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Cap gains are taxed lower because it's already taxed money being invested. In addition, it's a reward for risking your money by investing it into the economy (

• jameshart 9y ago
  I've never understood the 'already taxed' argument. Money circulates; governments decide that certain transactions are taxable. The money left over in a given transaction after the tax is paid doesn't magically become exempt from taxation in future transactions, morally, legally or factually. Arguments against inheritance or capital gains taxes on the basis that they tax money that has already been taxed just privilege the idea that taxing earned income is axiomatically legitimate - the one transaction that it's okay to tax. But why is that special? Why not pick sale of goods as the legitimate taxable transaction, then paying tax on wages is paying taxes on money that has already been taxed. Paying someone for their labor is a taxable transaction. Selling an asset at an appreciated value is a taxable transaction. Transferring wealth to descendants after death is a taxable transaction. 'Already taxed' money is not a thing.
• Kluny 9y ago
  It just that there's a surplus of capital right now - you can tell by the way bond and savings interest rates are close to zero. The reward for risking your money isn't needed right now. People can't find enough places to leave their money.
• ashark 9y ago
  The money in my paycheck has already been taxed a bunch of times by that logic, so my taxes should go down, right?