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Really there just shouldn't be any privileged category for capital gains and it should be taxed like regular income, progressively.
by mullingitover 6y ago
Really there just shouldn't be any privileged category for capital gains and it should be taxed like regular income, progressively.
- throwaway201103 6y agoWell that's a bit different than your earlier statement that we should "ruthlessly tax" capital gains. Capital gains get a favorable treatment because we want to encourage investment that creates economic growth, but comes with risk of loss.
- mullingitover 6y agoI mean, we ruthlessly tax working for a living, I just don't see why we don't tax speculation gains the same.
- apta 6y agoTwo wrongs don't make a right.
- valuearb 6y agoThe reason for giving capital gains a preferred long term rate is inflation. If you invest in business for 10 years and double your money, you've made a 7% annual return. But if inflation averaged 7% during that time you actually made zero economic gains. A better way to restore progressively to capital gains is to index them for inflation, and then you can tax them at ordinary income rates.
- pashamur 6y agoYeah, it was an aha moment for me when I understood the reason for the cap gains / normal tax difference. It makes sense that it's an attempt to index for inflation, although strange that there is only one cutoff (securities held for 1 year taxed the same as the ones held for 10 years); you would imagine some sort of step-down function would make more sense / track inflation more accurately (or indexing directly which is much harder). So maybe different tax rates for 1/5/10/20 years held?
- valuearb 6y agoYou don't need different tax rates, just indexing. Lets have a single fair set of rates with progressivity. A rich man in the 35% tax bracket should pay 35% on their capital gains, just as a poor retiree in the 15% tax bracket should only pay 15% on capital gains.