Why conservatives hate Warren Buffett

[Tim Eriksen]

1 out of 4 American children go to bed hungry. For more empirical evidence, concerning the NEEDS of American citizens, please read "The Price of Civilization" by respected economist, Jeffrey Sachs.

 

The 1 in 4 statistic is widely quoted but never substantiated.  It implies every night when it likely refers to at one time during the year.  It also implies malnourishment/starvation which is not a problem in our society.  Obviously no one wants a child to be starving.  If a child goes to bed hungry in this country (meaning they did not get any dinner) it is due to the failure of their guardians.  There are significant resources (food stamps, school lunch programs, etc.) set up in order to make sure the poor are fed.  For example in my city (rural) a family of four with an income of $41,000 or less qualifies for free school breakfast and lunch.  Larger families qualify even more easily.  A family of 6 with an income below $55,000 qualifies.

Are there no work houses.... Tim do you know how much of the philosophy of Scrooge you are espousing. Who cares WHY the kids are going hungry you feed them first and then work on finding long term solutions. Paul Ryan thinks that Tiny Tims demise is just one of the unfortunate causalties of the noble crusade he is leading.

 

I am espousing none of the philosophy of Scrooge.  As I said we have numerous government (federal, state and local) plus non-profit programs in place to prevent starvation/malnourishment.  When was the last time you heard on the news that a child in America starved to death or nearly starved to death (excluding some nut job that locked up their child in some closet or basement)?  Please read Kiltacular's post.  If it were to happen it would not be due to lack of concern or programs.  Someone would have to purposefully do it.  We (as a society) do feed the children of the poor.  We offer free education for the child.  We provide health care for the child.  We subsidize housing for the child's family.  We subsidize college for the child.  We reduce the tax burden for the parent(s).  etc.  What do you want a check a for whatever they make below $50,000?

 

Our society has problems, but our treatment of the poor is not at the top of the list.

       

[ubuy2wron]

Our society has problems, but our treatment of the poor is not at the top of the list.

Tim I agree with you, it is our treatment of the wealthy that I think is at the top of our societies problems.

[twacowfca]

It really ticks me off when I read off the wall comments about supposedly large large numbers of people starving in the USA.  We have no idea of what starvation is like.  Muhammad Yunis told what starvation really was like when he returned to Bangladesh in the 1970's:

 

He saw them straggling in from the countryside.  Young or old, men or women, they all looked the same.  He couldn't tell them apart.  They were walking skeletons.  They didn't cause any trouble.  They just stood around or lay around until they died. 

 

That's what starvation is like.

[twacowfca]

It's politically correct for Warren in his sunset years to declare: "Tax me more."

 

But would soaking the rich be wise or shortsighted?  Let's think about it.

 

People who know Warren say he spends a little over a million dollars a year on himself, mostly for travel.  He earns about two billion dollars a year, counting his undistributed earnings in Berkshire Hathaway.  But, he only spends about one dollar out of every two thousand that he earns on himself.  The rest is invested in profitable businesses owned by his company.  These businesses provide useful goods and services that increase the wealth  of society by much more than the earnings that Warren is entitled to, but chooses not to spend. 

 

What a golden goose Warren is for the rest of us!  He's not the only one who lays golden eggs.  Most other billionaires also save and invest much more than they spend on themselves.  Wouldn't we all be better off if we had a couple of hundred more Warren Buffetts, Bill Gates or Steve Jobs working for us on similar terms?  Through an invisible hand, the terms of employment for the very rich usually mean that we ordinary citizens have in effect "sharecroppers" on our land who take only a tiny portion of what their crop yields!  :) 

 

Raising taxes on the rich might not kill these golden geese, but that certainly would take a big chunk of wealth out of the most productive types of investment so that this flock would lay fewer golden eggs.  What would our government do with the increased tax receipts?  Would they find a better use?  How about extending unemployment benefits one more time?

[ubuy2wron]

The problem with the economy is not a lack of capital, if capital was short interest rates would not be at zero. The problem is a lack of consumption, Warren gets it, not sure that others do. The other thing the economy is missing are a few more classic risk takers in the form of Mr Buffett Mr Jobs, and that fellow from Texas Mike Dell. I saw him interviewed on CNBC this AM and he matter factly described how he was transforming his company acquiring new business and growing his company. When questioned about the political climate he refused to raise to the bait. The next time I hear  a business leader complaining about uncertainty or regulation or government policy I think I will throw my remote at my TV, my own personal stimulous effort ,as I think I will be replacing a TV every half hour. The real leaders do not bitch and moan they quietly go about making their business better. I am sure there is a Dell thread  here somewhere, I know I will own some before the year is out.

