Courtney

Nick Courtney
Government 3
Mr. Rogers
2 November 2015
Financial Regulation
Who doesnt like more money? The capital gains tax applies to basically anyone who
makes a profit. A capital gain can be defined as the profit from a sale or investment. If that is a
little hard to understand, there is a formula for making it more clear: Sale Price Purchase Price
= Capital Gain. These capital gains represent the money you will profit from stocks, assets, real
estate, bonds, or futures. But, you dont have report any capital losses that occurred. When trying
to understand what percentage category you fall under for the capital gains tax, you just have to
look at the tax bracket for your income tax. Chris Bibey explains it well in his article saying,
Short-term capital gains are taxed at the same rate as your ordinary income. This can be as high
as 35% depending on your tax bracket and how much money you earn, (Bibey). Some people
will pay up to 28%, some as low as 0%. This tax usually applies to people with a higher income
because they will have more money to invest in stocks or real estate. The capital gains tax should
be lowered because it will improve economic growth, corporate tax is applied before it, and
inflation makes it worth less money.
All investors want the economy to improve so they can make more money. Throughout
economic history, we have had many instances of the stock market plummeting. The most
famous ones being in 1929 and more recently being in 2007 and 2008. In times past, cutting the
capital gains tax has improved the economy. According to CTJ, In August of 1981, another
capital gains tax cut was enacted, this time cutting the top rate to 20%. Over the 12 preceding

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months, the economy had grown by 3.5%. In 1981, Congress cut the top rate of 28% to 20%
which reeled in much more investors because they knew they would be keeping more money.
Because more money was being invested, the economy improved greatly. If the tax rate is too
high, and someone is making a lot of money, they could feel threatened to pull out of their deal
because they would have to pay more tax money. According to Kyle Pomerlau of the Tax
Foundation, People are less willing to realize capital gains from one investment in order to
move to another when they face a tax on their returns. Funds will be slower to move to better
investments, further reducing economic growth, (Pomerlau). Allowing more money to be
invested will help the economy grow. The capital gains tax is restricting people to invest because
the government is collecting too much of it. Having more capital in a company is better because
this will allow employees to better remunerated and opening up more positions within
companies. This will not only lower the unemployment rate, but also advocate for people to
invest their money into the stock market or other ways to make profit. Lowering the capital gains
tax will help improve economic growth by giving people more money and not lure investors
away by the large sum of they will have to pay.
The capital gains tax can be considered as a double tax. That is, money that has been
taxed once from one law and taxed again from a separate law. Stocks that pay dividends and
corporate tax. An example of this would be companies that pay dividends to their stock holders.
A dividend is a sum of money that is earned and paid out by a company to people who own share
in the company. In an article written by Kyle Pomerleau, he says, Capital gains taxes represent
an additional tax on a dollar of income that has already been taxed multiple times, (Pomerlau).
Companies are all already forced to pay corporate tax on all the profit that they make. When the
companies pay out their dividends, the people receiving the money will have to pay their capital

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gains tax on that money also. Therefore, it is considered a double tax. If people were to have
more money because the tax rate was less, they would feel more obliged to put more money into
that companys stock. This tax is essentially penalizing the company for making a profit and also
penalizing you for the company sharing some of their money. Jared Meyer said in his article
The Compelling Case for Lower Capital Gains Tax Rates, that When capital gains taxes are
applied to income already subject to Americas 39 percent top corporate tax rate, the combined
tax burden on U.S. gains can reach 56 percent, (Meyer). 56 percent is an outrageous amount.
Think about that. If a company makes $100 and pays out that money as a dividend, the
government will take $56 of that, which leaves you with $44. The government shouldnt be
allowed to do this because the companies worked for and earned this money. Essentially, the
capital gains tax is a double tax because corporate tax is already applied to dividends.
Inflation has been a big issue in times past. Weve seen during the world wide depression
in the earl 1930s. Over the past 50 years, stocks and car prices have gone up greatly. But since
the value of the dollar decreased, they wont be worth as much anymore. Unless, the stock
skyrocketed over those years, then you would be having a big payday. In an article by The Tax
Atlas, they mention, Because the main increase in value over time is inflation, most capital
gains taxes are only taxing inflation (Tax Atlas). Say you were to buy a home for $250,000 but
the housing market increases greatly and the house is now worth $500,000. If you were to sell
this property, you would have a capital gain of $250,000, which is a good amount of money. But,
due to inflation, you would have to pay the government much more money due to the capital
gains tax than if you were to just sell it at $300,000. John Aldridge said, In some instances, the
practice of taxing the nominal gain can lead to an infinite effective rate on real capital gains
when the increase in price is only due to inflation. In fact, if a taxpayer purchased an average

