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Originally Posted by Snake Doctor
BTW, lower capital gains taxes don't encourage people to sell bad investments and move the money to good investments.
A bad investment would be one that lost money (or made very little), a good investment is one that makes alot of money...since the tax is only paid on the profit, selling a bad investment is not a taxable event, or in the case of a barely profitable investment, the tax is miniscule in relation to the amount of capital that will be freed by selling.
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the last economic crisis was when bush sr lost to clinton. (it the economy stupid). The fact is there are virtually no stocks that have lost so much money in the last drop that it would wipe out all the gains that have happened since that last recovery. under that senerio give current average stockmart roi $200 is still worth $300 after the crash.
That a $100 i would have to pay tax on. Assuming that my current company was going to post a modest 5% growth and the capital tax rate was 50%. The act of switching would put 50 buck of profit into the new company. Which means it makes no sense to move my money unless the new company was making at least 10% (100 *5% - 50 *10%).
If that happens the country loses the extra 5% of economic growth that would have happened (and all the jobs that would lead too)
conversely if the tax rate was dropped to 25% then 75 bucks would go into the new company (100*5% < 75+10%) and the company which is growing faster has the capital it need to make that growth happen. Which results in an increase in the economy over all.
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If anything, the low tax rate would encourage me to sell an asset (say a good stock) and then immediately reinvest all of the after tax proceeds into the same asset, thereby raising my cost basis for future taxes. (i.e. paying tax now at the lower rate on profits I've made so that if taxes go up later and I sell, the tax bill will be lower)
All this really does in the long run is cost the treasury money that it will have to make up for in another part of the economy.
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even if that were to happen that would put more money in the government coffers to pay for social services it need to pay for (unemployement, retraining) which still have a positive effect.
It a temporal diversion of tax revenue (getting more money now when the economy is bad, and getting less when the economy is good).
all without putting punitive on economic growth (higher taxes).