Thinking more subversive thoughts about whether capital gains really deserve a tax break

A few weeks ago, The Epicurean Dealmaker declared that:

If any of you PE knuckleheads piss off Congress so much with your lame and pathetic special pleading that they decide to eliminate capital gains tax treatment altogether, you’d better find a deep, dark hole to run and hide in.

I don’t know about Congress, but I do know that this private equity tax battle is causing a lot of people who are generally well-disposed to capitalism to wonder if it really is so smart to tax capital gains at a lower rate than the income people actually, y’know, earn. Here’s Felix Salmon:

The way I see it, when you’re rich enough, you can pretty much always structure your income so that it turns into a capital gain. (In its simplest form, you just found a company with a little bit of money, redirect your income into that company, and then sell the company.) So having a capital gains tax rate much lower than the income tax rate is tantamount to giving the rich a massive tax break – even before accounting for the fact that it’s the rich who generally have capital gains in the first place, and not the poor.

Facebook Insiders Are Cashing Out Their Stakes Before IPO

NEW YORK (AP) — Insiders and early Facebook investors are taking advantage of increasing investor demand and selling more of their stock in the company’s initial public offering, the company said Wednesday.

Facebook said in a regulatory filing that 84 million shares, worth up to $3.2 billion, are being added to what’s shaping up to be the decade’s hottest IPO.

Matt

Amen Fox.

General economic indicators (GDP, DOW, etc.)too often ignore the distribution of wealth, and the fact that it’s been widening over the last few years is concerning, especially now that Congress is actually considering worsening it by lowering the capital gains tax. Lowering the tax also wouldn’t help our current budget deficits.

Matt
http://stevethepenguin.blogspot.com Bianca Reagan

Hey there, Mr. Fox. Rich people gotta eat, too. Never mind that po’ folk like me have to decide between purchasing fruits or vegetables, not both. They’re expensive!
Louis

People seem to spend so much time trying to find ways to increase taxes on the wealthy to equal that of average citizen.

Why don’t these people spend more time trying to find ways to lower the taxes of the average citizen to equal that of the wealthy citizen? Or why don’t we eliminate the IRS altogether, and simply tax what we consume creating a fair and playing field for everyone, whether you are rich or are poor?

Increasing taxes on the rich does not put this money in the bank accounts of the average citizen. It puts it in the hands of the government, and this does not necessarily translate into reducing the gap between the rich and the poor.

Most of this debate is used as propaganda by political parties to further their agendas and get the votes needed to win elections. Nothing else. If people really wanted a fair system the IRS would be eliminated and replaced with an equal consumption tax. But that change is never likely to happen because the IRS is too easy for politicians to manipulate to get votes to win their elections, and this goes for both Republicans and Democrats.
Carolyn Wu

If you want to be even more subversive, ask yourself why we SHOULDN’T double tax corporate income. After all, corporations confer enormous benefits (such as limited liability, the ability to raise capital in capital markets, unlimited life, etc.) so the taxation of corporate income could be thought of as simply a cost of having this type of economic structure.