[ubuy2wron]

A lot has been said on this and other threads about the politics of envy. It has been said that the Democratic Party is in fact an expression of this and that point probably has some merit. At the same time very little has been said about an emotion which is the very opposite of envy the Germans have a word for it is Schadenfreude http://en.wikipedia.org/wiki/Schadenfreude . It would seem to me that many Republican conservatives express this emotion in its extreme forms. For some of the wealthy it is not enough that they have achieved wealth others have to suffer on a relative basis for them to experience satisfaction. Because it is even less of a desireable trait than envy noone will admit that they experience this emotion however every news organization will give extensive coverage to what ever awfull tragedy the world may be experiencing at any moment because they know it attracts the most viewers/readers so the pervasiveness of this emotion? is simply unargueable. 

[Packer16]

I totally disagree.  I see very few people rejoice at the suffering of others.  Just look at the generosity of folks of every persuation after natural disasters.  I think there may be an honest disagreement about who should provide the generosity (private individuals/charities or the gov't) and the effectiveness of gov't versus private charity/individuals.  To be honest, value investors take advantage of the misfortune of others but is there a problem with that if the others knew the risks they were taking when the entered the investment.  If they were mislead or fraud has occured then the gov't needs to take action.  I would like to see some evidence that conservative Republicans show this more the Wall Street Hedge Fund liberals.  As far as I know either political persuation is willing to make a mis-risked bet.  Just my 2c.

 

Packer

[rranjan]

It's politically correct for Warren in his sunset years to declare: "Tax me more."

 

But would soaking the rich be wise or shortsighted?  Let's think about it.

 

People who know Warren say he spends a little over a million dollars a year on himself, mostly for travel.  He earns about two billion dollars a year, counting his undistributed earnings in Berkshire Hathaway.  But, he only spends about one dollar out of every two thousand that he earns on himself.  The rest is invested in profitable businesses owned by his company.  These businesses provide useful goods and services that increase the wealth  of society by much more than the earnings that Warren is entitled to, but chooses not to spend. 

 

What a golden goose Warren is for the rest of us!  He's not the only one who lays golden eggs.  Most other billionaires also save and invest much more than they spend on themselves.  Wouldn't we all be better off if we had a couple of hundred more Warren Buffetts, Bill Gates or Steve Jobs working for us on similar terms?  Through an invisible hand, the terms of employment for the very rich usually mean that we ordinary citizens have in effect "sharecroppers" on our land who take only a tiny portion of what their crop yields!  :) 

 

Raising taxes on the rich might not kill these golden geese, but that certainly would take a big chunk of wealth out of the most productive types of investment so that this flock would lay fewer golden eggs.  What would our government do with the increased tax receipts?  Would they find a better use?  How about extending unemployment benefits one more time?

 

There is difference between taxing warren more and taxing warren at  least at the same level as some one who works in mines or cleans toilets. I don't have fixed opinion on rich getting taxed lot higher but I do strongly feel that rich should not pay less than regular Joe.

 

And if we extend your logic of money is better off with rich guys then why not have zero tax rate for anyone having net worth over a $100 Million. That will not next logical step. 

[twacowfca]

It's politically correct for Warren in his sunset years to declare: "Tax me more."

 

But would soaking the rich be wise or shortsighted?  Let's think about it.

 

People who know Warren say he spends a little over a million dollars a year on himself, mostly for travel.  He earns about two billion dollars a year, counting his undistributed earnings in Berkshire Hathaway.  But, he only spends about one dollar out of every two thousand that he earns on himself.  The rest is invested in profitable businesses owned by his company.  These businesses provide useful goods and services that increase the wealth  of society by much more than the earnings that Warren is entitled to, but chooses not to spend. 

 

What a golden goose Warren is for the rest of us!  He's not the only one who lays golden eggs.  Most other billionaires also save and invest much more than they spend on themselves.  Wouldn't we all be better off if we had a couple of hundred more Warren Buffetts, Bill Gates or Steve Jobs working for us on similar terms?  Through an invisible hand, the terms of employment for the very rich usually mean that we ordinary citizens have in effect "sharecroppers" on our land who take only a tiny portion of what their crop yields!  :) 

 

Raising taxes on the rich might not kill these golden geese, but that certainly would take a big chunk of wealth out of the most productive types of investment so that this flock would lay fewer golden eggs.  What would our government do with the increased tax receipts?  Would they find a better use?  How about extending unemployment benefits one more time?

