Basically, capital gains tax should be much higher than income tax. That seems obvious to me. Someone working for a paycheck should pay a smaller tax rate than someone who randomly bought NVDA stock a few years ago and watched the number go up.
Then you would in effect discourage investing. Investing, which creates jobs and promotes innovation. Is as simple as that.
Consider the opposite extreme, where the government subsidizes investments to 100x what they are actually worth. Would this create more jobs and innovation, or merely "bullshit investments"?
If a subsidy wouldn't create jobs and innovation, a tax wouldn't take them away.
There is also the likely possibility that the same investments would be made, but valued lower.
Any economics text book.
>> Decreasing them all the way to negative ten thousand percent would increase investments a lot.
A physicist would say you have just invented perpetuum mobile.
>> Is that a good thing?
Does it matter if what you suggest is impossible?
If I buy shares of, say, APPL today, Apple Inc. doesn't actually get that money. The person who owned those shares before does. Even if I bought up $2B worth of shares, Apple would see none of that money. It is not actually invested in the company in any way.
If you want to encourage investing, then you need to find a way to advantage shares being sold directly by the company. (And, frankly, strongly discourage stock buybacks, because that's literally the opposite of investing, and generally only benefits the wealthiest shareholders.)
If your only contribution to a company is that you've funded it, I really don't think you should enjoy the same tax benefits as an entrepreneur who put their blood and sweat into it.
Let's define it like this - if working for a company is your primary occupation, you can enjoy the lower capital gains tax from its success. This includes founders and employees with equity. For everyone else it's income tax, because they've done little else than speculate, and, well, gambling wins count as personal income.
It's crazy that if I have a $5k loss in year one, I can't completely offset it in year 2 if I have a 5k gain. Now I can only use 3k going forward forever.
Wait did they change the carry forward rules?
At least the way it used to work was:
* Year 1 - 50k loss, 3k offset of ordinary income 47k carry forward
* Year 2 - 60k gain, 47k zeroed out from last year's carry forward, 13k is taxed
Is that not still the case?