Resolved: The United States should abolish the capital gains tax.
I will take affirmative position on the debate that United States should abolish the capital gains tax.
Definitions
It is key for us to define that we are not looking to replace this tax with something else.
The 2 primary benefits will be
- Economic growth - since it encourages investment and higher risk taking, we should expect people to actually spend vs saving money
- Society well being - capital gains tax is inefficient form of taxation to be applied towards public well being (like improving transportation or building hospitals). The cost of collecting this tax is also high since there is complex administrative overhead involved.
This article, provides good insights on the topic
The Overwhelming Case Against Capital Gains Taxation
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Arguments
I suggest we drop capital gain taxes and simplify our tax code to avoid double taxation.
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Abolishing capital gain tax will not serve any purpose in the United States.
This article argues why progressive income redistribution is actually required to resolve inequality in the United States. If the United States abolishes Capital Gain tax - the benefit of economic growth won’t benefit the poor in a meaningful way, but would just be a change for sake of change.
Why stopping tax reform won’t stop inequality.
As a matter of fact United States should increase the taxes for the higher income population.
Please see the article below.
https://theconcourse.deadspin.com/we-need-to-tax-the-rich-but-instead-well-do-the-opposit-1790982273
Eliminating capital gain tax will just do the opposite.
Finally, low capital gain tax really provides unfair benefit to the rich, ans that is not something an effective taxation system should aim at.
https://www.americanprogress.org/issues/general/news/2011/02/23/9163/tax-expenditure-of-the-week-capital-gains/
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thanks for your arguments.
You anchor your position on a point that capital gain doesn't benefit the poor, but that's not really the goal of a taxation system to be effective.
There is a skewed definition of "the rich" and "the poor" and it is not effectively defined in today's society.
Luckily we don't live in a socialist country and there is nothing wrong with aiming to be "rich". In many ways that's actually definition of American dream and what drives productivity and innovation.
Check out this older article that explains why capital gain taxes are unfair. While it's from 1994, it does a great job of explaining why aboloshing the capital gains tax in the US will be a smart and fair thing to do.
http://marshallinside.usc.edu/joines/544/articles_pdf/wsj941121.txt.pdf
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you are trying to make a point that capital gain tax is unfair, but you fail to address how it's making our top 1% even richer at expense of the poor.
investments that do well is a form of income. We know that historically equity holdins appreciate in value at about 8% a year. If we don't tax these capital gains then we need to tax our poorer population more to fill the gap. It's not just a gift to the rich, we really need to be thoughtful of those in need.
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Position that capital tax gain taxation is all about rich vs poor is misleading. Capital gain tax is a form of income, as it can be financially engineeringed to produce income from investment. If capital gain tax is abolished then it will provide a source of tax free income and will also create a stock market bubble, impacting risk/return equilibrium.
I just don't see indisputable evidence in this argument of removing the tax.
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1) sophisticated investors will abuse the system to avoid taxes
2) there should be indisputable evidence to change the system.
let me please address each one of your points.
1) the US government is actually abusing current investors by fully taxing capital gains and limited tax writeoffs to only $3k annually. That doesn't sound fair fair to me.
2) For any topic to find indisputable evidence is really challenging, as we can be arguing in circles forever. It's not criminal court where there should be proof beyond reasonable doubt.
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Jason Clemens, Charles Lammam, and Matthew Lo have produced a thorough studyfor the Fraser Institute about the economic impact of capital gains taxation. Their study focuses on Canada, but the arguments apply in every nation.
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I am fully supportive of eliminating capital gain tax.
Your argument re impacting the poor reminds me of occupy Wall Street movement from years ago.
please see below article
https://www.forbes.com/sites/danielmitchell/2014/11/07/the-overwhelming-case-against-capital-gains-taxation/#35b69f6f3b0a
It offers insightful analysis.
As Occupy Wall Street protesters deliberate over a policy agenda that would combat economic inequality and political favoritism, they will find no target better suited to their mission than the tax break for capital gains. Under current law, the maximum tax rate on profits from the sale of investments held longer than a year is 15 percent. That rate is substantially less than half of the 35 percent applied to ordinary income for the highest earners, who collect an overwhelming share of taxable capital gains. Reforming the tax code to abide by the simple principle that income from investments should be taxed at the same rate as earnings from work would greatly enhance the fairness of the tax system while eliminating myriad economic distortions.
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I agree though with @agsr point about unfairness of deduction limit, although in reality the deduction limit of $3K is annual until full amount of loss is written off.
- Walt Disney
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If the capital gain tax is abolished then it will encourage more aggressive investments and entrepreneurship, resulting in overall higher growth and therefore tax revenue.
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I am against capital gains tax. You need to get into specifics to understand why.
The Overwhelming Case Against Capital Gains Taxation
It turns out that there are many reasons why the capital gains tax harms economic performance. Clemens, Lammam and Lo explain the "lock-in effect."
Next, they investigate the impact on entrepreneurship.
Last but not least, the authors also discuss the impact of capital gains taxation on compliance costs, administrative costs, and tax avoidance. They also look at the marginal efficiency cost of capital gains taxation and report on some of the research in that area.
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The linked article provided the following evidence against the capital gains tax:
1. The capital gains tax disincentives investors from switching their investment to a more profitable venture. However, since the tax is not on gross capital gains but net capital gains, the tax incentivizes investors to sell their least profitable venture to offset any additional taxes. After all, if an investor was switching their investment, they would naturally sell the worst investment.
2. The administrative costs are significantly higher for capital gains taxes than consumption taxes. The main evidence is that, on average, the marginal administrative costs are almost 3.5 times as high. But why? Capital gains taxes are a lot more easy to "game". Legally avoiding a consumption tax is much harder. The solution is a simplification of the law; complications such as long-term vs. short-term investments create more opportunity for expensive accountants to avoid tax.
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Individual income tax is widely regarded as the most efficient taxation form, as it effectively slices all economical activities equally, hence the balance between those activities mostly does not change significantly - with the exception of the segments of the market that feature a very small marginal return and that become nearly unprofitable with extra taxation.
On the other hand, the capital gains tax negatively affects a specific set of industries, such as private real estate trade or stock market. As the supply/demand balance in those industries shifts, while remaining the same in other industries, the actors are strongly encouraged to abandon those industries in favor of the less taxable ones - and as a result, the market experiences a shortage of a group of the essential economical activities, leading to market imbalance and, in turn, slowing down the economical growth and sending ripples across all economical sectors. Without the capital gains, the market participants cannot satisfy their needs without being punished for it, and that skews their interaction with the market.
All kinds of trade/sales taxes/tariffs have a very detrimental effect on the market - and ideally should be abolished. Capital gains tax is merely one of them, although arguably one of the more important ones.
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I am in favor of abolishing all taxes and having the government ventures funded through private charities and crowd funding campaigns, so people know what it is exactly they are spending their money on, rather than putting the money into the black hole and hoping that the hole produces a bigger return.
Or, at least, if they are forced to pay the taxes, then they should choose what their investment is spent on directly. Electronic democracy organized this way would be much more effective than any of the current systems.
That said, even in the current system abolishing taxes on gambling and lottery winnings is a given. Gambling industry is extremely effective at attracting investors, and such places as Las Vegas or Macau tend to feature the highest quality of life on Earth. Taking the government out of the equation would take these already exploding places into space.
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