3 ms·

Or at a minimum, increase the "long-term capital gains" holding period from 1 year to somewhere around 3 to 5 years. This maintains the lower rate for people ge

• wilkskyes 8y ago
  What makes you think the optimal holding period is around 3 to 5 years?
• dragonwriter 8y ago
  > This maintains the lower rate for people genuinely investing for retirement. Insofar as we need tax favored retirement vehicles, we have plenty—general taxation of capital income need not be concerned with that. There are two legitimate interests I see addressed by special consideration of long term capital gains (but the current “jist give it a lower rate” approach is suboptimal for addressing them.) (1) Gains over >1 year taxed as current income in the year realized, when this is not repeatable (that is, when the owner doesn't have a large pool of long term investments to liquidate some of each year) is unfair in a progressive tax system because you will get high taxes in the realization year because of a high bracket, but you need to use the income across multiple years. This can be simply addressed by allowing taxpayers to recognize income for tax purposes before realizing it (and/or allowing deferring some of the income received in a spike year.) I prefer combining both. (2) Because of inflation, the real net gain from capital may be much lower than the nominal gains for assets held for a long time. (If appreciation is less than inflation, you may have a real loss with a nominal gains.) This is best dealt with by inflation-adjusting basis values when computing capital gains.