2011-08-23 — reuters.com
A far more important objection is that the tax preference for capital gains undermines capitalism -- a system in which capitalists, not the state, are supposed to make the investment decisions. When I discuss this issue with my Economics 101 students, I show them an example of a proposed investment that loses money before tax (and which, therefore, should be rejected) but which actually turns a profit after tax because of the preferentially low capital gains rate.
There is a defense of lower capital gains rates this article doesn't discuss that I will throw out there: that because capital has become so "globalized", any increase in tax rates will encourage that capital to leave our shores. Conversely, lowering the tax rates on capital could attract badly needed money into our economy.
Personally, we're for getting rid of the personal income tax anyways.
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