Normal income tax rate max out at 35% while capital gains tax rates are only 15%. This never seemed equitable to me. Why should income derived from owning be favored over income derived form doing.
I don't get to deduct the cost of collage from my income tax. The principal should be that a citizen should contribute a portion of his living to maintain the collective functions of society; even, and maybe especially, if he didn't earn it.
The biggest problem I have with this tax inequity is the harm it does to our free enterprise system. Gone are the days when a stockholder invested in a company and revived a share of the profits in return. Very few companies pay dividends anymore since dividends are taxed as regular income. Investors want capital gains income instead of regular income. Companies can not distribute earnings to shareholders; the goal is to increase shareholders value so that when the owners sell they will make a profit and the income will be taxed at the lower rate. Companies are forced to grow to the level of their incompetence. Corporations today either grow or die as the saying goes; fueling this endless cycle of mergers and acquisitions. The founders of a company likewise are motivated to sell the company when they want to realize the benefit of what they have built.
Corporate CEO s don't want a larger salary they want stock options and are motivated to manipulate the stock price for short term gain.
By shifting the tax burden from those that a baling out of a company to those that are creating a company we harm our ability to create the new goods and services needed to grow our economy. Ask yourself when did Bill Gates need a tax break?
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