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US1 - Eliminate the Capital Gains Tax Advantage
| Tax capital gains the same as other personal income | |
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Description
Put capital gains into the same pot as other personal income and tax it all according to one set of progressive marginal tax rates.
"Long-term" capital gains were taxed at 28% until 1998 and lowered to 15% in 2003. Compare this with all personal income over $83.6k being taxed between 28% and 35%.
Eliminating the capital gains tax advantage would raise ~$100 BN per year in revenue.
Arguments
The long-term capital gains rate is just 15% and this is the primary reason why billionaires pay a lower tax rate than their secretaries. Essentially we have a tax system that favors those who sit back and watch their piles of money grow over those who earn their income through hard work.
Interest from savings is taxed the same as regular income. Why should stock market investments be taxed less than savings?
We should require anyone with their primary domicile (home) in America to pay capital gains tax in America. To those who leave anyway to get that lower tax rate, good riddance. America has a great chance of getting by doing non-finance things. America is a premium place to live and do business. It makes perfect sense that our tax rates would be slightly higher and based on principle instead of competitiveness.
Mitt Romney, joking with a mid-level associate at Bain:
"Yeah, you're at that tough level where you're paying a lot in taxes and it's a substantial portion of your income. Don't worry, it gets better."
Counterarguments
#1 We are operating in a global environment. Money is like water it flows to the path of least resistance. You want capital flowing into the US. That is easy money, you don't have to pay them back. In order to get the money flowing investors (overseas and here) need to be encouraged otherwise they'll put in other places. Low taxes relative to other places encourage investment.
#2 Labor gets paid first, encourage the entrepreneur. "Trickle down" is a farse. There is no trickle down for entrepreneurs. They risk capital and pay labor first. Before any profit or anything is made or sold, labor gets paid. So no trickle down, is flows downs. So lower capital gains taxes encourages entrepreneurs. Entrepreneurs fail 5 times or more before hitting it, all the time labor gets paid. When the do hit it, everyone wins.
#3 Risk taking needs to be rewarded. Tenure, safety, is easy. Risking your money and time is hard, the payoff should be great.
Capital gains, investments, and business related income is subject to corporate taxes already before it is paid. It is taxed twice separately. This is an imaginary crisis and hardly part of the "politics of fairness"
Rather than raising taxes (as you suggest) we should flatten the rules. I proposed a flat 12% tax rate for all income methods. Its competitive globally, its math works so that it increases revenues, and there is no longer an argument about 'fair'.
In the last decade, the average effective tax rate was 12.48 percent. So, people are paying that anyway. Lets make it official and reduce the regulatory burden and make foreign investment in the US possible again.
- Capital Gains is taxed at the normal income level, bro. The reason why you're seeing some corporations pay less is because of the Bush-era tax cuts, and the subsides. Also, the tax is way too high compared to the rest of the world.
I don't think people should be punished for using their brains to create wealth. I don't believe in taxes period. I believe everything should be done in passion. Investing is a passion. To submerge it with the burden of paying people like you who sit and think about how to take a profit on my personal passions is pathetic. For the sake of the argument though, I think physical mindless labor is easier than mental labor. If you have ever tried investing, you would know that the middle class are really the people who invest and they lose their money because it's not only mentally taxing to invest
4 Topics
Discussion
Related Ideas
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| Apply a minimum tax rate of 30% on individuals making more than $1 million a year More detail | |
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| Build the economy from the middle class out More detail | |
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| Make sure everybody plays by the same rules from Main Street to Wall Street to Washington DC More detail | |
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| 1% annual wealth tax on net worth >$50 million. Keeps income inequality and the government deficit under control. More detail | |
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| Raise taxes for those in the high class and decrease them for the middle class. More detail | |
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| Those who caused the financial crisis should have to repay the country through increased tax rates More detail | |
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| Keep the top rate for capital gains and dividends at 15% More detail | |
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| We can't even tax citizens enough to cover the interest on the debt. We can't keep printing & spending money frivolously More detail | |
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| Make the Bush tax cuts permanent. More detail | |
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| Maintain current tax rates on interest, dividends, and capital gains More detail | |
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| Capital gains tax rates must be reduced More detail | |
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| Distribute taxation in proportion to ability to pay More detail | |
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| Eliminate taxes on capital gains for small business investments More detail | |
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| Let the long-term capital gains tax rate rise from 15% to 20% as scheduled in 2013 More detail | |
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See our discussion at DailyKos