Skip to comments.Everybody's Doing It: Abolish The Capital Gains Tax
Posted on 04/17/2006 12:38:25 PM PDT by Tolerance Sucks Rocks
How many times have we heard liberals exhorting America to act like the rest of the world?
For literally decades, the denizens of the left have been badgering us to adopt socialized medicine, abolish capital punishment, and support other "progressive" measures so we can appear more "enlightened" to their friends in Old Europe and other lovely places.
Never mind that their ideas are anything but progressive, particularly if by "progressive" we mean the achievement of actual progress. Hyper-progressive France, for instance, has had double-digit unemployment for most of the past quarter century, even with a 35-hour work week; its youth unemployment rate stands at 23 percent, its Muslim-heavy suburbs are 50 percent unemployed, and those relative few who do get to work pay a combined tax rate of 68 percent. They are little more than (very self-satisfied) serfs.
No wonder the whole world has been going the other direction for twenty years! The left's "enlightened" ideas invariably restrict individual freedom, weaken personal responsibility, sap private initiative, and empower government bureaucracies at the expense of the people they're supposed to serve.
But since everybody's doing it (and let's just ignore that vast world of countries which aren't so foolish), so must we. Thus speaketh John Kerry and his friends.
But for those of us with teenagers, we've heard this song before.
And the answer is always, or should always, be the same:
"No, young man/lady, everyone is not doing it -- and even if they were, that wouldn't make it right."
There is, however, at least one policy idea that much of the world has already embraced which liberals stridently oppose. And much like wearing clothes in public or not eating with your fingers, it's one of those things they ought to follow.
It's the abolition of the capital gains tax.
Of the thirty member nations of the Organization for Economic Cooperation and Development (OECD), fourteen don't have any individual capital gains tax at all: they have wisely chosen not to eat their seed corn, and to let their citizens build a future for themselves and for their families.
But don't expect liberals to join the crowd on this one. Most of them even opposed President Bush's reduction of the rate to 15 percent; and before the Easter recess, they again blocked efforts to make that tax cut permanent. Calls for abolition are met with the usual shrill class-warfare bleats that reform favors the rich -- even though working middle-class families would benefit most of all.
This is a case where we really ought to join the crowd.
The capital gains tax is the veritable poster child of unfairness, a gross example of double taxation at work. Corporate income is already taxed when earned. That income belongs to shareholders, most likely your IRA or other savings. So when Washington taxes it again when you sell your stock, you're getting hit a second time on the exact same money. Not some corporate fat cat somewhere. You.
The capital gains tax is a wealth destroyer, but in a much more insidious way than just this. The logic is straightforward. Anytime government taxes something, you get less of it. So when government taxes capital formation -- people investing their money so businesses can expand, research and hire -- it creates a colossal roadblock to entrepreneurship and a huge disincentive for investment, the essential building blocks of prosperity for any family or nation.
What's true logically has proven to be tragically obvious empirically. As just one example, when Washington raised the capital gains tax rate from 20 percent to 28 percent in 1986, funding by venture capitalists plunged by almost 60 percent over the next five years.
And since so many developed or developing nations have no capital gains tax, ours places us at a serious disadvantage. Many worry about China, but do they consider that China is one of those OECD nations completely free of this wealth-destroying tax? In fact, those who wring their hands the most about Chinese competition are among the strongest opponents of abolition. But the absence of a capital gains tax is one of the key reasons for China's surging economy, and for its year-after-year nine percent growth rates (three times our own).
We could do the same thing here, unleashing a torrent of capital and business formation, job creation and prosperity. And while Leftists scream about "lost government revenues", all that new economic activity -- and all those new tax-paying workers -- would actually flood government coffers.
So there's every reason to abolish the capital gains tax.
And after all, everybody's doing it.