 

There is difference between taxing warren more and taxing warren at  least at the same level as some one who works in mines or cleans toilets. I don't have fixed opinion on rich getting taxed lot higher but I do strongly feel that rich should not pay less than regular Joe.

 

And if we extend your logic of money is better off with rich guys then why not have zero tax rate for anyone having net worth over a $100 Million. That will not next logical step.

 

There already is a zero tax rate for the rich: income from tax exempt municipal bonds.  Take the Walton family.  What might happen if we raised the tax rate on the super rich to 90% for example?  The Waltons might pull their money out of WalMart and buy municipal bonds.  Wow! Wouldn't that be good for the country!

[ubuy2wron]

I totally disagree.  I see very few people rejoice at the suffering of others.  Just look at the generosity of folks of every persuation after natural disasters.  I think there may be an honest disagreement about who should provide the generosity (private individuals/charities or the gov't) and the effectiveness of gov't versus private charity/individuals.  To be honest, value investors take advantage of the misfortune of others but is there a problem with that if the others knew the risks they were taking when the entered the investment.  If they were mislead or fraud has occured then the gov't needs to take action.  I would like to see some evidence that conservative Republicans show this more the Wall Street Hedge Fund liberals.  As far as I know either political persuation is willing to make a mis-risked bet.  Just my 2c.

 

Packer

Packer are you certain? You mentioned natural disasters do you remember the media coverage of Rita or the earth quake and tsunami in Japan. It seems a large percentage of media viewers are irresitibly addicted to consuming content about others misfortune.

[Packer16]

People may be attracted to it but that does not mean they enjoy it.  What matters is thier actions/re-actions to the events not that they notice the events.  As a matter of fact it is better that they notice it to develop a sense of empathy rather than ignore it.  If they enjoyed it, you would see partying in the streets and no outpouring of money or volunteer time to fix the place/situation.  When I think of the types of folks you are describing, it reminds of Nazis/Communists who liked to see others suffer which in my mind represents neither the majority of Dems or Repubs. 

 

Packer

[rranjan]

What might happen if we raised the tax rate on the super rich to 90% for example? 

 

I don't have any opinion about 90% or even 60% tax rate for rich guys. Only thing bugs me that why should we have a system where a rich guy pays less than an average Joe. I don't think taxing them at the level of average Joe should have any objection. I have not heard any good arguement so far.

 

While I agree that few guys like Buffet will use the money efficiently to make a difference but that's not true for everyone. Lots of people might be good at accumulating money by using unfair tax system to their advantage but they might not use it for benefit of mankind. I don't hold any opinion about optimal tax rate or any fix number but I feel strongly about average Joe paying higher tax rate than some one who makes millions each year. If unchecked it is going to create terrible situation of civil unrest in long term.

 

I don't have any problem if everyone is paying only 10% or 0% but current system seems unfair to me.

[ubuy2wron]

People may be attracted to it but that does not mean they enjoy it.  What matters is thier actions/re-actions to the events not that they notice the events.  As a matter of fact it is better that they notice it to develop a sense of empathy rather than ignore it.  If they enjoyed it, you would see partying in the streets and no outpouring of money or volunteer time to fix the place/situation.  When I think of the types of folks you are describing, it reminds of Nazis/Communists who liked to see others suffer which in my mind represents neither the majority of Dems or Repubs. 

 

Packer

Packer I think you are confusing Schadenfreude with Sadism.

[Tim Eriksen]

What might happen if we raised the tax rate on the super rich to 90% for example? 

 

I don't have any opinion about 90% or even 60% tax rate for rich guys. Only thing bugs me that why should we have a system where a rich guy pays less than an average Joe. I don't think taxing them at the level of average Joe should have any objection. I have not heard any good arguement so far.

 

While I agree that few guys like Buffet will use the money efficiently to make a difference but that's not true for everyone. Lots of people might be good at accumulating money by using unfair tax system to their advantage but they might not use it for benefit of mankind. I don't hold any opinion about optimal tax rate or any fix number but I feel strongly about average Joe paying higher tax rate than some one who makes millions each year. If unchecked it is going to create terrible situation of civil unrest in long term.

