The Democrats are going to raise capital gains taxes significantly because Obama says that would be only fair. But what is fair about attacking economic growth, which amounts to an attack on future living standards? What most people do not understand, especially Democrats, is that capital gains are economic profits and not accounting profits, and this is where capital gains taxes do the most damage. The tax is levied on the sale of assets, e.g., businesses and shares. This has the effect of reducing the number of transactions because that is one of the ways of avoiding the tax. In other words, capital gains taxes are also transaction taxes where they are levied on realised gains.
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