Capital gains taxes are just for rich people right? The super rich get a massive benefit if they get reduced capital gains, right? Corporate fat cats make a lot more money if the cap gains tax goes lower, right?
So, we should get those rich fat cats and corporations and raise the capital gains tax. The budget will be balanced and they deserve to get taxed more anyway. Right?
That’s what a lot of folks would have you think. But capital gains taxes affect each and every person in the United States. Raising them especially affects people that are hourly workers hardest.
1. Ultra wealthy people are relatively unstimulated at lower rates of capital gains. When Warren Buffett makes 1 billion, or 900 million, does it really affect his lifestyle? It doesn’t. But it does affect their behavior. The rich don’t have as much money to invest in businesses that create jobs. Higher cap gains taxes mean less jobs for people making $50k per year.
2. Corporations are hyper affected by capital gains. Suppose you work on an assembly line and your union invests money in your pension. If corporations have lower cap gains taxes they are going to pay more dividends to your pension-not hold the cash on balance sheets. That means less money for the working class.
3. Corporations also guide investment in new property plant and equipment with corporate and capital gains taxes. Lowering the cap gains tax changes the incentives for investment. At lower cap gains taxes, they will invest in new equipment, and new plants creating jobs all through the supply chain. Their modernization of equipment also makes assembly line workers more productive. That allows line workers to earn more money.
4. Lowering capital gains taxes provide more incentive for investments in start up companies. The more start up companies that are created, the more jobs that are created. This creates opportunities for the person making $50k per year to find investors for their idea and build a company, or go work for a new company that has been created. For example, UICO was created and is manufacturing in the United States. 10 manufacturing jobs were created with that investment. That could be repeated over and over again with lower cap gains rates because lower rates will lower the costs of starting a company and exiting successfully.
5. Capital gains at its essence is a tax on wealth. Is creates disincentives to make money. When you create roadblocks to wealth formation via the tax code, the result is less wealth. If you are making $50k per year and have a desire to someday be wealthy, higher capital gains taxes are another impediment to you creating wealth for yourself and your family.
Of course, Obama is proposing the largest increase on capital gains tax increase in the history of the United States. It’s job killing, and wealth creation killing. It won’t affect the already super wealthy because they can avoid it. The tax increase will increase the divide between rich and poor, not narrow it.
Raising the tax will do nothing to the budget deficit. As a matter of fact, tax revenue from raising the tax will go down in response to a tax hike.
That’s why raising the capital gains tax is yet another crushing blow for the working class in the US. It’s also why many economists advocate for a 0% capital gains tax. It’s a tax on capital that could go to help the middle class build wealth. Instead, the left wing idea is to raise it, to further destroy the middle class.
This ties in with the theme of many posts on this blog. The one that got Rick’s attention was The Virtuous Cycle. We can improve the economic climate in America. The hard concept will be getting government out of the way. Too many people look to government. All government really needs to do is regulate lightly (but correctly), tax lightly, keep the roads paved and military strong-then get the hell out of the way.