 

I don't have any problem if everyone is paying only 10% or 0% but current system seems unfair to me.

 

rranjan

 

We don't actually have a system where the rich guy pays less than the average Joe.  Buffett has to use poor logic and ignore the whole picture in order to come to that conclusion.  If you look at effective income tax rates it is progressive in the US.  While there are exceptions, the rich pay a higher percentage than the poor or middle class person.  That is a fact. 

 

Buffett has to include payroll taxes and ignore corporate taxes on his non-dividend paying stock ownership, dividend paying stocks, and any capital gains in order to get the numbers to match his conclusion.  (Note I am not saying he is doing it on purpose because I do not know.) 

 

If payroll taxes are a tax, which is how Buffett looks at them, then social security and medicare benefits have to be what?  A government handout/benefit.  It cannot be the return of money you paid or else he should eliminate it in the calculation.  Remember he also attributes not just the employee paid portion but the employer paid portion to the secretary. 

 

When Buffett's secretary retires, he/she will receive $25 to 30,000 in annual Social Security income plus likely significant Medicare benefits.  If it was a tax when paid, then it is a handout or benefit when received.  Does he point out that after age 67 his secretary will be largely untaxed and in fact a net recipient of what will likely be hundreds of thousands of dollars, if not a million dollars?  No he does not.  So he is using a snapshot to arrive at his conclusions when he should look at a lifetime. 

 

Buffett's argument is weak, misleading, and flat out wrong. 

   

[stahleyp]

Buffett and poor logic? lol

[rranjan]

What might happen if we raised the tax rate on the super rich to 90% for example? 

 

I don't have any opinion about 90% or even 60% tax rate for rich guys. Only thing bugs me that why should we have a system where a rich guy pays less than an average Joe. I don't think taxing them at the level of average Joe should have any objection. I have not heard any good arguement so far.

 

While I agree that few guys like Buffet will use the money efficiently to make a difference but that's not true for everyone. Lots of people might be good at accumulating money by using unfair tax system to their advantage but they might not use it for benefit of mankind. I don't hold any opinion about optimal tax rate or any fix number but I feel strongly about average Joe paying higher tax rate than some one who makes millions each year. If unchecked it is going to create terrible situation of civil unrest in long term.

 

I don't have any problem if everyone is paying only 10% or 0% but current system seems unfair to me.

 

rranjan

 

We don't actually have a system where the rich guy pays less than the average Joe.  Buffett has to use poor logic and ignore the whole picture in order to come to that conclusion.  If you look at effective income tax rates it is progressive in the US.  While there are exceptions, the rich pay a higher percentage than the poor or middle class person.  That is a fact. 

 

Buffett has to include payroll taxes and ignore corporate taxes on his non-dividend paying stock ownership, dividend paying stocks, and any capital gains in order to get the numbers to match his conclusion.  (Note I am not saying he is doing it on purpose because I do not know.) 

 

If payroll taxes are a tax, which is how Buffett looks at them, then social security and medicare benefits have to be what?  A government handout/benefit.  It cannot be the return of money you paid or else he should eliminate it in the calculation.  Remember he also attributes not just the employee paid portion but the employer paid portion to the secretary. 

 

When Buffett's secretary retires, he/she will receive $25 to 30,000 in annual Social Security income plus likely significant Medicare benefits.  If it was a tax when paid, then it is a handout or benefit when received.  Does he point out that after age 67 his secretary will be largely untaxed and in fact a net recipient of what will likely be hundreds of thousands of dollars, if not a million dollars?  No he does not.  So he is using a snapshot to arrive at his conclusions when he should look at a lifetime. 

 

Buffett's argument is weak, misleading, and flat out wrong. 

 

 

Some one who earns 175K pays marginal rate of 33% and some one who earns 380K pays 35% without taking account for any state tax or SSN/Medicare tax. Now we are talking about rich who makes millions but don't really work for it. They get millions every year with capital gains or dividend. They pay close to 15% on average. Anyone making wages of millions does pay enough but argument is mainly for people who makes millions without working and pay 15%.

 

There are issues in our tax system. Hedge fund manager's portion of earnings gets counted as long term capital gain, portion of future gains(held for less than 10 minutes) gets counted for long term capital gain, rich person who pushes capital rather than stoned pays very less tax. I think system is biased in favor of rch due to lobbying money available.

 

Clearly, this tax system being progressive argument is not applicable here because we are not talking about families making 200K.

