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To: littleharbour
I can see a few ways to handle this. The best is a national retail sales tax like the FairTax to completely replace all income, estate and payroll taxes. If you insist on keeping the current tax system, how about this:

1. Capital gains tax rate is the same as the regular income tax rate for the recipient.

2. The capital gains cost basis in adjusted based on the ratio of the CPI on the sale date and the purchase date.

3. All dividends received are taxed at the same rate as regular income.

4. All dividends paid are counted as legitimate business expenses and are thus tax deductible for companies.

This way dividends are taxed once and only once rather than the multiple taxation we have now, with adjustments in rates for some investments but not others based on how the company is organized. Also, you pay taxes on capital gains, but not on the nominal gain that comes from inflation. Buy stock for $1000 and sell it for $3000, but if inflation would have made that $1000 worth $1800 later you would then pay tax only on the $1200 in real gain, not the $2000 of "gain". You also get rid of all the rules about short and long term capital gains, like it is somehow morally suspect to sell a stock at 364 days, but OK at 365 days.

4 posted on 09/20/2011 2:19:10 PM PDT by KarlInOhio (Compare "Delay is preferable to error" - Thomas Jefferson // "Pass this bill now!" - Barack Obama)
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To: KarlInOhio
Capital gains tax rate is the same as the regular income tax rate for the recipient.

For me, the problem is not that capital gains are taxed more than once, it's that we must not discourage capital formation.

I vote for zero tax on capital gains. We must encourage savings and investment. Combined with your idea of a national retail sales tax (to discourage consumption), the economy would soar.

One more thing. We absolutely must change the Federal Reserve's policy to one that targets a stable quantity of currency -- not prices or employment.

7 posted on 09/20/2011 3:37:48 PM PDT by BfloGuy (Even the opponents of Socialism are dominated by socialist ideas.)
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