Tuesday, October 9, 2012

The case for raising taxes on capital gains



From Ezra Klein’s column:

As Dylan wrote on Monday, most — though not all — economists will tell you there’s a good theoretical case for taxing capital gains and investment income at a lower rate than normal income. Mitt Romney, in other words, should be paying a low tax rate.

But it’s also worth understanding why more and more tax wonks are wondering if the case holds up under current conditions. For one thing, the low rate on investment income has been an important contributor to rising inequality. In fact, it’s worked so well that if you want to tax the rich without ratcheting their earned income tax rate to extremely high levels, or reform the tax code without massively cutting taxes on the rich, the best option might be to raise capital gains taxes.

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