Eliminating The Capital Gains Tax :: essays research papers

Eliminating The Capital Gains Tax One of the major obstacles facing all entrepreneurs in the United States when starting a new business or expanding an existing one is raising capital. Here capital refers to money that people invest in a business. Investment and entrepreneurship are the heart and soul of a lively economy. There is no other economic task more important than investing one's capital into new ideas and new enterprises. Therefore capital raised from one person or a group of professional investors remains a crucial source of funding for these type of enterprises. In the type of economic world which is present today the opportunity for good returns on a person's money must be in abundance to allure investments in such ventures. Capital gains taxes significantly diminish these returns, therefore reducing the incentives to invest. Eliminating the capital gains tax will spark entrepreneurship and new investments in the economy, which in turn will elevate economic growth and increase the number of jobs. In order to stimulate economic growth in the United States, taxes on capital gains should be eliminated. Members of Congress once considered a reduction in the capital gains tax rate from 28% to 19.8%. Combined with indexation, which is , reducing the capital gains tax by any amount would be a vital pro-growth step taken by Congress. However, given the fickle and high risk nature of investments and entrepreneurships, and the importance of maintaining a competitive economy in a global environment, capital gains should be exempt from taxation altogether. A zero percent capital gains tax would attract entrepreneurial risk taking, which is very important to economic growth. It would entice wealthy investors to invest in a certain enterprise, which in small numbers would immensely increase the economic growth in the United States. In the Wall Street Journal the U.S. Commission on civil rights said, "Reducing the tax on capital gains effectively increases the flow of financial 'seed corn' to budding entrepreneurs." Also, from a global perspective, the United States has one of the biggest capital gains tax rate. Depending on inflation, sometimes the United States has the largest capital gains tax rate in the world. In a competitive global economy a zero percent capital gains tax rate would make the United States a haven for capital, which in the long run will spark economic growth in the United States. Eliminating the capital gains tax altogether would not only promote a "boom" economy in the United States but will give the United States an edge that it needs to compete in the global world, not to mention create new jobs. The potential benefits for eliminating the capital gains tax are clear.