Why is income taxed differently and why is this not seen as an unfair situation?
For instance, if you earn a pay check or are self employed you are taxed somewhere between 10% and 35%.
Yet if you earn your income through investments you are taxed a flat 15%.
The government logic is that it's the difference between income and at risk capital.
Income is owed as earned. Capital can be completely lost, which happens more than you realize.
The lower tax rate on Cap Gains is due to the long term nature of investments and their importance to economic growth (which enables income producing jobs).
IMO, income taxes should be low and the same flat rate for everyone, and capital gains should not be taxed. The income which produced the capital has already been taxed once. And given the way the government continues to destroy the value of the dollar, taxing gains which are often just barely keeping up with inflation (if that) is adding insult to injury.
"The lower tax rate on Cap Gains is due to the long term nature of investments and their importance to economic growth (which enables income producing jobs)."
Recent Capital Gains Tax Rates
1991-92- 28.9%
1993-96- 29.2% "
1997-2000- 21.2% "
2001- 21.2% "
2002- 21.2%
2003-05- 16.1%
2006-07- 15.7%
2008-09- 15.4% "
2010-12- 15%
So, as the Capital Gain Tax decreased, more employment followed? Well not quite. Below is the Employment Participation Chart based on the Department of Labor Statistics. Match the Capital Gains Effective Tax Rate with the percentage of people employed. When the Capital Gains Tax Rate dropped as part of the Bush tax cut, the participation rate never had the bounce one would expect. Thus historically, lowering the Capital Gains Tax had very little effect regarding the job creators creating jobs,,well in the US anyway.
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