That may be the rationale, but in practice most of the capital gains that are earned in the US are on investment money that has not been taxed in the first place. In fact with margin buying and leveraged buyouts the money that is used to purchase the stocks is borrowed money so when the capital gain is achieved it is taxed at the lower rate and the investor not only gets the advantage of the lower rate but also gets to offset the gain by the cost of the interest on the loan.
Romney has earned much of his money playing these kinds of tax avoidance shell games that are available to guys like him but are not available to guys like Joe the Plumber.
I think when his returns are scrutinized you will find that Mr. Romney's capital gains are largely on investments that were made with money that was taxed for the first time on his capital gains and dividend distributions.
Apparently one of the tactics used by Bain is to have the companies that they run borrow money to pay dividends to themselves and when the company then can't meet it's financial obligations, they send the company into bankruptcy and keep the dividend distributions.
Romney's business practices have opened my eyes to realize that there is a huge tax disparity in the treatment of people who toil and sweat for a living and those who live off the toil and sweat of others.
For instance, the machinist who has to drive 50 miles a day to earn $20 an hour to feed his family and is left with no money for investments at the end of the week and yet not only pays an effective Income Tax rate in the range of 15-20%, but also pays payroll taxes of 7-8% and has to pay 40 cents a gallon in Federal and state taxes on his commute, has to pay for his lunch at the fast food place with his after tax income, has to buy his work clothes with after tax income, has to purchase his portion of his health insurance with after tax income, while guys like Romney borrow money to make millions and pay an effective tax rate of 13% including their Social Security contributions, get all kinds of tax write offs for their vehicles, mileage, "corporate lunches", Armani business suits, etc., while basically living off the hard work of guys like the machinist mentioned above.
The system is skewed to screw the little guy. There is no question about that.
I don't know what the solution is, but I know what the problem is.
I can't believe I'm reading this stuff at FR.
Risk, risk, risk. Your strawman assumes that all investments go up in value. However, if the investment goes bad the margin gets called. If an investment loan goes bad, for whatever reason, the principals are liable if it's a recourse loan, or the banks are if it's a non-recourse loan. IOW, no one gets free money.
If we want to argue that failure is a key regulator of a free economy I'm with you 100%. The problem with TARP was it broke the chain of responsibility.
Romney's business practices have opened my eyes to realize that there is a huge tax disparity in the treatment of people who toil and sweat for a living and those who live off the toil and sweat of others.
So the guy who puts a huge enterprise together, which employees a lot people, isn't working really hard?
I won't vote for Romney under any circumstances, but it's not because he has been successful in business.
YES!
A HOUSEHOLD should be considered a business and all costs of operating that business should be non-taxable, the same with other businesses.
That way all gasoline, school fees, food/clothing/shelter, lunches, etc., and are deductible.
What would then be taxed is that amount of money left which we will call profit. Profit should be taxable for a HOUSEHOLD the same as for any other enterprise...and EXPENSES should not be.
That will make the rulers of the nation sprint — not walk — to their nearest sales tax plan.