Capital Gains should be taxed at a higher rate than wages

[Jacobtm]

Taxing capital gains at a higher rate than wages will discourage investment in the stock market, and help lead us away from our addiction to stocks, an addiction which time and time again has led us to harmful cycles of boom and bust.

[bullmoose88]

Taxing capital gains at a higher rate than wages will discourage investment in the stock market, and help lead us away from our addiction to stocks, an addiction which time and time again has led us to harmful cycles of boom and bust.

O Rly?  Boom and Bust is due to the stock market (primarily...in other words, getting away from capital investment means no more boom and bust)...even Opebo's video attributes it to the growing and shrinking of the money supply due to the creation and retirement of debt.

[bullmoose88]

Didn't vote.  For a start, not sure whether the proper rate for taxing capital gains (or not taxing at all) should be determined relative to wages, or anything...and even if we measure it against so called "real work" what the proper rate would be.

[Verily]

Didn't vote.  For a start, not sure whether the proper rate for taxing capital gains (or not taxing at all) should be determined relative to wages, or anything...and even if we measure it against so called "real work" what the proper rate would be.

Perhaps a better phrasing would ask whether capital gains should be taxed at a higher, lower or equal rate as "all other income", as the distinction is currently drawn.

[bullmoose88]

Didn't vote.  For a start, not sure whether the proper rate for taxing capital gains (or not taxing at all) should be determined relative to wages, or anything...and even if we measure it against so called "real work" what the proper rate would be.

Perhaps a better phrasing would ask whether capital gains should be taxed at a higher, lower or equal rate as "all other income", as the distinction is currently drawn.

Additionally, Capital Gains (as the OP implies) covers much more than the simple selling of a stock held for longer than a year...we're talking the family home...dad's coins, mom's jewelry...junior's baseball cards...not exactly increases with a ton of effort, but still not necessarily the sole province of the rich.

[bullmoose88]

Didn't vote.  For a start, not sure whether the proper rate for taxing capital gains (or not taxing at all) should be determined relative to wages, or anything...and even if we measure it against so called "real work" what the proper rate would be.

Perhaps a better phrasing would ask whether capital gains should be taxed at a higher, lower or equal rate as "all other income", as the distinction is currently drawn.

True.  Point Taken.

 Another question I would have is...would increasing the LTCG rate really have the desirable result the OP supposes.  1) Would we escape economic harm in the transition away from an investment economy...2) Would such economy be immune to the boom and bust cycle...aka business cycle?

[shua]

Increasing the capital gains tax means making capital losses more risky because you do not have as much of your gains to counter them. That will make it harder for smaller, less established companies to attract investment.

[True Federalist]

Not all capital gains are alike.  To discourage volatility, I think short term capital gains should be taxed as ordiniary income, but to encourage investment, long term capital gains should be taxed at a lower rate or even not taxed at all if held long enough (say five years).

[bullmoose88]

Not all capital gains are alike.  To discourage volatility, I think short term capital gains should be taxed as ordiniary income, but to encourage investment, long term capital gains should be taxed at a lower rate or even not taxed at all if held long enough (say five years).

STCG (held < 1 year) are already taxed like ordinary income.  There are different gains rates for LTCGs depending on the type of asset...see a collectible vs. a stock etc.

[Politico]

Increasing the capital gains tax means making capital losses more risky because you do not have as much of your gains to counter them. That will make it harder for smaller, less established companies to attract investment.

Which, in turn, will lead to less competition and therefore less consumer surplus (among other things, including less innovation). In other words, increasing the capital gains tax will ultimately lead to a less dynamic economy.

The federal government needs to be scaled back in size in the long-run, not fed a bit more in the short-run (albeit less in the long-run) in the form of higher capital gains taxes now. Making everybody pay far too much for failed, bloated bureaucracies, the model that is bankrupting much of Europe, is not the wave of the future in America.

[phk]

This is not the right way to fight bubbles.

[True Federalist]

Not all capital gains are alike.  To discourage volatility, I think short term capital gains should be taxed as ordinary income, but to encourage investment, long term capital gains should be taxed at a lower rate or even not taxed at all if held long enough (say five years).

STCG (held < 1 year) are already taxed like ordinary income.  There are different gains rates for LTCGs depending on the type of asset...see a collectible vs. a stock etc.

I was aware of that, but the thread to that point had been about what to do in the abstract and posters had been treating all capital gains equally without regard to the length held.

[Grumps]

IIRC, the Treasury says when the CG rate is lower, CG total inflows increase, because people don't mind the tax as much and they won't hold onto their gains.

I'm not looking it up though......

[greenforest32]

Taxing capital gains at a higher rate than wages will discourage investment in the stock market, and help lead us away from our addiction to stocks, an addiction which time and time again has led us to harmful cycles of boom and bust.

It should be taxed at the same rate and we should have a (global) financial transaction tax.

[opebo]

Its official - the forum is 61% right-wing.

[Torie]

They should be taxed the same. As an added bonus, that would make the Tax Code a lot simpler because from an economic standpoint, interest and dividends and capital gains are all the same thing, and so the Tax Code has to go on for pages and pages trying to define which is which in a veritable galaxy of various transactions with only mixed success, so the courts have to decide which is which when clever tax lawyers try to manipulate transactions to convert ordinary income into capital gains. It does help enrich tax lawyers however.

[Gustaf]

If you encourage people to consume you're not necessarily smoothening the business cycle.

The key issue with taxation on capital as opposed to labour is that capital is globally mobile, whereas labour isn't. Therefore it is harder to tax capital highly than to tax labour highly.