Between the late 1930s and the 1970s the U.S. tax rate for individuals making over $100,000 was 70%and90%0% (taxes on capital gains fluctuated between 20% and 25%).
Tax income has declined, too, with a staggering 81percentt drop in capital gains tax receipts between June 2008 and June 2009.
While the 15% capital-gains tax rate is at a seven-year low, "both Democratic candidates are talking about increasing the capital gains tax to between 25% and 28%," he says.
In 1986, when Ronald Reagan was president, the differential between capital gains and ordinary income was eliminated — and the economy soared.
This is only one example of how rate differentials between capital gains and ordinary income allow highly compensated tax-payers to reduce their rate of taxation.
Even Republicans used to understand the benefits of leveling the rates between capital gains and ordinary income: It was a central feature of the 1986 tax reform bill, which best embodied the idea of lowering rates and broadening the base.
I like Senator Bernie Sanders's suggestion for raising the inheritance tax plus various wonky steps that target the wealthy, like eliminating the step-up basis and ending the gap between capital gains and earned income rates.
By comparison, market analysts note that capital gains distributions steadily rose between 2002, when stock prices fell to their lowest point after the collapse of the Internet bubble, and 2007, when the market reached fresh peaks.
To my mind, the best approach would be to abolish the distinction between capital gains and ordinary income altogether and desist from using the tax system for any kind of economic or social engineering.
To the Editor: The column illustrated the gradations between capital gains and ordinary income in similar transactions, concluding that some of it may seem unfair but adding that "not all problems have easy answers".
