Capital Gains - or Losses?
I read a debate in the newspaper about whether or not the capital gains tax should be eliminated. The first argument, coming from the newspaper, was that the tax is only affecting the rich - and Republicans are trying to make their lives easier by eliminating it. It is not a tax burden on the people who have to pay the capital gains tax, because overwhelmingly these people are making over $100,000 annually. Furthermore, the burden from the eliminated tex revenue would shift from the rich to the poor if the capital gains tax was eliminated. The newspaper also wrote that they were disappointed that the Republicans, who talk so strongly about balancing the budget, are willing to cut taxes to the rich, which would impede the process of a balanced budget.
I read this all, and it made sense. I thought, “Yeah, we should keep the tax. Who is it hurting?”
Well, the response to this article came from Newt Gingrich, a man with whom I seldom agree. When I started to read, I had to reassess my position.
The tax, he said, is wrong. You’re taxed on investments, and are taxed again when you pull your money out of the investment. These taxes are difficult to manage with at tax time, there are many forms and schedules and exceptions that make filing a tax report come April 15th with capital gains taxes more difficult. (This extra processing and paperwork also costs the government money, keep in mind, which we pay for - with more taxes.) Eliminating the capital gains tax would save the people - as well as the IRS - headaches.
It also is a relatively small tax, directed to a relatively small group - people who invest. What this tax then does is makes people who want to invest less likely to because of overtaxation. What effect does this have on the economy? The government, if they are going to be involved with regulating the economy in the first place, should definitely not be hindering people from investing their money.
people who invest for their own businesses suffer too, as well as people who invest their money. I knew of a man who made a business out of buying old houses, renovating them and reselling them. He hired carpenters, electricians, plumbers, landscapers and painters to renovate his homes - helping people get jobs. He purchased appliances, carpeting, supplies for renovation - putting money back into the economy. But when higher capital gains taxes were implemented, doing these renovations was no longer economical for him - which cost jobs, which meant fewer products were purchased, which meant people were less productive.
Some could also argue, he suggests, that pointing a tax at investors is pointing a tax at the rich simply because they are rich, which is discriminatory. There is less incentive to be more productive and earn more when it means that more money will be taken away from the producers by the government. The government shouldn’t be hindering people from making more money, or from going into business - that’s what keeps the economy strong.
Expecting people with more money to pay more than their “fair share” to help out the “less fortunate” is essentially forcing them to give away more of their money to other people - people who haven’t earned it. Most people would call this kind of scenario a robbery.
If we are going to try to balance the budget, the key isn’t in doing it by taxing everyone until the debt is gone, like the newspaper suggested. The key is accepting more responsibilities as citizens, and not expecting the government to make things easier on us. If we did that, if we took that responsibility, there would be no need for excess taxes - especially like capital gains.
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