Why is the capital gains tax rate so low?

[Shaun @ Tru6]

also, is the low rate one of the contributing factors that have pitted the Financial Economy against both the Manufacturing and Main Street Economies?

[sammyg2]

Originally Posted by Shaun 84 Targa

also, is the low rate one of the contributing factors that have pitted the Financial Economy against both the Manufacturing and Main Street Economies?

Productive, successful, responsible, non-parasitic people think it's too high.

[widebody911]

Golden Rule: those who have the gold, make the rules.

[jyl]

Capital gains rate being lower than income tax rate means we reward financial investments more than work income (wages) or operating income (corporate profits).

[Evans, Marv]

I can say capital gains taxes certainly don't feel low if you sell some income property outright. In Kalifornia the federal tax and State taxes amount to 24.3%.

[Gogar]

Originally Posted by jyl

Capital gains rate being lower than income tax rate means we reward financial investments more than work income (wages) or operating income (corporate profits).

"Taking Less" ≠ a "reward".

[jyl]

Regardless of semantics, the tax treatment means there is more economic incentive to make money via buying/selling financial investments than through working or through investing in and operating a business.

I'm all for it, personally. Given I work in the financial industry, I think it is good and right for the stock and bond markets to be hitting new highs while ordinary workers are suffering through one of the hardest periods in decades. Ugh :-(

[Jim Bremner]

Originally Posted by jyl

Regardless of semantics, the tax treatment means there is more economic incentive to make money via buying/selling financial investments than through working or through investing in and operating a business.

I'm all for it, personally. Given I work in the financial industry, I think it is good and right for the stock and bond markets to be hitting new highs while ordinary workers are suffering through one of the hardest periods in decades. Ugh :-(

POOR PEOPLE DO NOT CREATE JOBS.

Once the .gov gets used t their new income, they will NEED more!

[sjf911]

Long term capital gains have a hidden tax component; lack of inflation indexing.

[Shaun @ Tru6]

Originally Posted by Jim Bremner

POOR PEOPLE DO NOT CREATE JOBS.

Once the .gov gets used t their new income, they will NEED more!

Jim, please stay on topic.

[jyl]

Originally Posted by sjf911

Long term capital gains have a hidden tax component; lack of inflation indexing.

Neither are wages nor business income inflation-indexed.

[Gogar]

In one respect I agree with you, Shawn, but you've got it backwards. Personal income tax rates are too high, and should be lowered across the board to equal the capital gains rate.

[Jim Bremner]

Are all men not created equal?

Flat tax rate. Set in stone so that no one can raise the tax. No new FEEs, Levies etc.

Our Forefathers fought a war for far less of a tax rate that we're paying today.

[nostatic]

The financial markets have always bugged me. Always felt like people were making a lot of money and contributing very little real value to society. Yes, I know that business needs capital and understand that there needs to be infrastructure to support that, but it became an "industry" in and of itself.

[sjf911]

Originally Posted by jyl

Neither are wages nor business income inflation-indexed.

Income tax is annualized, capital gains can be on investments made decades before with huge equity erosion by inflation.

[sjf911]

Originally Posted by Gogar

In one respect I agree with you, Shawn, but you've got it backwards. Personal income tax rates are too high, and should be lowered across the board to equal the capital gains rate.

Flat tax without deductions of any kind would level the playing field. Also, some type of tax on inflation indexed unrealized capital gains would capture the likes of Buffett and his cronies and probably reduce stock market and real estate volatility.

[widebody911]

Only IPOs and bonds are "investing" -- the rest is gambling. Someone sitting at a terminal all day buying and selling equities is not producing anything.

[sammyg2]

Originally Posted by jyl

Regardless of semantics, the tax treatment means there is more economic incentive to make money via buying/selling financial investments than through working or through investing in and operating a business.

I'm all for it, personally. Given I work in the financial industry, I think it is good and right for the stock and bond markets to be hitting new highs while ordinary workers are suffering through one of the hardest periods in decades. Ugh :-(

Forgive me if I'm wrong, but don't lots of those ordinary workers have 401k or pension funds that are invested in stocks and bond funds etc?
I mean, the ones who don't blow their entire paycheck on 40 ouncers and dime bags of course.

[KFC911]

Originally Posted by widebody911

Golden Rule: those who have the gold, make the rules.

Yep. Personally, I don't flip stocks or houses (I'm a long term investor with all irons in the fire), and capital gains are virtually a non-issue with me (houses, 401Ks, IRAs and pension). IMO, the reduction to 15% (coupled with the "tax shelter" for one's primary residence) had a direct, almost immediate impact on "house flipping" and the houising bubble in many areas. WE ARE ALL paying dearly for that one . I know of one individual who completely avoided even CG taxes (legitimately taking advantage of the "primary residence shelter") by living in their investment properties.

[KFC911]

Originally Posted by sammyg2

Forgive me if I'm wrong, but don't lots of those ordinary workers have 401k or pension funds that are invested in stocks and bond funds etc?
.

You're not wrong, but what you infer is misleading as CG taxes aren't applicable to those .

edited (before Sammy corrects me ). I guess CGs could apply to "funds" within 401K/IRAs...I was thinking from an individual's perspective (and I don't do "funds").