[FoRK] Private equity, venture capital, entrepreneurs, and tax policy

[Kevin Elliott]

On May 6, 2008, at 10:30 AM, geege schuman wrote:

> On Tue, May 6, 2008 at 11:17 AM, Jeff Bone <jbone at place.org> wrote:
>
> <That's what the long-term cap gains rate is *for* --- to encourage
> long-term investment and reward the greater degree of risk  
> associated with
> it.>
>
> Long term is MORE risky?  We reward RISK?

Risk was a poor choice of words on Jeff's part.  Long term investment  
has a higher opportunity cost, both because of loss of liquidity and  
the risks from inflation.  We like people to invest, especially for  
the long term, so the capital gains rate is lower.  It's also worth  
noting that inflation has a much greater effect on long term  
investments, which also argues for lower rates.