Capital Gains Tax

[Drogue]

The issue with removing capital gains, as opposed to any income tax, is that it reduced the burden on the middle class and the rich and avoids the poorest. The poorest people don't save. Those on middle incomes save the most (% of income), and the richest save almost as much.

Also, is saving good? Yes, it reduced the long-term liabilities of the state with regards to old age, but spending helps keep the economy bouyant. Without all this credit, the world economy wouldn't be as high as it is now. Yes, it may be a bubble, but increased savings can cause problems if it's too high (see Japan in the late 90s).

Capital gains is there to hit the people who are rich enough to have serious savings. In the UK at least, we're in danger of becoming a split society of those with enough collateral/income to buy houses and thus gain from property prices, and those who have to rent because they don't have a high enough income or enough collateral. Removing capital gains massively aids those who are making money from investments, which if society becomes polarised like this, could cause further wealth transfer from the poor to the rich.

Originally posted by Lazarus and the Gimp
I would back a limited form of this abolition, providing it was limited to capital gains within earmarked pension saving schemes, up to a maximum ceiling. It would give a greater universal incentive to save for old age.

Isn't that already the case? The whole point of putting an investment in a pension wrapper is to avoid tax. Admittedly only a certain lump sum can be taken, and most of it used to buy an annuity, but that's to ensure people have enough money to not rely on the state if they're longer-lived than expected.

The issue with disincentives is actually more about means tested support. Those at the bottom end of the income scale can face 70% or more effective tax-rates on their savings, since it reduces the amount of support they get. It's hard though, do you force people who don't save to work past 65? Do you have means-testing and mean saving for the lowest-earning people is virtually useless? Or do you have a high basic state pension and have a transfer of wealth from young to old? None of them are really fair.

[Dauphin]

Originally posted by Drogue
Admittedly only a certain lump sum can be taken, and most of it used to buy an annuity, but that's to ensure people have enough money to not rely on the state if they're longer-lived than expected.

Look up "A-day".

[MRT144]

drogue, i would want the capital gains tax to be waived on a savings fund like 401(k) specifically for first time home buyers saving for a downpayment.

[Peter Triggs]

What's the current annual exemption threshold for Capital Gains Tax in the UK? IIRC, very few people in the UK pay CGT.

Americans and Canadians should drool over this system.

[Kidlicious]

Originally posted by MRT144
has the savings rate gone up in light of tax cuts across the board?

would a reduction in capital gains tax encourage more long term investment for people that absolutely will need to save for their future? I dont care about helping the economy with this tax reduction, I care about helping people that make less money benefit from the same system that makes lots of money in the long haul.

It doesn't make much sense to increase the savings rate and create a deficit at the same time. The increase in savings is just going to finance the deficit.

And if you want to help people who need it the most then cut their taxes. You just aren't going to do that much by cutting the capital gains tax. Anyone who needs help the most knows that. You are just helping rich people, cause rich people can take advantage of it.

Basically read Drogues post.

anyway, you're just repeating yourself here. you obviously dont understand the concept of taxes having a secondary effect of incentives or disincentives.

Incentives help people who can take advantage of them. The more money you can save the more you can take advantage of low capital gains tax. However, everyone can take advantage of lower consumption tax for example.

[MRT144]

Originally posted by Kidicious

It doesn't make much sense to increase the savings rate and create a deficit at the same time. The increase in savings is just going to finance the deficit.

And if you want to help people who need it the most then cut their taxes. You just aren't going to do that much by cutting the capital gains tax. Anyone who needs help the most know that. You are just helping rich people, cause rich people can take advantage of it.

Basically read Drogues post.

Incentives help people who can take advantage of them. The more money you can save the more you can take advantage of low capital gains tax. However, everyone can take advantage of lower consumption tax for example.

what makes you believe i would want the deficit to increase? decrease spending! yay!

rich people can take advantage? Am I rich Kid? I could take advantage of it and I don't make that much money. or are you talking about everyone below me.

