The issue of capital gains tax is quite interesting as well as intriguing as some experts argue that it would make more sense if the tax was just scraped off al together. Any way that is beside the point for now. Let's look at the possibility of reducing capital gains tax from the IRS's point of view before we can explore our own possible strategies of overcoming the capital gains tax if we feel it is too burdening.
According to the law as it stands currently on capital gains tax, all capital gains are taxed at an average rate depending on your capital gains tax margin. Given that the margins have a wide discrepancy in tax percentages, it could be strategic to try and turn the margins and their respective percentages to your favor. Take the case of a trader whose marginal federal tax rate is 25% or higher. Such a trader can tactfully manipulate the reduction of his capital gains tax by doing a few things. This few things may include the extension of properties for more than one year as the tax rates for properties that have been held for more than one year are lower as compared to short term gains on assets sold.
As much as this strategy would work it is also important to note that there are exemplary situations that may reverse the taxation rates of long term held assets. This includes category of long term gains accrued from the sale of collectibles. The state taxes long term gains on collectibles at a much higher rate of 28% as opposed to the 15% rate that applies to other long term gains from other types of assets.
Investor attitude towards tax reduction
Other than such tactics, it is up to the government to try and reduce capital gins tax depending on its perception. As many people have continuously tried to argue that increasing capital gains tax is quite dampening to the general investment attitude as it is more or less a case of double taxation since they claim that they get taxed on their regular incomes and the eventual taxation on their capital gains is unfair. The other trivial issue is the aspect of having to pay more as your capital gains increase.
Most investors feel this is unfair since even individuals can improve their performance in whatever field they participate in by perhaps taking a better diet and joining fitness gyms to enhance their performance and wellbeing. If people were to be taxed more for being smarter and more productive, the feeling is that such individuals would be demoralized and may opt to remain unfit if such circumstances would guarantee less penalties.