Reply #17: Capital gains

[Gulf Coast J]

For some reason, I'm choosing to respond to your post in a civilized way:

You say that people won't refuse profits because they are taxed. But there are many things people can do with their money besides put it in the stock market. For example, if the average return to the market is 10% and I know I'll be taxed 50% on all profit, then an investment that only payed a 6% return suddenly is more appealing.

With high capital gains taxes, I'll also be more likely to hold on to the stocks that I own instead of transferring my assets into better stocks. Say I have 100 shares of GE and I expect them to grow 5% a year. I think that Wal Mart is going to grow by 6% a year. Depending on the capital gains tax, it might not be worth it for me to sell GE and buy Wal Mart. So a rate that is too high could cost the government revenue.