In the US, realized capital gains are taxed at 15% if they are held for more than a year. Suppose instead that we include realized capital gains (those held for more than a year and less than a year) in income instead so that they are added to an individual’s AGI and therefore are taxed at the same rate as an individual’s income. We would still NOT tax unrealized capital gains. Use any graphs, equations and logic that you think will support your answers to the following questions. This is good practice for an article analysis.
a) How do you think that this will affect the amount that individuals invest in capital? Does it vary across individuals? Why?
b) How will it affect how long people hold capital?
c) How might this affect the economy in general?