Kwak on Taxing Investment Income

Over at the Atlantic, Kwak has a piece on how best to tax investment income. He has some good links and numbers showing that:

  • Lower capital gains taxes cost the Treasury about $50 billion per year
  • Lower capital gains taxes are not associated with higher growth (nor do they increase savings and investment)
  • The benefits go largely to the top of the income distribution

My own argument has been that we should make a grand bargain in which we tax capital income at normal income tax rates, and do away with corporate taxes on profits. Corporations have been paying less and less in taxes, and there’s the political economy argument that these taxes encourage corporations to enter into the political process, an area where they do not belong.

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