It looks like we could add the Congressional Budget Office (CBO) to the long list of tax professionals, including the IRS and every other state tax office in the country, when it comes to calling a capital gains tax an income tax. This emerges from a CBO report dated March 22, 2021: "Capital gains taxes – Capital gains taxes are taxes on the return on capital. "
The CBO report continues:
“Individual income tax combines a tax on labor income and a tax on capital income such as interest, dividends, capital gains, and certain corporate profits. Corporate income tax and inheritance tax also impose a tax on capital income. By reducing the return on capital employed, capital gains taxes reduce the incentive to save and invest. Because of this effect on saving, which distorts the distribution of resources over time, the economic distortions in capital taxes are generally viewed as greater than those in labor taxes. The extent of the impact of capital gains taxes on saving is uncertain and depends on the specifics of the tax change being analyzed.
Excise taxes – Excise taxes, which are used to tax goods and services purchased for personal use, are less of an incentive to reduce saving than income taxes. With an income tax that covers both labor and capital income, income is taxed when it is earned, regardless of whether it is consumed that year or stored for future consumption. If saved, an income tax is re-taxed on the return on the saved income. In contrast, a consumption tax levies a tax on income consumed for the current year, but exempts income saved for future consumption. This saved income is only taxed if it is used to finance future consumption.
Consumption taxes can take many forms and are widely used outside of the United States. Similar economic effects could result from a uniform sales tax on all goods and services, a sales tax or a combination of a tax on labor income and a trade tax on the non-wage-related components of value added. An economically significant feature of excise taxes is that they do not directly affect the return on investment and, therefore, people's decisions about how much to save.
Consumption taxes are generally more efficient than income taxes because they do not skew savings decisions by changing the rate of return on savings. "
The CBO report also notes:
“Individual and corporate taxes affect both labor and capital income. Excise taxes are consumption taxes on certain goods. "
Is there any tax professional in the world who calls a capital gains tax an "excise tax"? I couldn't find one.
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