Capital-Gains Tax

E-mail debates of newsworthy topics.
April 3 1997 3:30 AM

Capital-Gains Tax

VIEW ALL ENTRIES

John,

Advertisement

       In brief:
       1) If retained corporate earnings were treated as taxable income to shareholders, yes, there should be a credit on the capital-gains tax, or a basis adjustment, to reflect that fact. In the first example, the woman's basis, which starts out at zero, should be increased to $60,000 (assuming she pays the tax on the $60,000 from noncorporate funds). Therefore, she would owe no capital-gains tax. But if she sells the stock for more than $60,000, she owes tax on the difference. Why not? It's income. Ditto the second example.
       2) Even where losses and gains are exactly equal (e.g., your costless casino), there are individual winners and losers, so I do not follow your argument that if a situation produces no net tax revenue it should be exempt from taxation. Why shouldn't the lucky winners pay a bit more tax and the unlucky losers a bit less? The real-life asymmetrical tax treatment of gambling is a noneconomic policy decision I have mixed feelings about.
       3) You concede that in the stock market, by contrast, real gains exceed real losses. Yet you also concede that if losses were deductible without limit (and the limits are much less onerous than on gambling losses), net revenue to the government would be zero. That, John, is precisely why it's reasonable to have limits! See my earlier detailed explanations of all this.
       4) Without settling whether taxes on capital are "ultimately" paid by labor (if so, it's odd that holders of capital--such as the backers of your center--raise such a fuss about them), I merely note that the tax on labor is directly paid by labor. For any given level of income-tax revenue, less raised from capital means more must be raised from labor. The point is not to punish or burden either capital or labor, but to raise the necessary revenue as fairly and efficiently as possible.

John C. Goodman is president of the National Center for Policy Analysis, a public-policy research institute. Michael Kinsley is editor of Slate.

This dialogue grows out of Michael Kinsley's article "Eight Reasons Not to Cut the Capital-Gains Tax," which appeared recently in Slate.

TODAY IN SLATE

Politics

Talking White

Black people’s disdain for “proper English” and academic achievement is a myth.

Alabama’s Insane New Abortion Law Gives Fetuses Lawyers and Puts Teenage Girls on Trial

Tattoo Parlors Have Become a Great Investment

A Jaw-Dropping Political Ad Aimed at Young Women, Apparently

The XX Factor
Oct. 1 2014 4:05 PM Today in GOP Outreach to Women: You Broads Like Wedding Dresses, Right?

Big Problems With the Secret Service Were Reported Last Year. Nobody Cared.

Crime

Operation Backbone

How White Boy Rick, a legendary Detroit cocaine dealer, helped the FBI uncover brazen police corruption.

Hong Kong’s Protesters Are Ridiculously Polite. That’s What Scares Beijing So Much.

This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century

Moneybox
Oct. 1 2014 8:34 AM This Gargantuan Wind Farm in Wyoming Would Be the Hoover Dam of the 21st Century To undertake a massively ambitious energy project, you don’t need the government anymore.
  News & Politics
Politics
Oct. 2 2014 11:01 AM It Wasn’t a Secret A 2013 inspector general report detailed all of the Secret Service’s problems. Nobody cared.
  Business
Moneybox
Oct. 2 2014 12:58 PM Why Can’t States Do More to Protect Patients From Surprise Medical Bills? It’s complicated.
  Life
Lexicon Valley
Oct. 2 2014 1:05 PM What's Wrong With "America's Ugliest Accent"
  Double X
The XX Factor
Oct. 2 2014 12:37 PM St. Louis Study Confirms That IUDs Are the Key to Lowering Teen Pregnancy Rates
  Slate Plus
Behind the Scenes
Oct. 1 2014 3:24 PM Revelry (and Business) at Mohonk Photos and highlights from Slate’s annual retreat.
  Arts
Brow Beat
Oct. 2 2014 1:29 PM Want to Know What Makes David Fincher Great? Focus on What He Doesn’t Do.
  Technology
Future Tense
Oct. 2 2014 1:22 PM If Someone Secretly Controlled What You Say, Would You Notice? What cyranoid experiments reveal about how people act.  
  Health & Science
Science
Oct. 2 2014 12:53 PM The Panic Virus How public health officials are keeping Americans calm about the Ebola threat.
  Sports
Sports Nut
Oct. 1 2014 5:19 PM Bunt-a-Palooza! How bad was the Kansas City Royals’ bunt-all-the-time strategy in the American League wild-card game?