The preferential treatment of capital-gains income is a tax boondoggle that should be re-examined if we are to talk honestly about our national balance sheet.
Join me after the sweet-potato, and think about signing my WhiteHouse.org petition if you agree.
I have read Daily Kos for a long time, and I enjoy the wit and intelligence that leap from the pages here. I joined a week ago, in order to create this post, and during my seven-day wandering-in-the-desert waiting period several front-page articles have only reinforced this truth.
Capital gains, and to a lesser degree dividends, enjoy a preferential low tax rate that is presumed to stimulate investment. This has not always been a part of our tax code, and need not remain. Indeed, several separate bases exist for the equalization of taxation for all forms of income.
First, does reduced taxation actually increase investment or growth ? Data compiled by non-partisan research arms of our own government reveal that there is, in fact, no correlation between the capital-gains tax rate and national growth, and no correlation between this tax rate and rate of investment.
Second, if not justified by growth, does it serve any social benefit ? Of course, we know the opposite is true--a quick glance at the comments of one recent presidential candidate will reveal that bestowing a 14 percent tax rate on a millionaire does nothing for his sense of a common good. The same government research I mentioned earlier shows only one good correlation--the lower the capital gains tax rate goes, the greater the separation between rich and everyone-else grows.
So, it doesn't increase growth or investment, and increases inequality. Does it, somehow, promote a national tax goal ? Of course not. Since most of the upper-upper income tiers are filled by investors of one sort or another, the long-standing goal of progressive taxation is inverted at the top: those who could afford to pay more actually pay much, much less (on a percentage basis) than residents of the middle and even lower tiers, who rely on their own hard work, every day, for their income.
Fourth, it drains the national government of needed funds. Equalizing capital gains taxation would raise about $ 70 billion each year; or that money could go to reducing other, truly impactful, rates.
So to sum: the preferential taxation of capital gains and dividends produces no investment benefit, worsens inequality and the societal ills that come with it, up-ends a professed goal of our tax system, and deprives the government of much-needed funding in the process. It is time to restore equal tax treatment to capital and labor income.
Join me, if you agree. Let the President know where we stand. Sign my petition, and make our voice heard.