Raise the capital gains tax
August 7, 2007
Long-term capital gains is taxed at 15%, while income is taxed progressively from 10% to 35%. This means a rich person who derives most of their income from investments will pay a lower tax rate than a coal miner who earns a salary. This is ridiculous. Former Fed governor Alan Blinder agrees that low capital gains is silly. All income, regardless of its source, should be taxed equally. John Edwards proposes raising the capital gains tax rate to 28%. He wants to lower taxes on low income groups, but raises top rates to 38% because he would repeal Bush’s tax cuts. If you increase the capital gains tax, then all tax rates should be lowered so total tax revenue is the same. In addition, the double taxation on corporate dividends should be fixed. The total tax hit on the rich will go up, but the taxes will no longer be distorted by weird tax laws.