What if capital gains on corporate securities were not taxed at all, or at a very minimal level (10% or less) as long as the money invested went to the company?
At the same time, secondary purchases and sales would be subject to ordinary income tax rates. To be clear about it, buying stock in the market from a prior shareholder, investing via derivatives like total return swaps or over the counter options, or any of a number of other ways people invest would revert to ordinary income. This would apply to bonds, as well, though the amount of income the bond world offers as capital gains is pretty limited.
This would definitely steer more money toward the genuine needs of companies to raise capital, while removing the temptation to waste money and time avoiding income tax by “converting” ordinary income into capital gains.
Just a thought on a way to increase real investment in our private economy, which should help create employment opportunities, while simultaneously cutting back on the incentive to strip companies of their assets and fire American workers through the mechanism of buying and breaking up companies.
I would love to hear what my readers think. Their comments after the break.
Readers get their say: