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INCOME
INEQUALITY
For Profit & Nonprofit Businesses
Establishing Precedent:
A Look Back at History
Capital Gains Tax
Reagan's landmark 1986 tax bill taxed capital income and labor income at the same rate. People raised concern that investment would plummet, however the S&P 500 businesses continued to prosper.
How do the following sectors influence the creation of tax codes?
Charitable Deductions
Nonprofits: These organisations generate around $166.2 billion in economic activity each year. They spend nearly $1 trillion on goods and services. The government uses tax breaks to encourage donations to nonprofits because these foundations have the money and resources to serve people that the government cannot. If there are not enough donations this sector will fall and so will all the services they provide.
In the 1980's, through a series of reforms Jimmy Carter decreased the top tax rate from 70% to 28%. Despite concern, people donated just as much with a lower tax rate.
Housing Market: The 2008 housing market crash proved that this sector has a large influence on the economy. The government uses tax breaks to gain back people's trust by incentivising homeownership.
Investors: The stock market is a large part of the American economy. The amount of investments tend to correlate with how well the economy is doing. By taxing unearned income at a lower rate, more investors will have the money to invest back into the market.
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