| Capital Gains tax is a federal tax penalty that is | | | | represent 6% of personal and corporate income tax |
| imposed on capital accumulation, investment and | | | | receipts and 3% of total federal revenues. There is a |
| productivity. Some of the income that is subject to | | | | lot of controversy surrounding the capital gains tax that |
| capital gains tax includes the sale of an investment, a | | | | individuals and corporations have to pay but it actually |
| home, a family business, a farm or ranch or even a | | | | brings in much less revenue for the federal |
| work of art. The capital gains tax is applied on the | | | | government than most people would think. In fact, the |
| difference between the price paid for an item and the | | | | total collections during the 1990s were between $25 |
| money received from selling it, or the capital gain. The | | | | billion and $30 billion a year. In the USA, capital gains |
| most common form of capital gain for people is the | | | | are not indexed for inflation which means that the |
| sale of their corporate stock. The capital gains tax rate | | | | seller pays capital gains tax on the real gain and also |
| for individuals is currently at one of its highest rates | | | | on the gain attributable to inflation. This is one reason |
| ever and is at 28% while the corporate rate is at its | | | | that the capital gains tax is lower than regular income |
| greatest level in history, namely 35%. There is an | | | | tax rates. In other countries, such as the United |
| inequality with capital gains tax in the fact that people | | | | Kingdom, the capital gains tax rate is much higher |
| must pay taxes on all of their gains but are only able | | | | (over 40%) but there it is actually indexed to inflation. |
| to deduct a portion of their losses. This particularly | | | | The difference between capital gains tax and all other |
| applies to investments that fluctuate between gains | | | | forms of federal tax is that it is basically a voluntary |
| and losses over time.In many states taxpayers are | | | | tax. People can avoid paying any of the tax by simply |
| liable, not only for the federal capital gains tax but also | | | | not selling their assets. This is becoming increasingly |
| the state's own form of capital gains tax. This can | | | | common, especially with the uncertainty of the stock |
| actually take the combined rate to almost 40%. | | | | market, and the government estimates that there is |
| California, Montana and Rhode Island are amongst the | | | | $7.5 trillion of unrealized capital gains which would all be |
| highest in the country. | | | | subject to capital gains tax if it was sold. |
| For the government, the capital gains tax payment | | | | |