From Pete Kirby: "Every time a capital gains tax is brought up in the news, there seems to be quite a stir that it would only benefit ‘the rich.’ I am not rich. I do, however, invest in the stock market and have done pretty well. I tend to hold my positions for long periods and have built up some pretty healthy capital gains. Taxes on these gains will hit me as hard as or harder than ‘the rich.’ Here’s my thought: why not shelter the first $10,000 or so from any capital gains tax? This would help with the perception that a cut in the tax rate only helps rich folks. It would also help those people who invest to keep more of their gains until they are ‘rich.’"

Makes good sense, no? Of course, a break that would amount to about $2,000 in saved taxes (20% of $10,000) is of trivial interest to those with the most political clout, and thus would not be likely to get very far. And philosophically, one might wonder why investing needs any more tax breaks than it already gets. We already have the lure of (a) making a profit, (b) having it less heavily taxed than if it had been earned by the sweat of our brawn, and (c) having it grow tax-deferred until we decide to take the gain. So I’m not sure, when you consider the treatment we accord capital and labor, that we don’t already give capital a pretty fair shake (and labor a pretty fair shakedown).

Then again, we double-tax corporate profits — first with corporate income tax, then with personal income tax on the portion of profits paid out in dividends. So maybe things are vaguely balanced after all. (There was for decades a small "free ride" for dividends up to $300 a year, but this nice little nod to the small investor was long ago repealed.)

 

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