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$67. However, this fact does not stop federal and state governments from exacting their $160 tax. Therefore, the investor, who at first glance seemed to make $500, actually lost $93 because of an unfair tax system.
Last fall, a majority in both houses of Congress attempted to rectify the injustice of unfair capital gains taxes. Despite the attempt, a handful of senators blocked passage of reform. The defeated legislation included a measure called “indexing,” which would have eliminated penalties on capital gains caused by inflation.
Had indexing been included in the example above, the total amount of taxes paid to the state and federal governments would have equaled about $22. This figure represents a tax savings of $138 and would have taxed the investor only on his real profit.
As the inequity of the current system becomes clearer to potential investors, they become less willing to invest their money for fear of unfair tax codes. Penalties on investment/ such as the capital gains tax, have driven needed money away from those who could use it for starting up or improving businesses.
The current system is particularly damaging since it has led to a low savings rate and less investment. The tax bias against investment in the United States increases costs for business enterprises by raising the cost of obtaining funds for new projects.
Currently, U.S. tax codes detract from many American companies’ ability to remain competitive in world markets. When the cost for innovation and development rises,
94.4%