Volume 2, Issue 3

Reformed taxation of capital gains could play an important role in a broader policy package to improve the simplicity, equity, and efficiency of the federal tax system. Constructive reforms for the United States would draw on Canadian provisions for taxing capital gains: a) eliminate the distinction between short-term and long-term gains, taxing both equally; b) use an average-cost basis for computing capital gains on all holdings of a security; c) apply a fixed tax inclusion rate for net capital gains; d) eliminate the $3,000 offset of taxable income for net capital losses; and e) adopt “deemed realization” of capital gains on death to facilitate quick abolition of the estate tax.

The American savings rate, always low by international standards, has fallen sharply in recent decades. In this essay, I argue that a large part of the savings shortfall results from pressures to keep pace with community spending standards, pressures that have been exacerbated by rising income and wealth inequality. The progressive consumption tax is one possible remedy.

Many Americans donate little or nothing to charity, but according to Robert Cooter and Brian Broughman, our social environment is the cause, not human nature. They propose a small policy change to increase transparency and elicit generosity inspired by experimental evidence about the nature of giving.

Why don’t people give more to charity? One reason is that the problems will be there whether individuals give or not. Here is a policy--inspired by the matching grants that charities use so effectively--that could actually make a real difference.