To understand whether or not tax is a necessity the first thing that should be looked at is what tax contributions are used for. One use and the most obvious one is to raise capital for all of the required expenditure, this includes things like health care, education, pensions, ect and on a local level things like local parks and even cleaning roads. However is the tax system really needed for this? can't the private sector provide these goods/services? one might argue that every individual should just account for themselves and pay for what they use individually but when this theory is really looked in to it becomes clear that most people couldn't afford to do this because each person would have to pay the full fee of the service in question regardless of their ability to pay. Eliminating the capital gains tax one of the major obstacles facing all entrepreneurs in the united states when starting a new business or expanding an existing one is raising capital.

There is no other economic task more important than investing one's capital into new ideas and new enterprises. Therefore capital raised from one person or a group of professional investors remains a crucial source of funding for these type of enterprises. In the type of economic world which is present today the opportunity for good returns on a person's money must be in abundance to allure investments in such ventures. Capital gains taxes significantly diminish these returns, therefore reducing the incentives to invest.

Eliminating the capital gains tax will spark entrepreneurship and new investments in the economy, which in turn will elevate economic growth and increase the number of jobs. In order to stimulate economic growth in the united states, taxes on capital gains should be eliminated. Members of congress once considered a reduction in the capital gains tax rate from 28% to 19.8%. Combined with indexation, which is , reducing the capital gains tax by any amount would be a vital pro growth step taken by congress. However, given the fickle and high risk nature of investments and entrepreneurships, and the importance of maintaining a competitive economy in a global environment, capital gains should be exempt from taxation altogether. A zero percent capital gains tax would attract entrepreneurial risk taking, which is very important to economic growth.

It would entice wealthy investors to invest in a certain enterprise, which in small numbers would immensely increase the economic growth in the united states. Commission on civil rights said, reducing the tax on capital gains effectively increases the flow of financial 'seed corn' to budding entrepreneurs. Also, from a global perspective, the united states has one of the biggest capital gains tax rate. Depending on inflation, sometimes the united states has the largest capital gains tax rate in the world. In a competitive global economy a zero percent capital gains tax rate would make the united states a haven for capital, which in the long run will spark economic growth in the united states.

Eliminating the capital gains tax altogether would not only promote a boom economy in the united states but will give the united states an edge that it needs to compete in the global world, not to the potential benefits for eliminating the capital gains tax are clear. This was followed by a dramatic downturn as the rate was hiked 40% in 1987 venture economics. Eliminating the capital gains tax would augment the incentives to invest in new and expanding ventures. In a report from the small business survival committee's july 1994 newsletter, economists gary and aldona robbins estimated the economic impact of eliminating the federal capital gains tax. By the year 20, the robbins' projected that a zero percent capital gains tax would lead to many new heights, some of which include: an additional $3.2 trillion in capital formation, a creation of 1.1 million new jobs, and extra $1.6 trillion in gdp to the year 20, an annual gdp $391 billion higher than it would normally be, and additional 0.43 percentage points on the long term annual growth rate for the economy. It can be seen clearly by the preceding that eliminating the capital gains tax would stimulate economic growth in the united states proponents for a capital gains tax argue that a capital gains tax is merely a tax on the wealthy and this particular tax will not affect the economy too much.

However, capital gains taxes are not only taxes on the wealthy but they are taxes on wealth creation. Our writers can help get your essay back on track, take a look at our services to learn more about how we can help. Essay writing service essay marking service place an order when the basic conditions are satisfied for a taxpayer to eligible for the cgt small business concessions, the cgt 50% active asset reduction will be applicable.

The provision can also be applied in conjunction with the small business rollover concession and the retirement exemption concession. This concession permits taxpayers to reduce the capital gain 23 raised by applying the general cgt discount 24 the 50% active asset reduction. At the taxpayer's discretion they may choose not to apply the 50% reduction, otherwise it automatically applies 25 .

Essay on My House for Class 2

The 50% reduction tax concession is not applicable to capital gains generated from cgt events j2, j5 and j6. The advantage of this concession is that it encourages taxpayers to invest in capital assets by providing incentives. One of the goals of the small business tax reform was to make australia internationally competitive with countries that have lower cgt rates, this was achieved. For example if a company were to apply the 50% active asset reduction concession on the balance of a capital gain generated, the profits would be non taxable. However if this profit is disseminated amongst the shareholders the proceeds would be classified as unfranked dividends, therefore the exempted amount is included in the taxable income. For example if a trust were to distribute the exempt capital gain after applying the concession, the proceeds will be used to reduce the purchase expenditure of the units.

This effectively increases the cgt liability when the units are eventually sold 26 . To avoid this disadvantage taxpayers are advised to retain the active asset exemption amount and distribute the proceeds when the company or trust is wound up. This scenario represents the areas of complexity and ambiguity caused by the tax reform. If the taxpayer satisfies the basic small business tax concession requirements and fails to obtain the small business 15 year exemption 27 they may choose to apply the small business retirement exemption on their capital gain, subject to further conditions.

This exemption permits a taxpayer to disregard a capital gain derived from a cgt event occurring in relation to a cgt asset 28 . The capital gain amount which is disregarded will depend on the individual taxpayer's $500 0 cgt retirement exemption limit and where the taxpayer is a trust or company the disregarded capital gain will be dependent on the individual's cgt retirement exemption limit 30 . In the circumstances where the taxpayer is a trust or company it must also satisfy the significant individual test, meet the company or trust conditions 31 and pay the stakeholders the disregarded capital gain. The exemption is only applicable if a company or trust has less than two controlling individuals, the exemption is not accessible if the company or trust has more than two controlling individuals. Despite the misleading title the exemption is available for taxpayers not currently retired. For an individual taxpayer under the age of 55 the amount disregarded must be transferred into a complying superannuation fund or retirement savings fund 32 . Who wrote this essay request removal example essays the complexity of the legislation may cause confusion amongst taxpayers.

A taxpayer is required to submit an approved form to the superannuation provider by the time the contribution is made, these conditions may be deemed as too complex. Another significant problem arising from the concession is the controlling individual requirement. If a company has more than two controlling individuals the provision is not applicable. This may result in some small businesses being excluded from the concession, it can be argued that inequity will result. The roll over concession permits a taxpayer to defer a capital gain arising from a cgt event in relation to an active asset if the essential conditions in section 152 a are satisfied 34 .

To be eligible for the concession the taxpayer must acquire a replacement asset which is or will be an active asset 36 . When the rollover is applicable for the capital gain, the rolled over amount must not surpass the combined first and second elements of the cost base, this amount is then disregarded 37 . This concession does not apply if the 15 year exemption is applicable, as it overrides 38 . There are no maximum limits on the amount of a capital gain that may be disregarded.

Kindle Fire Academic Papers

The taxpayer may choose to disregard the entire or a fraction of the capital gain if satisfying the requirement for the division. The cgt roll over can be applied after the cgt general discount and the 50% active asset reduction provisions. This effectively provides the taxpayer the opportunity to adjust the capital gain to his requirements.