Rod D. Martin is Founder and Chairman of TheVanguard.Org. A former policy director to Arkansas Gov. Mike Huckabee and Special Counsel to PayPal.com Founder Peter Thiel, he is a member of the Board of Governors of the Council for National Policy, Executive Vice President of the National Federation of Republican Assemblies (NFRA), and editor and co-author of Thank You President Bush, the definitive handbook to the second term.
Note -- The opinions expressed in this column are those of the author and do not necessarily reflect the opinions, views, and/or philosophy of GOPUSA.
Abolish ALL taxes... except those that benifit me :>)
You rent-seeker, you. :-)
Pay Go, please.
My only problem with the "fair tax": We will inevitably get Democraps in control again at some point. They will then add a "new" income tax "just on the rich." Of course, that's how our current income tax started, so in 30 years we will have BOTH taxes.
Come up with a way to prevent that from happening -- probably a Constitutional Amendment -- and I'm on board...
Taxes discourage investment. While the gov't may get some revenue, the economy is restricted, which means less revenue for the gov't and less profit to the people. Lose-lose.
You're O.K. with a 23% "fair" tax?!
I understand all about "hidden" taxes - my concern is that there are lots of people who pay less than 23% even taking into account all of those "hidden" taxes.
Beats the heck out of the 28% tax (after all adjustments) I pay now.
I reckon go for either a flat tax or a universal sales tax.
(I'm not even sure I'd support "progressive" sales taxes (raw necessities untaxed --> pure luxuries highly taxed) because, honestly, how do we trust those who'd define what is necessary and what is luxury?)
get rid of all other taxes.
Just pay all your taxes to me and I will be happy. Oh, and your beer.
What more could a man want? :>)
Sales tax excepting food and built-in appurtenances of houses would be okay. That would let those who can barely afford Alpo get away tax-free.
We don't need a damn govt. What we need are two divisions of law enforcement: Internal ( Police) and External (Military) and a small body that makes decisions on when to hammer a misbehaving nation or group. Taxes should be 2% for the "poor" and 5% for the "rich". Now am I being too radical here ?
For you, I would agree, it would make sense (unless, of course, the Dems eventually add another income tax "just on the rich" again).
the "necessity clause" would have to be absolutely iron-clad, so that no enterprising asshat could ever modify it to endorse "progressive" sales taxation.
and, given how tricky lawyers/politicos are, I honestly don't know how/whether that can be accomplished.
I think you are - the current federal budget for just national defense (we're not even talking your "internal" police force) is over $500 billion per year - how do you raise even that with 2% and 5% tax brackets?!
Read the book.
Once again and reaaaal slow, read the book.
A graduated tax? Tax the rich, they deserve it?
I would prefer a tax for those things that protect us, as you proposed, but I prefer a flat tax, instead of a graduated tax. Also, taxes should be voted for each year, individually, so that we can readily see who is voting to increase or continue the taxes.
Good question. When taxes are down to 3% flat (across the board for fairness sake)the GDP is going to increase so significantly that 3% should cover it comfortably ! :)
You are kidding, right? If 2005 GDP was $12.5 trillion, you realize that 500 billion is ALREADY 4% of that - not including your "internal" police spending - how much do you think GDP is going to increase in year 1, for instance?
Even after you read the book, there are lots of people who pay less than 23% under the current system even taking into account all of those "hidden" taxes. What part of that don't you understand?
There are lots of people paying less than 23%...and that would be the roughly 50% of the country that pays NO INCOME TAX...some collect the mis-named "Earned Income Tax Credit" and the "Child Tax Credit", resulting in a NEGATIVE effective tax rate. Is that "fair"? NO!!!!!!!!! I've just about had it with this new welfare class....all clamoring at me to file their returns so that they can get "Their checks." Wretch. It's money that they never paid into the system and they have no rightful claim to it....but they get it.
Everyone living above the poverty level should pay SOMETHING. Everyone enjoys the benefits of a common defense...and they should pay for it. Furthermore, by taxing all of those people who currently pay no income tax....we'll stop the growth of the welfare state, because they will feel the pain associated with the next government do-gooder program, and the next, and the next.
