I don't think it would be quite as simple as that, but that would be better than nothing, definitely.
Loosely, I think corporations should have a progressive income tax based on net income (defined in such a way as to prevent Hollywood-style games) or maybe market cap, to disincentivize getting huge and to encourage divestment. Dividends, I believe, usually already have a nominally lower tax rate than capital gains, but the fundamental problem is related to compounding. I therefore think the capital gains rate should be much, much higher and the dividends rate probably somewhat lower.
I agree. The system we have right now is ridiculous. We should harmonize our corporate tax rates and rules with the rest of the G-8 and then tax capital gains more like income.
We should move to a a progressive tax system with zero deductions, eliminate capital gains, and inheritance taxes. Make the top tax rate of over $5M be 54%.
We already know the effective tax rate for each bracket. Once we factor in the additional tax revenue from the top bracket we can adjust the other rates.
I would consider a true capital gain exception. For the investment in new and private busines investment that generates revenue. This horseshit of buying stock and holding it for a period of time is NOT capital investment. The company does not benefit from the purchase of stock once they go public. It’s a scam to allow the rich to avoid taxes.
I am for 0% corporate rates as well, I personally think we should just raise the taxes on higher earners and rethink cap gains for people that sell large amounts of assets, but cut corporate taxes to 0%.
You'd have to come up with a reasonable way to tax the gains of foreign investors, but otherwise I think it makes sense to just get rid of both capital gains and corporate income taxes and just roll everything into the personal income tax system.
Treating capital gains differently from general income is a policy move designed to increase investment by making the profits larger.
Eventually, a large portion of employment compensation got pushed through to look like capital gains -- for example, by issuing stock options or actual shares as part of overall compensation.
It's perfectly fair to kill that loophole by modifying the capital gains tax. One option would be to make it progressive and marginal like the income tax: E.g. if you make under $20,000 in capital gains in a year, you pay no tax on that; then 10% on the next 10K, then 20% on the next 10K, 30% on the next 10K, and so on.
The structure of startup corporations might change as a result. An LLC might be much more attractive, and profitability a more attractive goal.
"To offset that we should stop taxing capital gains at a lower rate"
I think this is not a bad idea, in fact, corporate taxes could be significantly lowered and capital gains/dividends could make up for it I believe. If not the money would usually go to reinvestment or some other sort of purpose. I think that taxing capital gains as if it was regular income would also be a fairer way to tax since a significant portion of high net worth individuals make most of their money from capital gain and pay less % taxes than upper middle class individuals.
I have advocated this for years. We should also tax corporations on market cap and individuals on net worth. Taxes based on how much money you have, not how much money you made.
I think the exact opposite. Taxing capital gains and eliminating corporate taxes would incentivise value creation.
Low tax dividends and capital gains benifit individuals without active participation in the value creation.
We could get rid of capital gains tax and tax it as normal income. We could also get rid of like kind exchange. This money could be used to lower or eliminate income taxes for the poor. It is all about incentivizing how we want capital to be invested for the benefit of society. Today we've decided that shareholders are primary for public companies. The stock market is at all time highs but it comes with a cost.
Indeed. I do wonder what the right offset would be to minimize the impact on government revenue.
In any case, unfortunately, I've yet to hear the political advocates for corporate tax reduction/elimination argue nearly as vociferously for an increase in capital gains taxes.
If you abolish corporate taxation, (rich) people will just use them to avoid taxes. Won't have to pay any tax on investment growth if you wrap all your investments in a corporation. Hiring me? No you're hiring my corporation, which pays me a meager salary. Company car? Check. Company apartment? Check.
There is another consideration, you want to motivate people with lots of money to invest it somewhere. Money sitting on a bank ledger can't do nearly as much as money in a venture capital fund. You have to be careful with taxes to make sure you don't disincentivize investment too much.
I think the goal should be _more_ people earning capital gains, and perhaps a more progressive tax rate on them independent of other income including a generous 0% bracket at the bottom. (i.e. regardless if you make $20,000 or $1,000,000 in wages, the first $10,000 in capital gains is tax free.)
I think the solution is in reforming capital gains taxes. You should only get the discount on taxes if you hold for 5+ years. And even then, the brackets should be more progressive for extreme (e.g. hundreds of millions) in income.
But tax rates are meaningless otherwise. The top 1% pay as much as the bottom 90% combined, and the bottom 40% pay nothing at all.
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