Saturday, June 1, 2013

Why We Should Tax Capital Gains And Dividends As Ordinary Income

The preferential treatment of taxes on capital reduced government tax revenue by $161 billion.  It is the second largest tax expenditure in the US and 93% of the benefit goes to the the top 20%.  Moreover, the top 1% gets 68% of the benefit.  Research shows that the rate of taxes on capital has no impact on the rate of investment and economic growth.  Those who are worried about federal deficits should be concerned about ending a tax expenditure that makes the tax system less progressive and has no social benefit.  Of course, those who believe that increasing the post tax income of the top 1% is a public good will oppose any increase in tax rates on capital.

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