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stock in 1999, 2000, or 2007 and sold in 2013, they would be taxed entirely on inflation,
(Aldridge). This is a spot on portrayal of why the capital gains tax should be lowered. If you
bought a stock on investment and wait a few years to get your money out of it, you shouldnt be
forced to pay a tax on it that causes you to lose all of your profit. People are investing for a
reason and its to make money. If a tax is making people not gain money, it is going to push them
away from investing.
Many people say that the capital gains tax needs to be increased because lowering it will
just make the rich get richer. In an article in the Forbes, author Len Burman says, Postponing
realization of capital gains until death is the holy grail of tax planning because a taxpayer can
escape millions of dollars in taxes on a substantially appreciated asset, (Burman). This is true,
but money that was earned by someone that is dead should not be collected by the government.
The family should be able to inherit so they can have some sort of remembrance of their loved
one that passed. As said previously, the government should not ne allowed to take this money
because it was worked for and earned by person. President Barack Obama wants to increase the
tax rate 28% for certain people. He said, President Obamas 2016 budget proposes an increase
in the capital gains tax to 28 percent for couples earning $500,000 or more, (National Center for
Policy Analysis). But here is where he is wrong. President Obama is singling out the rich. They
work hard for their money and deserve to keep their capital gains. It is unfair to do this because
everyone should get taxed at the same rate. Just because someone has a lot of money and is able
to invest more, does not mean they should be penalized for it. Democrats want the capital gains
tax to be increased because they think the rich have too much money and the government needs
it to pay off their debt.
The capital gains tax should be lowered because it will stimulate economic growth, it is a

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double taxation, and inflation makes your money worth less. Kyle Pomelau from the Tax
Foundation says, Taking into account the federal deductibility of state taxes and the phase-out
of itemized deductions, the average top marginal capital gains tax rate faced by U.S. taxpayers is
28.6 percent. This is the 6th highest rate in the OECD, (Pomerlau). This rate is too high for a
country with a low debt as percent of GDP. The capital gains tax applies to all stocks, real estate,
bonds, dividends, futures, or assets that you make a profit off of. It is not justified to raise this tax
rate because it singles out the rich and will make people lose their interest in investing in the
stock market. If we dont have investors interested, the market will lose value and the economy
will be hurting. We need people to fight for this tax rate to be lowered. It only benefits the
citizens of the United States of America. So, what do you want? More money or more money
going to the government?

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Works Cited
Aldridge, John. "Inflation Can Cause an Infinite Effective Tax Rate on Capital Gains." Tax
Foundation. N.p., 17 Dec. 2013. Web. 23 Oct. 2015. <http://taxfoundation.org/article/inflationcan-cause-infinite-effective-tax-rate-capital-gains>.
Bibey, Chris. "7 Facts About Capital Gains Tax." US Tax Center. N.p., n.d. Web. 23 Oct. 2015.
<http://www.irs.com/articles/7-facts-about-capital-gains-tax>.
Burman, Len. "President Obama Targets The 'Angel Of Death' Capital Gains Tax Loophole."
Forbes. Forbes Magazine, 18 Jan. 2015. Web. 23 Oct. 2015.
<http://www.forbes.com/sites/beltway/2015/01/18/president-obama-targets-the-angel-of-deathcapital-gains-tax-loophole/>.
"Capital Gains, Double Taxation, and Fairness." Tax Atlas. N.p., 01 July 2013. Web. 23 Oct.
2015. <http://www.tax-atlas.com/capital-gains/>.
"The Hidden Entitlements." Capital Gains. N.p., n.d. Web. 23 Oct. 2015.
<http://www.ctj.org/hid_ent/part-2/part2-2.htm>.
Meyer, Jared. "America Strives to Exceed French Capital Gains Tax Rates." America Strives to
Exceed French Capital Gains Tax Rates. N.p., n.d. Web. 23 Oct. 2015.
<http://www.economics21.org/commentary/us-french-capital-gains-tax-rates-tax-foundation-0325-2015>.
Pomerleau, Kyle. "The High Burden of State and Federal Capital Gains Tax Rates in the United
States." Tax Foundation. N.p., n.d. Web. 23 Oct. 2015. <http://taxfoundation.org/article/highburden-state-and-federal-capital-gains-tax-rates-united-states>.
Pomerlau, Kyle. "U.S. Taxpayers Face the 6th Highest Top Marginal Capital Gains Tax Rate in
the OECD." Tax Foundation. N.p., 24 Mar. 2015. Web. 23 Oct. 2015.

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<http://taxfoundation.org/blog/us-taxpayers-face-6th-highest-top-marginal-capital-gains-tax-rateoecd>.
Villarreal, Pamela. "Obama's Proposed Capital Gains Tax Hike." Obama's Proposed Capital
Gains Tax Hike. N.p., n.d. Web. 23 Oct. 2015. <http://www.ncpa.org/pub/ba808>.