advantage of it. Its usual application is upon profits due the sale of shares or entire enterprises.

Entrepreneurs generally recognize and act in their own best interests. We can assume that’s what motivates sellers. To the extent that it is the deciding factor of a decision to sell, the capital gains tax reduction is government’s deliberate and deciding intervention within a commercial decision.
Where the tax reduction was not the deciding factor, we can assume the sale would have occurred even in absence of the tax reduction. Where the tax reduction was the deciding factor, the sellers’ might have otherwise continued to nurture and reinvest into their enterprises.

We have no reason to believe in aggregate if the decision to sell or if continuing to strive and improve the enterprise would have been to our nation’s best interests. Why are we favoring some investors and by so doing we are discriminating against all other investors and taxpayers? The capital gains tax reduction is clearly special strokes for special folks.

Respectfully, Supposn

 

[alms]

Income is income. My income gets taxed at a high rate, good or bad. But some people have been able to call their income something else (such as capital gains), and thus by doing so have decreased their tax obligation. It's essentially a perk to the rich, the aristocracy, who can be so widely invested that much of their income can be qualified as "capital gains". Everyone is equal, no one is special. You tax my income at X percent, then your income is taxed at X percent. The very very rich in this country end up paying less in taxes due to things like this. It's why Warren Buffett's tax rate is lower than his secretary's

Ikari,

Capital gains are not guaranteed like the income you earn on wages; the investor runs the risk of losing everything. Also, the discounted capital gains rate benefits more than just the rich, as there are literally millions of average Americans who are invested in the stock market in one way or another.

Having said that, I favor replacing the Federal income tax with a national sales tax, so I think we're on the same page.

 

[alms]

Billionaires don't employ people, unless you're talking about nannies, butlers, or pool cleaners.

Ahlevah,

Their lifestyles are easy to deride, but their lavishness creates many jobs. Real estate, luxury automobiles, watercraft, aircraft, electronics, personal services, etcetera.

Ultimately, most folks will work for a company.

Correct me if I'm wrong, but don't billionaires tend to own companies? And what about all the money they invest? Do you honestly think that doesn't contribute to job creation?

Give companies that build facilities here a tax credit. If the company is foreign and doesn't pay U.S. income taxes, give it a financial incentive to build facilities here. If Singapore can give a company like Hewlett-Packard an incentive to build a computer design center, why can't the United States? We need to reward companies that invest here.

The proper incentive would be to relax our labor laws and decrease our tax rates, more specifically, the corporate tax rates.

 

[Ahlevah]

Ahlevah,

Their lifestyles are easy to deride, but their lavishness creates many jobs. Real estate, luxury automobiles, watercraft, aircraft, electronics, personal services, etcetera.

If I wanted to live in a banana republic, with masses of poor people, no middle class, and a wealthy elite that keeps a few peons gainfully employed, I'd move to one. Anyway, if someone creates something, like an Apple or a Google or an Amazon.com, more power to him. He deserves everything he gets, including the butler and the fancy cars. The people I have a problem with are the ones who don't create anything but just take. If a private equity firm goes to a bank that holds little old ladies' life savings, borrows billions of dollars to buy a company, but then realizes it bit off more than it can chew and can't pay off its loans and so closes the doors and fires everyone while shrugging it off as just another bad "deal," how does that help anyone except the investment bankers?

Correct me if I'm wrong, but don't billionaires tend to own companies? And what about all the money they invest? Do you honestly think that doesn't contribute to job creation?

Yes, they do, and I'm sure it does. But Americans were sold a bill of goods: "Cut taxes and the jobs will come." All these mega-corporations do is figure out how to squeeze more nickels out of their workers (the ones they don't outsource or downsize) so their executives can retire in luxury. I think we'd have more job creation with millions of middle class employed workers buying American-made products instead. If the billionaires want to invest here, I'm all for giving them tax breaks and financial incentives to do just that. If they want to put their huevos rancheros in China or India while our young men and women from mostly poor and middle-class families are dying in wars to ensure their freedom to screw their workers, they don't get squat except an income tax bill with a capital gains tax adjusted to maximize federal incentives to businesses that employ Americans.

The proper incentive would be to relax our labor laws and decrease our tax rates, more specifically, the corporate tax rates.

As for incentives, I think that a corporate rate below 35% would probably be a good idea. But relax our labor laws? Are you kidding? They're already a joke. Corporations already have the upper hand. If you want to try to organize a workplace, good luck keeping your job. You'll be branded a trouble-maker by management and quietly given the boot at the first opportunity. That's one reason why labor unions have increasingly focused their organizing efforts in the public sector. I can't say I blame them. Maybe labor unions need to go back to cracking heads like they did in the '30s instead of holding onto the fiction that the deck isn't stacked against them.

