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An open letter to President Obama - Phil's Rambling Rants
November 7th, 2012
02:28 pm

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An open letter to President Obama

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From:bedlamhouse
Date:November 8th, 2012 04:52 pm (UTC)
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The problem with taxing capital gains at the same rate as ordinary income is that there is no incentive to leave investments for the long term. We WANT people to invest for long term, not just until the stock goes up a couple of points. I'd say rather to increase the holding requirements for capital investments to be treated favorably.

Dividends also are already double taxed (they are taxed as part of corporate income, they aren't deducted as an expense, and are then taxed again when the individual receives them). Dividends aren't considered capital gains and don't get special treatment in and of themselves, but I actually think dividends and interest income SHOULD get favorable treatment. This would be an incentive for savings.
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From:billroper
Date:November 8th, 2012 05:33 pm (UTC)
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I poked around a little looking at historical tax rates and it appears that capital gains have always gotten favorable tax treatment.

The other note on capital gains is that there's no inflation protection built in. As a result, when you sell an investment, you may have a "real" loss (in terms of purchasing power), but pay a tax on your "income".
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From:tigertoy
Date:November 11th, 2012 03:42 am (UTC)
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I would be fine with genuinely long term capital gains getting favorable treatment, but the great majority of "capital gains" income these days is profit on short term trades, which should at the very least be taxed at the highest rate of any kind of income. Such as, for each full year you hold an asset you get to shield 5% of the gain (or the rate of inflation for that year) from tax.
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