Capital Gains Taxes: Already Too High

Chris EdwardsDemocrats are proposing to raise capital gains taxes. Ranking member on the Senate Finance Committee, Ron Wyden, wants to tax capital gains on an annual basis, not the current realization basis. He also wants to hike the top capital gains tax rate for high earners to match the top rate on ordinary income. CNBCreports“Almost every major Democratic presidential candidate supports taxing capital gains as ordinary income . . .Sen. Elizabeth Warren on Thursday outlined an even more aggressive planthat would impose a new 14.8 percent tax on investment income to help finance Social Security.”These are radical and misguided ideas.This 2012 study discusses why capital gains taxes should be low or even zero. The study found that the United States already has high tax rates compared to other countries. The U.S. federal-state rate on individual long-term gains of 28 percent compared at the time to an average across 34 OECD countries of just 16 percent.A 2018study by OECD economists provides newer data for 33 countries. One finding is that “all countries tax capital gains on realization,” that is, when assets such corporate shares are sold. Not one of the 33 countries taxes gains on an annual or accrual basis, as Wyden proposes.The OECD study calculates the combined federal-state capital gains tax rates on investments in corporations in 2016, which are shown in the chart below. The calculation includes the corporate-level income tax and the tax on individual long-term...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs