Note: This post was originally published Oct. 23, 2012, but seems timely to revisit now.
With so much talk about our annual budget deficit, national debt, income inequality, reducing benefits and raising income taxes by both candidates – I’m surprised neither party ever mentioned eliminating the capital gains tax subsidy by returning the capital gains tax to the income tax rate. It’s a logical option. Why should the profits made on investments be taxed SO MUCH LOWER than income earned through hard work? It’s a huge tax subsidy given to those who need it least and whose corporations use our government funded infrastructure the most – paid for through the courtesy of the rest of us.
Other options for raising tax revenue like adding sales taxes or a value added tax (V.A.T.) will always be regressive – that is – hurting those made poor who must spend nearly all of their earned income. Likewise raising earned income tax rates hurts those made poor rather than those who are over privileged (i.e. the rich) who don’t actually earn income, but receive money from profits on investments.
Those who have the luxury of living off their investments can most afford to pay more in taxes. Eliminating the capital gains tax subsidy by increasing capital gains tax rates is a logical way to increase revenue from the group most able to pay it.
But ask yourself, “Why is raising the capital gains tax rate never discussed as an option?” “What happens when our government representatives are over privileged elites who consistently vote in their own interests and in the interests of their biggest campaign financiers rather than considering the common good?”
Next up: Another way to reduce the deficit that presidential candidates never mention.