To focus capital and entrepreneurship into empowering innovation, we should change is the capital gains tax rate. We would be better served by a regressive tax rate, that would become progressively smaller the longer the investment is held.
I would favor three policies: raising the minimum wage to $12, closing the tax loophole where persons only pay a 15% income tax on long term capital gains (tax it at the full tax rate), and institute a progressive tax moving the highest tax rate from 39.6% to 45%. I would favor implementing these three policies in that order, starting with raising the minimum wage, but not stopping there.
Well, certainly the Democrats have been arguing to raise the capital gains tax on all Americans. Obama says he wants to do that. That would slow down economic growth. It's not necessarily helpful to the economy. Every time we've cut the capital gains tax, the economy has grown. Whenever we raise the capital gains tax, it's been damaged.
Legislation to create a new 10 percent tax bracket, reduce the marriage penalty, cut the tax rate on dividends and capital gains, and increase the child tax credit have been essential elements in this economic expansion.
No one making less than $250,000 under Barack Obama's plan will see one single penny of their tax raised, whether it's their capital gains tax, their income tax, investment tax, any tax.
When you tax capital gains income, you don't help the economy, you hurt the economy, which is why President Kennedy, President Reagan, President Clinton and President Bush all believed we should have a lower rate for capital gains.
The appreciation of capital assets is already taxed at an extremely favorable rate compared to labor. That's why the rich pay such a low effective tax rate no matter what their marginal tax bracket.
There is an old adage that the quickest way to drop your tax take is to increase taxes. If capital gains tax is going to be 50 percent, my contingent capital gains tax is going to be 250 million pounds.
The biggest revenue target is the preferential rate for long-term capital gains, which raises a perennial question: Why should capital income be taxed at a much lower rate than ordinary income? Capital assets are owned overwhelmingly by the rich.
If top marginal income tax rates are set too high, they discourage productive economic activity. In the limit, a top marginal income tax rate of 100 percent would mean that taxpayers would gain nothing from working harder or investing more. In contrast, a higher top marginal rate on consumption would actually encourage savings and investment. A top marginal consumption tax rate of 100 percent would simply mean that if a wealthy family spent an extra dollar, it would also owe an additional dollar of tax.
I will promote savings and investment by maintaining the 15% rate on capital gains and dividends. I will eliminate the tax entirely for those with annual income below $200,000.
Lobbyists know that a 0 percent tax rate on capital income is not, in fact, the lowest possible rate. There can be negative tax rates. There can be subsidies. There can be allowances for depreciation. Lobbyists are adaptive creatures.
Tax laws favor capital over labor, giving capital gains a lower rate than ordinary income. The rich get humongous mortgage interest deductions while renters get no deduction at all.
I have worked with investors for 60 years and I have yet to see anyone - not even when capital gains rates were 39.9 percent in 1976-77 - shy away from a sensible investment because of the tax rate on the potential gain.
The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital... the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy.
Every time we've cut the capital gains tax, the economy has grown. Whenever we raise the capital gains tax, it's been damaged. It's one of those taxes that most clearly damages economic growth and jobs.
The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital from static to more dynamic situations, the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth of the economy.