Capital assets are those properties that individuals own for personal use.It is said that a capital gain or loss has been got by viewing the difference that exists on final price of that capital and that of its base price. If a capital asset is sold at a price that is higher than its buying price. Some of the examples of capital assets include homes, businesses and other collectibles. Capital gains tax is that is levied on the income from capital gain (US Tax Reform Act of 1986).
In America, those who benefit most from the rates of capital gain tax are the wealthy individuals (Seth Hanlon, 2011). According to Seth, these individuals receive this tax benefit due to fact that they are the ones that receive this type of income who earn high …show more content…
Hence this portrays the system as being skewed and it appears to be punishing and risk-taking since all gains or profits are subjected to tax but losses are instead absorbed (Burman, 2009). Whereas capital gains tax is seen as a benefit holding tax for a long period of time without paying, rather than a benefit to productivity and creation of wealthy, it depends on how one reports his/her capital gains and losses. One can report a tax gain or a tax loss as a long term or as a short term basis. However, this will depend on the lengthy of the asset in question had been held before it was …show more content…
This will lead to the increase in the value of assets which will lead to an increased rate of wealth accumulation. Capital losses that are accrued will be deducted on the spot. Income and expenses are required to be indexed for inflation for consistency. Hence what should be included in income is the real gain and losses on the assets. Also, for inflation to be deducted, the interest expenses should be indexed. Interest expense would also be indexed, so only the excess of interest above inflation would be deductible. This will be benefiting since they could result to the taxpayer gaining a pure arbitrage dividends by subtracting the nominal interest at the same time recognizing real gains. Variations on a consumption tax such as the flat tax or David Bradford’s X-tax could protect low-income taxpayers from the burden of a consumption tax, but that simply means that more of the burden is placed on middle-income households, assuming revenues are to be maintained (Burman et al,
In America, those who benefit most from the rates of capital gain tax are the wealthy individuals (Seth Hanlon, 2011). According to Seth, these individuals receive this tax benefit due to fact that they are the ones that receive this type of income who earn high …show more content…
Hence this portrays the system as being skewed and it appears to be punishing and risk-taking since all gains or profits are subjected to tax but losses are instead absorbed (Burman, 2009). Whereas capital gains tax is seen as a benefit holding tax for a long period of time without paying, rather than a benefit to productivity and creation of wealthy, it depends on how one reports his/her capital gains and losses. One can report a tax gain or a tax loss as a long term or as a short term basis. However, this will depend on the lengthy of the asset in question had been held before it was …show more content…
This will lead to the increase in the value of assets which will lead to an increased rate of wealth accumulation. Capital losses that are accrued will be deducted on the spot. Income and expenses are required to be indexed for inflation for consistency. Hence what should be included in income is the real gain and losses on the assets. Also, for inflation to be deducted, the interest expenses should be indexed. Interest expense would also be indexed, so only the excess of interest above inflation would be deductible. This will be benefiting since they could result to the taxpayer gaining a pure arbitrage dividends by subtracting the nominal interest at the same time recognizing real gains. Variations on a consumption tax such as the flat tax or David Bradford’s X-tax could protect low-income taxpayers from the burden of a consumption tax, but that simply means that more of the burden is placed on middle-income households, assuming revenues are to be maintained (Burman et al,