Have you ever wondered why capital gains aren’t taxed at regular income tax rates? #CapitalGainsTax #IncomeInequality
Progressives argue that taxing capital gains at lower rates disproportionately benefits the rich, increasing inequality.
Defenders claim that higher tax rates on capital gains reduce investment.
But what if we made all investment/savings fully tax deductible while taxing all income at the same rate? #TaxDeductions
This system could reduce consumption inequality without affecting the ability to invest. So, why don’t we tax income this way? #TaxReform
Let’s explore a new approach to taxing capital gains for a more equitable system. #TaxPolicy #InequalitySolutions
So you’re saying that all money put into investments reduces your taxable income and then you pay income tax on it when you withdraw? That is how a 401k works, so basically you are suggesting that we make 401k’s be able to be withdrawn from without penalty before retirement and have no contribution limits. Reducing the contribution limits on a 401k would just benefit the rich more. Your proposed system results in substantially less taxes paid.
> In other words, if I make a $1000 capital gain, and I reinvest $600 dollars but I take out $400 dollars to consume, then the $600 wouldn’t be taxed at all whereas the $400 would be taxed at regular rates.
Notice this is what IRAs, Roth IRAs and 401K plans do. Economists generally support these plans for exactly the reason that you have described.
Some economists have suggested removing the maximum limit from IRA plans and rearranging them so all types of asset can be held through them.