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Recent rhetoric has it that US corporations are excessively focused on quick profits in the capital markets instead of harboring a long-term view. Hilary Clinton's proposal on drastically increasing capital gains tax may try to address this perception, but is likely to get it wrong. Ultimately, she might be better off targeting executive compensation rather than the investors.
"The political appeal of the plan is clear. It targets wealthy investors, is friendly to executives, and is aimed at getting companies to spend more money. Unfortunately, it almost certainly won’t work. The simplest reason for this is that the plan would affect only a small slice of the market. Len Burman, a tax expert at the Urban Institute, told me, “The plan’s unlikely to have a major impact on stock prices, since most of the money in the market is controlled by institutions that don’t pay capital-gains taxes, like endowments and pension funds.” Burman also made the point that pushing people to hold stocks they would rather sell is hardly conducive to productive investment. “Even if short-termism is the problem, locking people into unprofitable transactions for long periods of time doesn’t really seem like a great solution,” he said."
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