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Capital Gains Taxes and General Income Taxes

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What is your interpretation as to whether or not capital gains taxes should be raised or lowered? Should general income taxes be raised or lowered? In either case, what is the likely consequence for business investment, production, and employment?

Should there be a Buffett Rule? Explain the Buffett Rule and whether or not it should be implemented.

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Solution Summary

Capital gains taxes and general income taxes are examined.The Buffett rule for a case is determined.

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Capital Gain Taxes

The profit that is realized on the sale of non-inventory assets such as stocks, bonds, precious metal and property is considered as capital gain. The tax over such income can be defined as Capital Gain Tax (CGT). Due to high CGT, individuals as well as corporations do not prefer investment in such assets as its profit is accountable to high tax that decreases the actual gain. It discourages the start-ups of businesses and purchases of new plants and equipments for existing firms. This situation would lead to decrease in investment, output and real wages accordingly. Due to this, CGT should not be increased as it would influence the economic growth adversely. On the other hand, CGT is an important source of federal income through which it is engaged to manage budget deficit in an effective manner. The reduction in CGT leads to a decrease in revenue and an increase in budget deficit that also influences the economic growth adversely (LaRochelle, 2012). Due to this, CGT should not be decreased as it would also not be beneficial for the ...

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