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Strategies & Market Trends : Stock Attack II - A Complete Analysis
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To: James F. Hopkins who wrote (19147)9/18/2001 5:25:46 PM
From: Art Bechhoefer  Read Replies (1) of 52237
 
Jim, you are 100 percent correct in your warning of what could happen by eliminating the capital gains tax. Doing so would simply create another tax shelter that would benefit only a few who don't need benefits like that.

An alternative would be to index capital gains by adding the annual GDP deflator to the cost basis of stocks held longer than one year. Thus, if the deflator were, say 3 percent, and you held the stock for five years, you would add 3 percent compounded to get a higher cost basis for the shares. This is better than the current formula of 20 percent after a year (for those in the higher brackets).

Indexing capital gains against inflation provides an investor with enough incentive over fixed income securities to create sufficient interest in equities. Unfortunately, this idea may be too complicated for the average member of Congress to understand.

Art Bechhoefer
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