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A capital gains tax is a tax applied to profit gained from the sale of a property or an investment. The more common capital gains are from the sale of stocks, bonds, precious metal, and the like. In the United States, the government places a relatively high marginal tax rate to capital gains as a means to foster a stronger local economy and increase worker wages.
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Currently, the tax rate on long-term capital gains income is 23.8 percent, exclusive of state-level rates, which range from zero to 13.3 percent. This means that companies and individuals can face a capital gains tax as high as 28.7 percent. This rate exceeds the global average of the 18.2 percent tax faced by taxpayers. This is based on research from the Organisation for Economic Cooperation and Development (OECD) that promotes greater transparency in tax matters by studying the banking and tax industries from 34 industrialized countries.
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This places a high burden on taxpayers, and many legislators believe that this may have a negative long-term effect on the competitiveness of the country. Because this tax deducts for a single purchase, certain prejudices and biases regarding savings may occur. This may create a snowball effect of corporations not having enough capital on hand to hire new employees which in turn slows down economic growth.
Many analysts and investors are still debating whether it would be fair to tax capital gains and most stock dividends at lower rates than earned income. The opinions vary, with no single tax analyst agreeing with one another. It is clear, however, that this is a relatively controversial issue and should be discussed with a tax representative before making any type of decision.
Wall and Associates Inc. has helped hundreds of clients understand their taxes better by providing them with the right information and proper guidance. As one of the nation’s leading tax representation firms, it recognizes the value of being an educated taxpayer. For more information regarding the company’s services, visit its official website.
