Instead, there are better ways to modify the existing capital-gains tax regimen. Charging interest on untaxed gains -- an idea proposed by economist Alan Auerbach in the 1980s -- would limit the degree to which untaxed wealth could snowball. And limiting the number of asset sales that could be used to generate tax-loss carryforwards to help reduce taxes on future income could cut down substantially on gaming the system.
And of course, the most important reform would simply be to raise the capital gains tax rate, as Microsoft founder Bill Gates has suggested. That would be unlikely to harm business investment, and would be an effective way of making the distribution of wealth and income in the U.S. a bit more equal.
This article provided by Bloomberg News.