Capital Gains Taxes are Good

Capital Gains Taxes are Good

The Capital Gains Taxes are Good Because the Alternative Is Bad The idea of having the capital gains tax eliminated sounds appealing, but in reality it may not be. Remember that the focus of the IRS is to tax increases in wealth, not income. Right now, the capital gains rate set at a flat 20 percent is one of the lowest taxes available. If you had $100,000 of income in a year, your tax rate would be approximately 30 percent.

A taxable gift of $100,000 would be taxed at approximately 37 percent. A taxable estate inheritance would be taxed at approximately 37 percent. So what’s so bad about a 20 percent flat rate tax on capital gains? Naturally, zero tax on capital gains would be better, but it is unimaginable that the IRS and a constantly changing political climate in the country are going to completely eliminate the capital gains tax.

To do so would allow this obvious increase in wealth to be taxed in some other way. At least, there is some certainty now, and the increase in wealth is taxed at the lowest available tax rate. So from this perspective, the current capital gains tax is good because the alternative is sure to be less desirable.