The United States generally does not tax capital gains realized by foreign investors on U.S.-sourced investments, provided they are not engaged in a U.S. trade or business. At the same time, foreign investors account for more than a fifth of activity in U.S. capital markets. Volume XLIX staffer Freya Stavis argues that these untaxed capital gains represent a revenue source that remains untapped. This post looks at the policy reasons behind the current approach and considers whether it still makes sense to keep that revenue untaxed.
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