On another note, we need to give foreign countries an incentive to bring their labor laws up from 19th Century standards. If they use forced labor, child labor, or prisoners to build their crap in unsafe conditions, then we need to tell them to ship it somewhere else where no one gives a damn.

 

[washunut]

Re: Special strokes for special folks

The reduced tax rate that favors some capital gains profits is of benefit to those investors who are able to take advantage of it. Its usual application is upon profits due the sale of shares or entire enterprises.

Entrepreneurs generally recognize and act in their own best interests. We can assume that’s what motivates sellers. To the extent that it is the deciding factor of a decision to sell, the capital gains tax reduction is government’s deliberate and deciding intervention within a commercial decision.
Where the tax reduction was not the deciding factor, we can assume the sale would have occurred even in absence of the tax reduction. Where the tax reduction was the deciding factor, the sellers’ might have otherwise continued to nurture and reinvest into their enterprises.

We have no reason to believe in aggregate if the decision to sell or if continuing to strive and improve the enterprise would have been to our nation’s best interests. Why are we favoring some investors and by so doing we are discriminating against all other investors and taxpayers? The capital gains tax reduction is clearly special strokes for special folks.

Respectfully, Supposn

Supposn - As you know the tax code is full of exclusions and I agree probably too many. When it comes to capital gains, let's talk about the part that most of the public thinks it is unfair. That is the tax break given to investors, who by definition have savings ( wealth). In this country we need MORE people to save not less. In a world where who knows the health of social security, corporate pensions are less and less we need to allow our retirees to have saved for their retirement. So in this case the rise in taxes you are advocating is on retirees, who may find that they can't retire as expected because the after tax return on their investments have gone down because of a government action.

The president, when running for office promised that families with incomes under 250K would not be effected, this would breech that promise.

As you delve into issues such as these, oftentimes you find that there is no black and white correct answer.

Regards

 

[Ahlevah]

What folks also should consider is that capital gains covers a lot of things. When someone builds a dry cleaning store that is sucessful and sells after thrity years, those are capital gains. Farmers who sell because they want to retire benefit grom caltial gains treatment.

It doesn't have to be complicated. If you think family farms are a good idea, exclude them from the tax. If you want to exclude small, family-owned businesses or partnerships, do that. But I don't think we should equate the billions of dollars in compensation a hedge fund or private equity partner receives with a family farmer who just wants to leave a legacy to his children.

 

[washunut]

It doesn't have to be complicated. If you think family farms are a good idea, exclude them from the tax. If you want to exclude small, family-owned businesses or partnerships, do that. But I don't think we should equate the billions of dollars in compensation a hedge fund or private equity partner receives with a family farmer who just wants to leave a legacy to his children.

Those are two examples, another is the capital gains when someone sells their primary residence. Once you start making exceptions congress winds up with a thousand pages on loopholes for whomever pays them enough. For example if you protect primary residences, what about houses bought for investment and rented out. The arguement would be if you raise the tax on that then those investors would have to raise rents hurting the poor. It goes on and on.

 

[I'm Supposn]

Re: Special strokes for special folks

..... That is the tax break given to investors, who by definition have savings ( wealth). In this country we need MORE people to save not less.

The vast majority of commercial profits that qualify for the reduction of taxes upon incomes derived from capital gains were not due to investments* but rather to transfers of wealth such as stocks and bonds.

[Economists’ definition of “investment” is considerably narrower than the common usage of the word. Investment is the dedication of goods and/or efforts for the production of additional goods or service products. Savings are transfers of wealth. Investments are, (and saving are not) factored into the calculation of nations’ GDP].

The reduction of taxes due to capital gain profits does not directly promote savings or invest. It does promote the sales of things held for a year or more.

When the tax policy is the deciding factor that induces such sales, the sale is not clearly to our economy’s best interest. When the tax policy is not the deciding factor, its only purpose is to shift greater portions of tax burden upon all other tax payers. It does not substantially increase savings or investments in our nation.

...... As you delve into issues such as these, oftentimes you find that there is no black and white correct answer.

The long term capital gains tax discount is among the less complicated issues. I recognize eliminating favorable treatment for tax payers’ profits due to the sales of their homes is politically unfeasible. Otherwise retaining the tax policy’s that unjustifiably favor the narrow interests of the few at greater burden to all other taxpayers is unjustified.

Respectfully, Supposn