Reply to Romney's tax rate under the Ryan plan would be 0.82%

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Thank you for explaining to the idiots why capital gains tax is lower than income tax, it's because you are using post taxed income to buy another investment. The only pre-tax investment is 401k, ira, tsp, retirement accounts etc...

It would be nice if people would get their heads out of their asses and realize the difference between income tax and capital gains and why they are a different rate. The whole mitt romney pays capital gains tax vs income tax is bunk. Take romney's income tax rate on his 500k and then compare that to obama's. [/quote]

[b]If that's so obvious then why is interest on savings accounts still taxed the same as wage income[/b]?

Taxing cap gains differently from ordinary income causes as much economic distortion as it claims to resolve, plus its a recipe for tax evasion.  Not to mention what "post-taxed" income do you think Zuckerberg used to buy his shares in facebook?  Or the heirs to the Mars candy fortune, who have spent the last 20 years and more money than any 10 of us will earn in a lifetime on trying to get the tax law changed in their benefit?[/quote]

Now you're getting into a different area of tax policy: Active investment versus passive investment, as well as risk.

It is true the interest you earn is subject to double tax. But, earning interest is a passive activity, with little or no risk. As such, the policymakers decided it doesn't merit a tax inducement.

Investing in stocks, on the other hand, is riskier and more active. It's an "investment" rather than a return on "savings."

That's the rationale, anyway. I'm not endorsing, just trying to explain.[/quote]

I have never in my life heard that explanation and it makes little sense.  Investment can be financed through debt or equity.  The idea that we are going to give preferential tax treatment to equity investments because it is "riskier" is bad economics and bad tax policy.

The fact is that most of these special tax rules exist because people have the political pull to get them, and they make up these bogus explanations after the fact (or to get the preferential treatment in the first place).  There was a while when cap gains and ordinary income rates were the same but it didn't last long thanks to the lobbyists/wealthy.[/quote]

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