Quote:
Originally Posted by WhiplashDug
There is soo much more to this, there just isn't enough time to get into it... but
The entire premise of the arguments in this thread assume that anyone who has an investment that qualifies as capital gains will sell it because the capital gains rates are low and then just hord that money away in their mattress. I am not sure where this thought process comes from, but personally I've never come across anyone with substantial money who sells off investments to move into cash.
People with money, move assets from one investment to the other -as they know sitting in cash does not grow their net worth. So lower capital gains rates stimulate capital investment as investors move money from one investment to the other. Some of that money then seeks higher risk, higher return investments (ie. venture capital) and thus stimulates economic expansion through new business development.
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At least this was a well thought out and reasonable explanation. Unlike the post above this one in which I was called a "boy" and told to go to school, by someone who doesn't know how to use capital letters.
The thing with what you're saying is that if capital gains taxes are low, then that encourages people to sell off profitable investments and make new ones. At the end of the day though, that's just shifting money from one place to the other so I don't see how that creates any sort of economic "expansion" that would create jobs.
You say that people with money know that sitting in cash doesn't grow their net worth, so then won't their money always be invested in the place they think will give them the highest return, regardless of what tax rates are?
It would seem to me, that lowering the tax rate only affects their behavior in one way. It makes them more likely to sell their investments while rates are low so they will save $$ in taxes, even if they just sell and then reinvest back into the exact same asset.
At the end of the day all this does is cost the treasury money in the long run, it doesn't positively affect investor behavior in a way that is conducive to economic growth.