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Originally Posted by Rekna
In your example you are selling a building but selling that building doesn't create jobs as people have been arguing as a reason to eliminate caital gains tax.
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People with jobs work in buildings, but that aside for now.
If I have a building worth $5 million and I paid $1 million, meaning I have $4 million in capital gains and $5 million in equity assuming no mortgage. If I sit on that equity and those gains, no jobs are created.
However, if I sell and realize the gain (pay reasonable tax on it), and take my equity out - I can spend it or I can re-invest it. If I spend it on cars, boats, travel, restaurants, clothing, jewels, personal trainers, plastic surgery, divorce lawyers, etc. I will go through the money pretty quick and the economy benefits to the tune of me spending $5 million. I have at least in theory created jobs.
If I re-invest it, let's say I build a $7 million building (market value) at a cost of $5 million (cost of construction), I have created jobs based on the labor to have the building constructed.
If I buy an existing building then the person who sold the building has the opportunity to either spend his gains and equity or re-invest it, still creating jobs.
As money, or let's say a single dollar, circulates in the economy there is a "multiplier affect". I earn a dollar and I pay, you to do something, meaning you earn a dollar. Then you pay someone to do something, meaning they earn a dollar. When you introduce a dollar into the economy it has a positive impact. Some call this "supply side economics", whether it is trickle down or trickle up, introducing a dollar in many cases can spur economic growth. In some cases it can be inflationary with no growth, i.e. "stagflation". The opposite is also true. Take a dollar out of the system you can hurt the economy.
So, the question with taxes is: If the government takes a dollar from the economy what are they going to do with it? If the government puts the dollar to some productive use, the impact can be positive. If the government wastes the dollar the impact will be negative.
This leads to the real answer to your question. Who is best able to maximize the return on a dollar in the economy (where everyone benefits), government or private citizens who invest in capital (the types of investments leading to capital gain taxes). Love him or hate him, Bill Gates when he started Microsoft probably did more for the economy with his investments creating Microsoft than the government could have. However, when the government created the Interstate Highway system or perhaps our investment in space exploration, that money was put to very good use, perhaps exceeding what would have been done by the private sector. In most cases I would side with privates citizens getting a better return and benefiting more people than government. Hence, I support lower capital gains taxes.
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Also when people are saying things are double taxed isn't that true for any buisness? If I buy food at a restaurant I pay a tax on it but didn't that restaurant also pay a tax on the ingredients? Does Kinko's pay sales tax on the paper they use?
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Ultimately consumers pay all taxes. Corporations as much as possible will earn a competetive return on investment and increased costs are passed on.
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Also the argument that it stifles job creation is not clear as lots of the tax dollars go directly to job creation (grants, infrastructure, security, etc).
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Again, it depends on how much waste you have in government. For example if my sister is unemployed and I give her $1 for food, she gets $1 for food. If the dollar is taxed and the government gives my sister $.50, in theory there is 50% waste. So, the question is what happened to the other $.50? If the government used it in a manner that is productive, all is good. If not, i.e. "pork" projects, no one or only a few benefit - waste.