[valuearb]

I’m a big fan of taxing both capital gains and dividends at ordinary income rates to help restore fairness and progressivist to the tax code.

But to do this you absolutely need to index capital gains for inflation. That’s the reason they get special tax rates in the first place, because when inflation is high a significant part of capital gains are illusionary and you don’t want effective rates to reach over 100% in real use.

So don’t tax profits if reinvested. Task them as income if returned to shareholders (or used as excess compensation).

[aidenn0]

I'm actually fine with effective rates approaching 100% in higher brackets in real use. Inflation is a sunk-cost. If the investor were instead to put their money under their mattress, they have negative real returns, so effective tax rates of 100% would still incentivize investments to offset inflation.

Other than that, I completely agree with you.

[valuearb]

You are right about the sink cost, but ignoring a very real risk. Taxing capital gains to the point where the investor has negative returns drives capital offshore to places where it will be taxed far less or not at all. It turns honest citizens into tax cheats, and we already have too many of those.