tag:blogger.com,1999:blog-2830084253401570472.post6861089414778184443..comments2024-03-28T09:22:36.967+13:00Comments on Offsetting Behaviour: Capital Gains Taxes ReduxEric Cramptonhttp://www.blogger.com/profile/15831696523324469713noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2830084253401570472.post-33204898420208245842011-08-06T20:12:08.278+12:002011-08-06T20:12:08.278+12:00Ben,
The issue is not, or at least should not be,...Ben,<br /><br />The issue is not, or at least should not be, whether revenue is lost through not having a CGT. Revenue is lost through not having any tax: e.g. through not having a 20% GST, through zero-rating exports in the GST, through not having a separate excise tax on, say, blogging, etc. The issue, or should be, whether the not having a CGT leads to resource allocation being directed in part because of tax advantage rather than the true underlying benefit. <br /><br />Now, it would seem that if people invest in order to earn a return as non-taxable capital gains, then that would suggest that resources are being misdirected, but it is not that simple. First, if the change in behaviour simply consists of which second-hand goods (shares, houses, whatever) a particular saver purchases, then we simply have a change of ownership of existing assets and we need to look further to see if that has had any impact on which new assets are calculated. This was the point of the second of my CGT posts: you can tell a story in which there is a misallocation of resources in the creation of new assets, but it is a pretty long stretch. More to the point, public discussions of CGTs never seem to even attempt to draw the link between CGTs and new asset creation. <br /><br />And the public discussions have a second, more severe, limitation. All the theoretical cases for CGTs that I know of require offsetting treatment of capital gains (taxed) and capital losses (subsidised) and equal treatment of realised and unrealised gains and losses. If such a tax policy is not being proposed, the debate also needs to make the case for why a tax on realised gains only with no offset for losses would be better than nothing for addressing the theoretical inefficiency of a no CGT regime.Seamus Hoganhttps://www.blogger.com/profile/06752338906486087395noreply@blogger.comtag:blogger.com,1999:blog-2830084253401570472.post-65176897872051295162011-08-05T18:37:26.185+12:002011-08-05T18:37:26.185+12:00The way I understand it (and I admit I could be wr...The way I understand it (and I admit I could be wrong), if you have some capital which you would like to get a profit from, you can either put it to work generating income (as in selling ships, shoes, sealing wax...) or you can put the capital into something which looks like it will grow more valuable (such as property) and wait for the sale price of that property to go up. <br /><br />The former is captured in the tax base whereas the latter is not, which encourages more people to invest in the latter way, which in turn results in greater tax losses to the govt. These have to be either offset by increasing taxes to someone else, or by running a deficit.<br /><br />labour's plan to reduce the deficit that we have indeed run by bringing this kind of profit back under the taxation system... that's the way I understand it but I know there are some holes in my understanding of economics. Apologies if I'm too far wrong.Ben Whttp://www.salient.org.nznoreply@blogger.com