Furthermore, the FairTax will tax all of the illegals.
If you work, and earn less than the current FICA ceiling, you're already paying 15.3% of your wage in FICA/Medicare tax, in addition to the amount of Federal Income Tax withheld. No, your employer doesn't pay half. He just reduces your wage by that amount and remits it to the government on your behalf. It's just ONE of the lies perpetuated by the government to keep the masses pacified.
Now consider just how much tax you are paying in hidden, embedded costs....add that to 15.3% of your wage, and your FIT.......there's the rough justice look at whether you'll be better off, or worse off under the Fair Tax. Don't forget to add the amount of the Prebate....that will reduce your effective tax burden as well.
Signed, FED UP tax preparer.
Whew! I would not want to be a tax preparer today - you deserve a long vacation : )
If anyone would like to be added to this ping list let me know.
John Linder in the House(HR25) & Saxby Chambliss Senate(S25) offer a comprehensive bill to kill all income (including capital gains and AMT) as well as SS/Medicare payroll taxes outright and replace them with with a national retail sales tax administered by the states.
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.
Refer for additional information:
Pay Go, please.
Why? So Congress can do more the same old thing they have in the past?
PayGo ended up merely a pretext for expansion of government rather than the restraint is was sold as.
Straight from one of the framers of the original Budget Enforcement Acts and PayGo rules.
Ersatz Congressional Budgeting
Paygo rule leads to government growth.
Jack Kemp, June 2004
Sure we could, but why bother? The Federal Reserve hates all those things and would do whatever it takes to stop it.
You purchase a stock. The company does well, increasing revenue or reducing costs, or both. You sell the stock. Capital gains is the result of increased corporate profits.
Those profits are already taxed at 35% at the corporate level -- otherwise profits would have been higher and the stock worth even more when you sold it. So the capital gains that an individual receives has already been reduced. Taxing it a second time at the individual level means that money was taxed twice while labor-income was taxed only once.
You want to employee everybody, you create investment. You want to create investment, don't punish it by taxing capital gains and marginally allow deductions for capital losses.
Besides, how much of capital gains are merely inflationary increases. Taxpayers have historically paid billions of dollars of gains that are nothing more than artificially inflated values with the same buying power as the initial investment. THAT is pure government stealing.
Glad to see you on a tax thread. We need a little pizzazz around here.
since we started the new company in AUG '05, i don't have MUCH time to spare. ( i try to "make time" to BEAT-ON the DAMNyankee haters/hypocrites, over on TWBTS threads!)
Well, the "spirit" of your argument is: "When taxes are down to 3% flat (across the board for fairness sake) the GDP is going to increase so significantly that 3% should cover it comfortably ! :)"
GDP would have to TRIPLE for your "spirit" to even be in the right neighborhood.
NNNNNNNNNOOOOOooooooo !!! The SPIRIT of my argument is you can raise productivity AND tax revenue by lowering tax rates! The numbers were thrown in just to make a point!
Then they will pay their FAIR share. That's why it's called the FAIR TAX.
About half the country pays NO FEDERAL INCOME TAX AT ALL. It's about time the poor contributed something instead of sucking off the tit of the productive. And I'll be happy to give em a job as the business climate explodes.
We will have to agree to disagree then.
I agree that cutting taxes (to a point) raises productivity AND tax revenues - but cutting the tax rate to ZERO would not raise any revenues, agreed?
You are right that cutting ALL tax rates to zero would raise no tax revenues. But I believe the point being considered is reducing the tax rate on capital gains to zero. Under the present tax system, that would mean GDP would grow sharply and revenues for income tax on earnings plus payroll taxes would increase even more than the amount of cap gains taxes lost.
Check the years since the 2003 tax cuts and you will find we gained even more cap gains taxes alone than the amount of cap gains cut.