[Kidlicious]

Originally posted by MRT144
drogue, i would want the capital gains tax to be waived on a savings fund like 401(k) specifically for first time home buyers saving for a downpayment.

You're talking about very little tax.

[Kidlicious]

Originally posted by MRT144


what makes you believe i would want the deficit to increase? decrease spending! yay!

rich people can take advantage? Am I rich Kid? I could take advantage of it and I don't make that much money. or are you talking about everyone below me.

I don't know how much money you make, but if you want to cut the capital gains tax without increasing other taxes it means there will be a deficit. So which is it? If you income tax increases you can't take advantage of lower capital gains tax cause it will be harder to save.

[MRT144]

Originally posted by Kidicious


I don't know how much money you make, but if you want to cut the capital gains tax without increasing other taxes it means there will be a deficit. So which is it? If you income tax increases you can't take advantage of lower capital gains tax cause it will be harder to save.

Cut government spending. derrr!

[Drogue]

Originally posted by MRT144
drogue, i would want the capital gains tax to be waived on a savings fund like 401(k) specifically for first time home buyers saving for a downpayment.

How could you make it so specific? Suppose someone was saving for a house, but then decided to buy a car instead?

Besides, it's still a subsidy for the middle-class, since the poor don't buy houses. You can't get away from the fact that it makes it easier for those who can afford to save to buy houses, at the expense of those who can't afford to save. Especially when you add the huge secondary effect that making savings specifically for houses easier makes house prices rise, cancelling out much of the effect. You can't get away from unaffordable housing by trying to use tax to make houses more or less affordable. The only cause of unaffordable housing is a lack of housing, and the only way to fix it is to build more.

[Drogue]

Originally posted by Dauphin
Look up "A-day".

Did they scrap the entire annuity-requirement? So you can take the whole thing as a tax-free lump-sum?

Originally posted by Peter Triggs
What's the current annual exemption threshold for Capital Gains Tax in the UK? IIRC, very few people in the UK pay CGT.

Americans and Canadians should drool over this system.

It's only ~£9k or so, IIRC. It does cut out all the people with little savings, but anyone with property or a large savings fund will likely hit it.

[Kidlicious]

Originally posted by MRT144


Cut government spending. derrr!

Ok, now you are just being silly.

[Kidlicious]

Re: Incentives to buy a house.

There's enough incentive already here in the US. Anyone who doesn't want to save for a down payment is nuts. Cutting the capital gains tax for that is just a give away. I wouldn't call that an incentive.

[MRT144]

Originally posted by Drogue

How could you make it so specific? Suppose someone was saving for a house, but then decided to buy a car instead?

Besides, it's still a subsidy for the middle-class, since the poor don't buy houses. You can't get away from the fact that it makes it easier for those who can afford to save to buy houses, at the expense of those who can't afford to save. Especially when you add the huge secondary effect that making savings specifically for houses easier makes house prices rise, cancelling out much of the effect. You can't get away from unaffordable housing by trying to use tax to make houses more or less affordable. The only cause of unaffordable housing is a lack of housing, and the only way to fix it is to build more.

like I said, the transfer of funds would be directly towards a downpayment. they couldnt simply withdraw the money without capital gains.

and im making the point that almost anyone can afford to save for a house given good life choices and lifestyle decisions. it's simply reducing the hardest part of it; downpayment financing.

The housing supply isnt independent of demand and as the demand rises the supply will increase relative to demand. if you can make a program that benefits first time home buyers, and essentially guarantee X amount of future home purchases based on measuring people setting up these accounts , you can then better predict how many homes need to be built to take up that demand. one of the parts i want to eliminate from a lot of housing costs is the elasticity of supply and demand.

also looking into the statistics of these tax free accounts, developers can be better able to price their product to the potential home buyers.

[MRT144]

Originally posted by Kidicious
Re: Incentives to buy a house.

There's enough incentive already here in the US. Anyone who doesn't want to save for a down payment is nuts. Cutting the capital gains tax for that is just a give away. I wouldn't call that an incentive.

A give away that has a positive economic effect? How many first time home buyers would contribute to an increased tax revenue based on these accounts?