Both Obama and Clinton are calling for the repeal of the Bush tax cuts. Both have their eyes on increasing the capital gains rate, but they should look elsewhere. A higher rate will not optimize total tax revenue from capital gains. Investors would flip less shares if taxed at a higher rate. In addition, investors would be less prone to take on higher risk securities, which typically are for growth companies. Under higher rates the opportunities of return is diminished.
Where then should the politicians turn to for more tax revenue other than the populist notion of soaking the rich? They can start with an online sales tax of about 7%. Brick-and-mortar stores must pay sales taxes, while their online vendor competitors don’t. Doesn’t this amount to a government subsidy to the online vendors? (Frankly, I’d be thrilled to see all forms of corporate welfare eliminated.) Online is no longer a nascent technology. It deserves no special breaks.
One last thought on taxes…Do you think America would have gone to war in Iraq if it was packaged with a War Tax to cover its costs?
Here’s something more pleasant to tune into, Gregory Isaacs’ Tune In (1978). Now that’s some good lip syncing!
Tags: capital gains, Clinton, Gregory Isaacs, Obama, subsidies, taxes, war tax
