What Dictates Fluctuations In Current Capital Gains Tax Rates?

The current capital gains tax rate is actually an amalgam of many changes that have been made to the legislation over the course of time. Acts such as the Revenue Act of 1921 and the Tax Reform Acts of 1969 and 1976 laid a lot of the groundwork that was later used to make further changes to the tax code in 1997 and 2001 under Presidents Clinton and George W. Bush. respectively.

Legislation or Choice

There are only two things that could possibly result in dictated fluctuation when it comes to capital gains tax rates. The first is legislation. The government has the power to control capital gains tax rates through legislation. This is a power that could be exercised at any point that legislation is enacted.

Any fluctuation that does not happen as the result of legislation happens as the result of choices built into the capital gains tax code. For example, a 1942 change to the tax code introduced a choice for certain taxpayers. The taxpayer, under this choice, could cut 50% of capital gains for assets in their possession for more than six months for tax purposes. Alternatively, they could choose to pay an alternative tax rate of 25% in situations where ordinary taxes were greater than 50%.

blog comments powered by Disqus