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To: kech who wrote (91286)	1/4/2001 9:06:34 PM
From: Cooters	Respond to of 152472

LT Cap Gains are quite different than regular income because they are, with rare exception, voluntary taxable events. The higher the rate, the less likely the volunteering. There is significant historical support for cap gains tax revenue increasing as the rate falls, especially upon the initial reduction. The top marginal regular rate also shows similar attributes, as many in that bracket choose what risks, with accompanying potential rewards, they will take. I can assure you my risk tolerance drops significantly across the 39.6% threshold. Cooters

To: kech who wrote (91286)	1/4/2001 9:19:37 PM
From: Art Bechhoefer	Respond to of 152472

Golfinvestor and Tom, I agree also that a tax on capital gains should be indexed against inflation, which is why the effective capital gains rate if indexed would be less than the rate for ordinary income. Although one can make a case for a uniform rate for everyone, regardless of income level or type of income, the disparities that would result, without any method of adjustment would create more inefficiencies. Milton Friedman was in favor of a negative income tax that would provide for low income people, but that method, while theoretically sound, is still less efficient than a children's allowance and a children's allowance tax based on adjusted gross income (the Univ. of Michigan formula). These alternatives should be examined carefully by those who want to reduce the size of government by getting rid of the huge bureaucracy dedicated to only one job--determining eligibility for assistance. I don't think inflation adjusted capital gains are doubly taxed. They would be if inflation were not taken into account. Dividends are doubly taxed, which is why many firms don't pay dividends, and why mutual funds and real estate trusts do (because those dividends are not taxable except to the recipient). I also think the tax on interest payments could be eliminate on the grounds that interest payment is simply a return of capital adjusted for inflation. All these kinds of tax relief would make the whole tax system more efficient, without exacerbating the problems caused by increasing disparity between high and low income populations. Art