Question

Should capital income be subject to personal taxation? There are arguments for and against its inclusion in the personal tax base. Center your argument around the issue of administrative complexity.

Answer 1

The question that whether capital income should be subject to personal taxation has aked for many years and this should be considered. The income tax is the tax charged for the income earned by individuals. Capital gains are profits from the sale of a capital asset, such as shares, a business, land, etc. Capital gains are generally included in taxable income. Capital income is a kind of investment income. Capital gains are two types such as long term capital gains and short term capital gains. These are based on the number of years which the income is earned. This is entirely different from personal or individual income.

Individual income is the income earned mainly through employment. When we use this personal income for the investing purpose then only it become capital income. Otherwise it will be individual income. So these capital gains are some kind of passive income. We can not include capital gains to the personal income because these are different. The main difference is that the difference in taxation rate. Short term capital gains have less tax rate comparing to long term capital gain and it considered as ordinary income. But in case of long term capital gain the tax rate is high. So we can say that capital income can not be include in the personal income because there are lot of administrative complexities regarding thr taxation rates and conditions.

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