 

I don't know if we should include corporate tax  when we count individuals paying 15% capital gain/dividend. Someone can use an  argument that if there is no corporate tax then salary will be higher so corporate taxes should be added for regular Joe as well when doing comparisons. I am trying to point out that we should stick to individuals net income each year and how much tax that individual pays. Corporate taxes are at legal person level but we should stick to natural person. Finally all natural person gets an income and I see no reason for people making millions by only capital gain/dividend paying less than regular Joe who works 40-50 hours. It simply does not seems fair to me.

 

 

[Packer16]

I would challenge that capital gains are not worked for.  Just ask folks here if they are working at trying to increase their wealth.  Also, this money has been taxed once already when it was earned or when it was inherited.  Since it appears the financial intermediaries are collecting alot of fees relative to others for the value they are adding (see who rules america thread) why not tax their activities?  Maybe a transacation tax and and an excess profits tax for fees greater than 1% of AUM?  This would definately disincentivize financial transactions (a good move in my mind).

 

Packer

[Hawk4value]

...Now we are talking about rich who makes millions but don't really work for it. They get millions every year with capital gains or dividend....

 

You have to be kidding???  How do you think these people got the money to invest in the first place. They worked for it, they saved, they lived within their means, and yes they paid income taxes on it.  Now they have a pool of capital accumulated after years of hard work.  What can they do with this pool of capital:  they can spend it on all kinds of nonsense like most people do;  or they can carefully and studiously risk this precious capital in businesses that create jobs for the people down at Occupy Wall Street.  I say that the government needs to specifically incentivize intelligent people to invest, i.e. minimum or 0% capital gains tax.  Letting the government continually tax this money year after year (after the initial income tax) is sending the proceeds down a rat hole.

[rranjan]

...Now we are talking about rich who makes millions but don't really work for it. They get millions every year with capital gains or dividend....

 

You have to be kidding???  How do you think these people got the money to invest in the first place. They worked for it, they saved, they lived within their means, and yes they paid income taxes on it.  Now they have a pool of capital accumulated after years of hard work.  What can they do with this pool of capital:  they can spend it on all kinds of nonsense like most people do;  or they can carefully and studiously risk this precious capital in businesses that create jobs for the people down at Occupy Wall Street.  I say that the government needs to specifically incentivize intelligent people to invest, i.e. minimum or 0% capital gains tax.  Letting the government continually tax this money year after year (after the initial income tax) is sending the proceeds down a rat hole.

 

Well, if they worked hard to earn the money and paid tax then they did nothing different than average Joe. Now if new money is earned by investing the accumulated money then why in the world new money should not be taxed at the same rate as average Joe income tax?Just because new money is not earned by doing physical work?

 

Government is not going to tax again and again if money just sits there but if money is used to earn new money then it is new earning and it should be taxed.

 

No, I don't think money pushers should pay 0% tax when mine worker is paying higher tax. I also don't think that having 30% tax in capital gain will stop anyone from investing because you pay tax only when you make money. You will still keep 70% of the gains. No one will start thinking that - ah, I am not going to try to make money in stocks because I get to keep only 70% of gains rather than 85% of the gains.

 

I am immigrant in this country and I have absolutely no influence of either republican or democrats in my thinking. But  I don't see the logic of mine worker paying tax but money pushers not paying anything. All this talk about billionaires working hard to earn their billions is fine but same billionaires can't earn their billions in Afghanistan. It is the system set up here which allowed them to earn billions. It is the system we have in place which allowed net worth of rich to become 4 times in last 15 years even though average Joe did not gain anything in same period. Even after that how can you make a case of giving more advantage to rich guys. In my opinion, the set up is already skewed and you are arguing about making it even more skewed.

 

One of the strength of America has been huge middle class with decent income. Gap between rich and normal person has grown too fast in last 15-20 years. Any system which leads to majority struggling but rich getting super rich will not end well.

 

I have very open mind so I am all ears for any arguments in favor of making 0% tax for already rich guys while mine workers continue paying income tax.

 

 

[Packer16]

I really wonder if this disparity of wealth argument has much relevance in developed countries, where for the most part even the poorest are fed, have shelter and can get an education and become an engineer and make a decent living with a modest amount of effort.  The real question is how much money do you need to do what you want and does lack of money prevent that.  In this age of increased productivity, the basics of life are cheap and getting cheaper so is the issue more of expectation that one will receive money from others or having enough money to do what one wants to do.  If the goal is the later, the cost may not be high. 

