Debating the Capital Gains Tax
It’s exciting when you buy a stock which goes up. Some of that excitement dies down when you sell the stock and realize that you didn’t hold it for at least 1 year and therefore are paying a 40%+ tax rate on your gain, especially if you live in a place like New York or California. The Capital Gains tax has been a volatile and debated tax going back nearly 100 years. Because the majority of capital gains taxes collected are on assets held more than one year, the long-term capital gains rate is at the center of this tax debate. Up through 2012 we had a somewhat friendly rate of 15% due on long-term capital gains. However, that amount jumped to 20% recently and is even higher (23.8%) if you earn a decent living and are subject to the Affordable Care Act surcharge. Capital gains taxes are collected at the state level as well, adding another layer of pain if you live in a state which imposes this tax. At the heart of the capital gains debate is the question: do capital gains taxes harm economic growth and reduce the rate of savings and investment?