Comments on: A speech on taxes that would help Romney’s run http://blogs.reuters.com/breakingviews/2012/01/19/a-speech-on-taxes-that-would-help-romneys-run/ Mon, 26 Sep 2016 03:26:00 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Gaius_Baltar http://blogs.reuters.com/breakingviews/2012/01/19/a-speech-on-taxes-that-would-help-romneys-run/comment-page-1/#comment-8790 Thu, 19 Jan 2012 23:31:30 +0000 http://blogs.reuters.com/breakingviews/?p=8787#comment-8790 Low taxes on capital gains do not encourage investments. Reagan proved that with the 1986 Act when it equalized the tax rates for capital gains and ordinary income. The real justification for taxing investment income at lower rates than other forms of income is that those earning it contribute generously to campaigns.

The most common form of capital gain for the bottom 99% is from selling their house. The first $500,000 of gain already is exempt from tax. Few of the bottom 99% earn capital gains, anyways. FactCheck.org noted that over 80% of capital gains inured to and were realized by those earning $200,000+. See http://www.factcheck.org/2008/04/impact- of-capital-gains-tax-on-the-middle-class  /. Thus, saying you’ll eliminate capital gains taxes for the bottom 99% is a throwaway line.

And if this were done, it is inevitable that we would immediately see political pressure, backed by massive campaign contributions and “studies” from marketing shops masquerading as “think tanks”, to raise the threshold for taxing capital gains. And President Romney would support it.

Further, to the extent the Internal Revenue Code treatment of income creates incentives or disincentives, then taxing salaries and wages at higher rates than capital gains punishes working for a living. One need not ask whether that is sound policy.

BTW, Warren Buffet once proposed imposing a surcharge on short-term capital gains to discourage speculation. I suspect that short-term for Mr. Buffet is less than 10 years.

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