General Discussion
In reply to the discussion: The USA only has one fiscal problem: Lack of political will to tax those who have all the money. [View all]1939
(1,683 posts)Short term capital gains are "speculations". Long term capital gains are "investments.
Suppose you took $15,000 in savings forty years ago and started your own business. Your business has done well and now you are getting old and ready to retire, You sell your business for $300,000. That is a "capital gain" of $285,000. Some of that gain is "illusionary" (i.e. a result of inflation over the last forty years) and some of it was the result of putting profits (already taxed) back into the business.
While I think that there should be some adjustment to capital gains taxation, I think there is a case to be made for having favorable tax treatment of long term gains.
My modest proposals:
1. Increase the holding period to qualify for long term gains from one years to two years.
2. Cap gains 2-5 years: Taxed at 75% of your max rate.
3. Cap gains 5-8 years: Taxed at 50% of your max rate.
4. Cap gains 8-11 years: Taxed at 25% of your max rate.
5. Cap gains over 11 years: Zero tax.
This will encourage "stock investment" as a way to build a retirement nest egg as opposed to "stock trading". You would invest for the long haul as opposed to getting in and out in the Wall Street casino.