Re:Raise the capital gains tax and treat investment earnings...
by dragonwriter on Monday January 28, 2019 @06:43PM
(#19022265)
> Treating capital gains differently from general income is a policy move designed to increase investment by making the profits larger.
Surplus wealth is largely going to be invested unless you actively prevent it, you don't need to tax favor capital income to get that result. Tax favoring capital income (i.e., tax penalizing other, most notably labor, income) just means that those that already have significant capital accumulate more faster while other people have a drag force applied preventing them from accumulating signficant capital.
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.