Problem is that capital gains aren’t all gains, they include inflation. I’m all for a transition to ordinary income if you index the basis of investments to the inflation rate.
selling at a higher price is how investors "get out" of the game, but allow other investors to "take over the reigns", all without the company having had to pay out dividends at inopportune times.
Use your own money to gamble. Once you accept shareholder's money, you play by their rules.
If you are not paying dividends, register as non-profit.
No. Selling is how investors get out. No need for a higher price because they presumably got a return via dividends. If there's no increase in stock price, there will be no capital gains on the sale price either.
Reinvesting all the profits into growing is a phenomenon that became popular due to tax law. A dividend paying company can still make the choice to reinvest profits rather than pay them out. That will just mean a lower dividend than if they paid out all the profit to shareholders.
Then the value of the company (and the expected dividend stream) presumably fell, in real terms, because inflation is typically nonnegative.
It's not a tax disadvantage if the expectation is that the bulk of the income eventually comes from dividends, even if that time is 10 years down the road.
Just thinking it would get 10x worse if it also formed the basis of cap gains taxes.
The standard deduction essentially establishes a 0% rate on a "minimum $ necessary to live" salary. Marginal tax brackets establish a progressive tax system which is consistent with diminishing marginal utility of money.
The problem that valuearb refers to is completely different. Because of inflation I could buy an asset in 1 year, sell it 5 years later and show a nominal gain (sale price > purchase price) but have actually made any real money. By most standards it would be unfair to tax me on this sale.
For example, Person A buys stock in Company A and holds it for just over 1 year. Person A's gain on this stock is $1,000.
Person B has held stock in Company B for the last 50 years. He sells at exactly the same time as Person A and has the same $1,000 taxable gain.
If we accounted for inflation, Person B would pay much less tax than Person A, because Person B's gain is mostly (if not completely) inflation. Person A's gain, on the other hand, is mostly real gain, not inflation.