 

Referring to the past for this argument, I think is misleading because then you really had starving people - like you have today in some parts of the developing world.  So for the benefit of the entire world, shouldn't the focus be on raising the living standards of those who are going hungry rather than increasing "relatively" wealthy poor in the developed world and feed there passions with a income disparity agrument that looks silly when compared to the developing world?

 

Packer   

[rranjan]

I really wonder if this disparity of wealth argument has much relevance in developed countries, where for the most part even the poorest are fed, have shelter and can get an education and become an engineer and make a decent living with a modest amount of effort.  The real question is how much money do you need to do what you want and does lack of money prevent that.  In this age of increased productivity, the basics of life are cheap and getting cheaper so is the issue more of expectation that one will receive money from others or having enough money to do what one wants to do.  If the goal is the later, the cost may not be high. 

 

Referring to the past for this argument, I think is misleading because then you really had starving people - like you have today in some parts of the developing world.  So for the benefit of the entire world, shouldn't the focus be on raising the living standards of those who are going hungry rather than increasing "relatively" wealthy poor in the developed world and feed there passions with a income disparity agrument that looks silly when compared to the developing world?

 

Packer 

 

Packer - You are right in thinking that poor in developing world are at different level. It would be much more efficient to raise their standard. If we spend the same money then more people will benefit but this kind of equation can be considered by only private foundations.    Tax payers will not allow majority of money to be spent outside by any government.

 

Country is kind of self contained unit in terms of set up and we should not have skewed system. All earnings should be taxed at same level and if we want to have different levels at all then I would think that money pushers can afford to pay higher rate than mine workers. Unfortunately , we have reverse situation right now.

[Hawk4value]

...why in the world new money should not be taxed at the same rate as average Joe income tax?Just because new money is not earned by doing physical work?....

 

Thats the crux of the issue isn't. I believe that the most important "work" is the efforts made investing capital. Risking your capital in new business ventures to create jobs and entire industries is far more important than an average joe earning a wage in a mine. Remember if risk capital was not invested to develop the mine joe would not have a job.  We have a middle class because of invested risk capital not the other way around.  Therefore society should maximize the incentive to invest.

 

Now regarding your idea: people will not not invest because of a 20% or 30% Cap Gain Tax. Well I am of the opinion that the higher the cap gain tax the less risk investors will take because returns are reduced. Again I want to maximize the incentive to invest.

[stahleyp]

...

 

Now regarding your idea: people will not not invest because of a 20% or 30% Cap Gain Tax. Well I am of the opinion that the higher the cap gain tax the less risk investors will take because returns are reduced. Again I want to maximize the incentive to invest.

 

I think we grew just fine with high capital gains rates.

 

http://www.ctj.org/pdf/regcg.pdf

[Tim Eriksen]

...

 

Now regarding your idea: people will not not invest because of a 20% or 30% Cap Gain Tax. Well I am of the opinion that the higher the cap gain tax the less risk investors will take because returns are reduced. Again I want to maximize the incentive to invest.

 

I think we grew just fine with high capital gains rates.

 

http://www.ctj.org/pdf/regcg.pdf

 

But the two decades where the rates were the highest were the 30's and the 70's.  That is not exactly a ringing endorsement for higher rates.  We should also remember that the late 40's and 50's are not a normal environment.  You had pent up demand from during WWII and much of the world's industry was destroyed except for the US. 

 

I am not arguing that 15% is punitive.  Or that 20% would be horrible for the economy.  I would say that 30% plus is not wise based on history.  We can't say based on history what the impact of a zero rate would do.

 

In theory what are capital gains anyway - the current capture (when there is a sale) of the change in NPV of future cash flows (as compared to when the security was purchased).  Those future cash flows, in theory, are going to be taxed under corporate taxes.  Capital gains is therefore a second tax on the same earnings just like dividend taxes are.  It is not necessarily unfair if those rates are lower than normal income rates due to that fact.  Once again we should look at the whole picture of taxation.  In reality, a strong case can be made that dividends and capital gains are taxed at a higher effective rate than normal income under current law. 

 

[Packer16]

In reality, most capital gains timing is elective.  Therefore, if the rate is increased, the amount of capital gains will decline and visa-versa.  So in my mind this discussion is nice in theory but in practice has smaller impact.  If you really wanted to raise taxes in this way, you would tax unrealized gains, which no one is talking about.

 

Packers