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**TaxSheemaSter** · 11-12-2010, 02:03 AM

This is a far better argument against the capital gains tax than anything I have heard on apolyton:

http://www.manhattan-institute.org/h...morandum_7.htm

JM

The fact that you think so demonstrates how much you need to learn. The best arguments against capital gains are, in order:

1) It distorts at the savings/spending frontier unnecesarily; if you want to levy taxes on the rich, then levy them on the rich: those whose lifetime consumption is higher than others

2) Even inframarginally to the savings/spending frontier, it distorts work incentives more for savers than spenders; a fundamental principle of efficient taxation tells you that differential taxation between two groups is more distortionary than a uniform rate (the deadweight loss is approximately proportional to the square of the tax rate)

3) Taxes don't stay where you put them, and there is good reason to believe that in a world where capital is the most mobile, capital gains taxes fall on everybody other than the holders of capital

4) It distorts between various capital structures (e.g. dividends and interest-bearing instruments are the worst possible way of investing taxable money)

5) Nonsense arguments (like the one you posted)

11-12-2010, 02:03 AM	#20
TaxSheemaSter Join Date Oct 2005 Posts 483 Senior Member	This is a far better argument against the capital gains tax than anything I have heard on apolyton: http://www.manhattan-institute.org/h...morandum_7.htm JM The fact that you think so demonstrates how much you need to learn. The best arguments against capital gains are, in order: 1) It distorts at the savings/spending frontier unnecesarily; if you want to levy taxes on the rich, then levy them on the rich: those whose lifetime consumption is higher than others 2) Even inframarginally to the savings/spending frontier, it distorts work incentives more for savers than spenders; a fundamental principle of efficient taxation tells you that differential taxation between two groups is more distortionary than a uniform rate (the deadweight loss is approximately proportional to the square of the tax rate) 3) Taxes don't stay where you put them, and there is good reason to believe that in a world where capital is the most mobile, capital gains taxes fall on everybody other than the holders of capital 4) It distorts between various capital structures (e.g. dividends and interest-bearing instruments are the worst possible way of investing taxable money) 5) Nonsense arguments (like the one you posted)
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