Besides raising government revenues, tax policy provides acarrot or stick for encouraging and discouraging behaviors. Dare tosay, we need a few more carrots as well as some sticks to changesome of our bad habits and re-orient our investment focus.
First of all, let's lower the capital gains tax to encouragelong-term investment, and I mean really lower them. We mustencourage a more long-term investment focus on building enterprisethat creates value over time and grows businesses. Decreasetax rates to 10% or less on investments held for 10 years andmore.
But sorry deal guys and traders, we should increase tax rates onshort-term capital gains and extend the term for the short-termrate before we start lowering it to the current long-term rate andthen below. People can still make money on day trading andflipping, just not as much. Dealmaking frenzies and flippingmay provide fees for many intermediaries, but do not providestability for local markets, encourage owners to put down roots, orcreate enterprise with staying power and some level of jobssecurity. New technologies and systems take time to nurture and weneed to enhance the rewards to spur more brainpower into theseendeavors. M&As, buying companies, stripping them down,refinancing them, and reselling them as quickly as possible mayhave their place, but not to the degree practiced in recent yearswhere the result is big pay packages for a few, all those fees, andgenerally a lot of disruption, lost jobs and lost benefits not tomention often compromised businesses.
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