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Q: Problem in Macroeconomics ( No Answer,   1 Comment )
Question  
Subject: Problem in Macroeconomics
Category: Business and Money > Economics
Asked by: aster1981982-ga
List Price: $2.00
Posted: 01 Dec 2005 18:34 PST
Expires: 31 Dec 2005 18:34 PST
Question ID: 600324
Bush administration is intent on elimination the capital gain tax.
Explain the purpose of the policy?
Answer  
There is no answer at this time.

Comments  
Subject: Re: Problem in Macroeconomics
From: ljb-ga on 05 Dec 2005 14:05 PST
 
I would not go with jadebusk-ga's answer.  

Think of how a government ideally wants to reward good behavior and
punish bad behavior.

A capital gain occurs when someone invested their dollars instead of
spending them.  The investor recieved a positive return on their
investment (a gain).  The key act is investing the dollars instead of
spending them.  Why tax someone for taking the risk and investing the
dollars which grow the economy?

Alternatively, a VAT (value-added-tax) is applied when someone spends
money for an item they use up (goods or services).  The item purchased
is not an investment to grow the economy; spending is a neutral or
drag on the economony.

Net conclusion:  VAT tax smart policy; capital gains tax poor policy.

So, why do governments have capital gains taxes?  Simple, governments
tax wherever the money is. It's easy to tax capital gains.  Not smart
-- just easy.

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