Re: Atheists: America's most distrusted minority

On Thu, 06 Jul 2006 16:38:32 -0700, Charlie Edmondson
<edmondson@xxxxxxxx> wrote:

Yeah, but the point is, until something is actually sold and a
profit/loss is made, no taxes occur. But that isn't what happens in the
estate tax - they take assets and tax them at their present value
whether they are sold or not!

If investors had to figure out their gain/loss on their holdings each
year so that it could be incrementally taxed, then they would require
much higher gains in order to make those investments worth it. It would
greatly decrease potential gains on any long term investments.

/Exactly/ the idea.

For one thing, stocks have little to do with investment. Many people
find that counterintuitive, but think about it: unless the stock you
buy has just been offered to the public, when you buy stock, the money
doesn't go to the company. In fact, I've read that broker's
commissions alone exceed the money that actually goes to companies
from stock purchases.

So really, taxing unrealized capital gains wouldn't have much of an
effect on investment.

For another, we tax corporate profits every year. If we really wanted
to reduce a tax, wouldn't it make sense to reduce a tax that acts to
punish successful companies while subsidizing unsuccessful ones?

The justification of having a lower tax on capital gains than on
earned income is that it encourages investment. But it seems to me
that it doesn't really do that very well, at least in the case of the
stock market. What's more, we usually need to encourage demand rather
than investment. And low capital gains taxes have the effect of
subsidizing the wealthy and encouraging the disproportionate
allocation of resources. They aren't very fair.

BTW, note the (intentional) market-distorting effect of having a lower
tax on long-term capital gains. The idea is to encourage long-term
investment while discouraging "speculation." Seems to me it can be
argued that speculators play a role that's just as important as that
of long-term investors (who are really speculating too, just in slow
motion). Either way, this stuff isn't exactly free market.

--
Josh

"I love it when I'm around the country club, and I hear people talking about the debilitating
effects of a welfare society. At the same time, they leave their kids a lifetime and beyond
of food stamps. Instead of having a welfare officer, they have a trust officer. And instead
of food stamps, they have stocks and bonds."

- Warren Buffett

.

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