The latest proposal for economic recovery comes from Hillary Clinton’s campaign, a tax rate increase on capital gains. Her suggestion is that a revamp of capital gains taxes which would hit some short-term investors with higher rates. The plan is part of a package of measures intended to push companies to put more emphasis on long-term growth.
Three New Rates of Taxes
The proposal outlines that the rate would be higher than the 28 percent President Obama proposed earlier in 2015 for the highest bracket, and it would consist of at least three separate new rates on capital gains. These rates would then change depending on how long an investor holds onto an investment.
The inherent problem with this proposal is the fact that the money being taxed here has already been taxed, both on a corporate and on a personal level. Although most large corporations have ways to shield themselves from that, this would mean that capital gains taxes would represent a double, or in some cases even a triple taxation of the same funds for companies and individuals without the same resources.
The second issue is that short term investments are the only logical choice for the current economic environment. For a company to survive in today’s digital and ever changing economy it has to focus on quarterly results and continuous and relentless innovation. As a result it adds to the already burdensome taxes that exist, as the U.S. already has one of the highest capital gains tax rates in the world, nearly 58 percent higher than the average in OECD nations.
Where the Plan Fails
While it may raise funds in the short term, this proposal would likely cause more companies to close, causing job losses rather than gains. Fewer jobs will mean less capital, and less capital will certainly mean no growth in the economy. Once again, short term political gain is taking precedence over long term economic consideration.