Capital Gains in Economic Theory and National Accounting

Steindl, Josef

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Document type:: Works

Collection:: Josef Steindl Collection

Title:: Capital Gains in Economic Theory and National Accounting

Author:: Steindl, Josef

Scope:: Typoskript, 13 Blätter, mit handschriftlicher Ergänzung auf Seite 1 sowie handschriftlicher Paginierung (beides nicht vom Verfasser)

Year of publication:: 1992

Language:: English

Note:: Der vorliegenden Text wurde post mortem (1998) mit geringfügigen Änderungen publiziert.

Topic:: Economic history,economic theory,current developments

JEL Classification:: E22 [Investment, Capital, Intangible Capital, Capacity] E01 [Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts]

Shelfmark:: S/M.78.1

DOI:: https://doi.org/10.48671/nls.js.AC14446488

r f bullish expectations continue. In this case the speculators form a chain each of them trusting in a continuation of the boom until finally at one point the underlying real determinants set a limit to the hausse: As already mentioned the share prices or the land values become unrealistic because the yield in form of dividend or earning power will be insufficient to maintain the belief in a continuation of the boom, and this will be sufficient to lead to its breaking. Thus the large element of irrationality which is necessarily implied in the expectations leads to instability of asset prices, possibly with effects on the "real" economy. X. CAPITAL GAINS TAX. In the United States capital gains are now taxed at the same rate as income. There is a very strong current of political pressure in favor of a reduction or abolition of the capital gains tax. The argument in favor of that is never very deary put, but it is maintained that it would reduce the cost of capital. Apparently the idea is that the recipient of capital gains would invest in bonds and thereby lower interest. It is not considered that the recipient of the gain might use it to continue the game of inflating asset prices, in fact that a substantial gain will tend to encourage him to do that, and therefore to increase the instability. From this point of view a taxing of capital gains could be recommended as a way of reducing instability. The argument of the opponents of the tax, incidentally, does not take into account that the tax prima facie would reduce the budget deficit and therefore the borrowing of the government. Some of the opponents of the capital gains tax might have a more sophisticated argument in mind: the tax might make it more difficult to sell new shares especially if it is the case of a firm which does not belong to the small set of very well established large corporations. The idea is that those who take up newly issued shares of a new high tec concern will often have to base themselves not on actual returns which are still modest but on the promise of large returns in the future. In other word the chances of new corporations are thought to be based on investors which are to some extent speculative. This argument is less shaky than the earlier one but it concerns only a very limited field and is therefore weak in comparison to the more general argument that capital gains favor instability over a very wide field.

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