Who invented capital gains tax

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Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. Last year, Trump introduced tax reforms that had one main goal: simplification.

What Trump's plan doesn't discuss is capital gains tax rates. The stock market could arguably be the best wealth creator the American public has at its disposal.

On the other hand, lowering the capital gains tax rate may wind up putting even more money into the pocket of wealthier Americans, who are the most likely to invest and pay capital gains tax. As with most issues, it's a two-sided coin that comes with its own set of advantages and disadvantages. But regardless of what happens with capital gains tax rate, take solace in the fact that today's maximum rates are among the lowest they've been since World War II.

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Reagan didn't relish raising the capital gains tax rate to 28 percent, but was willing to compromise on taxing capital gains as ordinary income since overall rates were being dramatically reduced for Americans. Like Reagan, many Democratic leaders understood the importance of capital gains tax rates to the economy. President Kennedy eloquently said that "The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital from static to more dynamic situations, the ease or difficulty experienced in new ventures in obtaining capital, and thereby the strength and potential for growth of the economy.

When President Franklin Roosevelt , who was known for a "soak the rich" approach to tax policy, and large Democratic Congresses ran the country, they adopted a capital gains tax sliding scale — the longer an asset was held, the lower the rate it paid. By claiming to encourage "investment" rather than "speculation," Roosevelt and Democrats were able to satisfy the populists in their party.

Today, Democrats say a hike on capital gains taxation is a lifeline to the middle class; Republicans say it is Robin Hood economics. In reality, a low capital gains tax rate has an important role to play in fostering economic growth and promoting the entrepreneurial drive, which is why Silicon Valley became ground zero for the Carter revolt on capital gains tax hikes. Entrepreneurs are a major force for technological breakthroughs, whether replacing an old lathe or coding the latest app.

It's a shot in the arm that can encourage risk taking for new start-up companies and the creation of high-paying jobs. The economic ripple effect touches everyone — the middle class and the wealthy. Economic research shows that tax policy, particularly when it comes to capital gains, can have a significant bearing on economic growth.

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