by Don Simkovich

Created on: May 14, 2008

Increased capital gains raises the cost of doing business. This cost will be passed along to consumers and could cause investors to slow down their rate of investment. If this occurs, then fewer jobs are created.

I recently purchased a house to fix up and then place back on the market and sell. Currently, I will have to pay a 15% capital gains tax when selling the property if I hold it for less than a year.

Okay. The 15% rate cuts into my profit but if I was taxed at a 20% or 25% rate then it becomes even more expensive to sell. As a middle-class person who is also an investor, I would have to change my strategies if the capital gains rate raises too high.

Currently, I'm employing 4 people who are helping fix up the house. I'm buying goods at local hardware and paint stores. I'm paying local taxes, permits and fees such as dumpster fees to the city where the house is located. Since the house is located in a different state, I've flown back twice thus adding revenue to the airlines and airports where I ate meals. I also flew in to the regional airport.

One investment in a small house, such as the one I made, benefits many other people. Lower the capital gains tax rate and more investors will be encouraged to take a risk and more money will flow into local communities.

However, increase the capital gains tax rate significantly and investors will be less likely to take on projects such as real estate or starting new companies. Tradespeople such as painters, carpenters, plumbers may have less work and so could local government.

An investment is not a necessary expense someone has to make. It's a calculated risk that's being made to gain profit. An investor has to be accountable for the return on their money if they are going to be successful and invest repeatedly. However, the federal government that levies the tax is not held accountable for how the money is spent.

Low tax rates that encourage investing produce more jobs along the way. It allows middle-income investors such as myself to step out and earn additional income and save more for retirement. We have more disposable income to put into the economy.

Higher tax rates discourage cautious and wise investors from spending money since a higher rate simply increases the cost of doing business. It forces us to make decisions on not hiring skilled labor who would otherwise have jobs.

I wonder if more politicians in either major political party were hands-on middle class investors, instead of coming from backgrounds such as corporate law, would this debate not even be necessary. They would see the wisdom in a low capital gains tax rate.

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