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With all the wealth tax conversations, I feel like the most obvious solution is to just raise the capital gains rates, or ideally, just tax all capital gains as

With all the wealth tax conversations, I feel like the most obvious solution is to just raise the capital gains rates, or ideally, just tax all capital gains as income, which is already progressively taxed. What am I missing? Is it just that it's politically impossible?

dragonwriter 6y ago
There is a good argument for treating income earned over a period of greater than one year, even if realized in one moment, differently than income earned within a year in a system of progressive annual taxation, which is (inasmuch as there is one) the fairness argument for favorable treatment of long-term capital gains (it misses other kinds of extended payoff income and is not perfectly targeted in the case of LTCG, though.) So, yes, you should treat capital income the same as other income, but you should also address the fairness issue. The best way I see of doing that is replacing favorable treatment of long-term gains with (1) unlimited ability to recognize gains in advance of realization for tax purposes, and to apply any such unused advance-recognized gains against current income for tax purposes, and (2) generous, but limited, ability to defer recognition of “windfall” gains for tax purposes. This would also avoid giving the favorable treatment appropriately due to non repeatable income to those with large capital assets that they can structure to provide continuous stream of “long-term” gains if the system is going to give them a tax break to do it that way. And, unlike throwing a wealth tax on top, this would be an overall simplification of the tax system compared to the status quo.