Agreed. We should be ruthlessly taxing capital gains, and in general should look upon money earned without laboring for it with scorn.
Tell that to startup founders whose only income from all the work they put in on their startup is capital gains.
> Tell that to startup founders whose only income from all the work they put in on their startup is capital gains.
I think there really ought to be more of a distinction made between taxing the upside of sweat equity vs. literal capital gains (as in, the return on invested capital).
Also, startup founders should only be deferring their salary (or a portion of it), not forgoing it entirely.
For that matter, it's insane that VC fund managers only pay capital gains tax rates on carried interest and management fees. The fees are really just ordinary income plain and simple (which they get regardless of how the fund does), and while carried interest is technically a return on invested capital, it's entirely OPM and seems like a dodge that lets the manager participate in the upside of the fund with no actual skin in the game, so what's the point of taxing it at a preferential rate?
Capital gains get a favorable treatment because we want to encourage investment that creates economic growth, but comes with risk of loss.
A better way to restore progressively to capital gains is to index them for inflation, and then you can tax them at ordinary income rates.
It makes sense that it's an attempt to index for inflation, although strange that there is only one cutoff (securities held for 1 year taxed the same as the ones held for 10 years); you would imagine some sort of step-down function would make more sense / track inflation more accurately (or indexing directly which is much harder).
So maybe different tax rates for 1/5/10/20 years held?
Lets have a single fair set of rates with progressivity. A rich man in the 35% tax bracket should pay 35% on their capital gains, just as a poor retiree in the 15% tax bracket should only pay 15% on capital gains.