Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 2
No. of Recommendations: 7
An unending stream of tax cuts is not fiscally prudent, but I have to say this one makes good economic sense. All countries should do it, even if it were only allowed for holding periods over (say) five years, which would massively cut the paperwork impact.
However it would probably also make sense to increase the capital gains tax rate at the same time. Some part of the reason for the lower rate on cap gains is presumably the assumption that there has been some inflation during the hold period, since in the olden days it took years for something to go up in value an appreciable amount.
Jim
No. of Recommendations: 2
Some part of the reason for the lower rate on cap gains is presumably the assumption that there has been some inflation during the hold period,
A big part of the reason for capital gains to be taxed less than ordinary income is to encourage investments. That's partially the rationale for taxing long-term gains lower.
The whole business of a separate capgains rate is silly. It used to be taxed on on 1/2 the gain at the same rate as ordinary income. That was much simpler.
The basis should be indexed by the inflation rate, because the non-indexed rate is just taxing a phantom profit.
But those two reason is probably why they won't index. Because those two things got more tax revenue.
No. of Recommendations: 6
However it would probably also make sense to increase the capital gains tax rate at the same time. Some part of the reason for the lower rate on cap gains is presumably the assumption that there has been some inflation during the hold period, since in the olden days it took years for something to go up in value an appreciable amount.
Indeed. The gains should be indexed to inflation, and the after-inflation gains should be taxed as regular income.
Elan
No. of Recommendations: 6
Indeed. The gains should be indexed to inflation, and the after-inflation gains should be taxed as regular income.
That always made sense to me. It's not as if the world needs a big incentive to invest capital these days. There was a time when economic progress was limited by capital formation, but that era has been over for a long time. What firm these days goes public because they need money to expand that they couldn't have found another way more cheaply?
If there were a tax break specifically for capital gains, I could see a case for allowing an unusual gain to be spread over a couple/few years. Capital gains can be quite lumpy. I'm thinking of a small business owner with a modest income who sells the business and consequently has one year with a very high tax rate.
Jim
