That's what we should say every time anyone advocates a lower capital gains tax. So far, conservatives have almost monopolized the "class war" meme. Rubbish. They get away with it partly because "capital gains tax" is an arcane enough concept that it makes most people's eyes glaze over. One of the best tests of whether someone is rich is whether or not he perks up when he hears those words: "capital gains tax".
Why is that? Because really rich people make most of their money as capital gains. Some of that happens because of gimmicks -- tax shelters -- that dress up regular income so it gets taxed as capital gains. But a lot, perhaps most of it, is because the usual way to get really rich is to own something that becomes fantastically valuable -- something like Microsoft, or the mineral rights to an oil field. It's perfectly fair to call the increase in value of an asset like that capital gain.
What's not necessarily fair is to tax that kind of income at a fraction of what you pay on income earned from the sweat of your brow.
There may be some rationale for taxing capital gains at a lower rate, to compensate for inflation. In times of high inflation, the dollars you used to buy an asset decades ago were worth a lot more than the dollars you'll get if you sell it now. But inflation has been pretty low for the last 20 years. Other than that, you can make a good case that capital gains should be taxed at a higher rate than sweat-of-your-brow income. Shouldn't we be rewarding, or at least taxing less, the fruits of real labor than we tax the fruits of just owning the right assets at the right time?
I remember a debate between candidate Obama and one or more of his opponents in the 2008 primaries, "moderated" by Charles Gibson. The subject of capital gains taxes came up, and Gibson said something in follow-up to Obama's comment that was clearly arguing in favor of lowering capital gains taxes. Obama didn't make much of it, but I wish he had. I wish he'd said something like,
"Well, welcome to the debate, Charles! From your enthusiasm for lower capital gains tax rates, it's pretty clear how most of your income is taxed. You've probably lost sight of the fact that the average American only pays capital gains tax once or twice in his lifetime, after selling a house. You're lucky to have joined the rich and powerful few who pay mainly capital gains tax."
It may have been good electoral strategy on Obama's part not to hammer Charles Gibson on that point at that time. But the point needs hammering now.
This diary is a little off the theme of Inherent Human Rights, but not that far off. I seriously think our current tax policy, that taxes Warren Buffet at a lower overall rate than his secretary, is eroding our middle class and turning us into a nation of only 'haves' and 'have-nots'. Preferential taxation of capital gains is probably the most important way we currently give tax preferences to the rich. The right to a fair chance to join the middle class ought to be an inherent human right.