> There are good economic and fairness reasons for the preferential rate. First, under current tax rules, all gains from investments are fully taxed, but all lo

> There are good economic and fairness reasons for the preferential rate. First, under current tax rules, all gains from investments are fully taxed, but all losses are not fully deductible. Losses can offset gains in any given year, but losses that exceed gains can only be offset against personal income up to $3,000. The preferential rate compensates for this asymmetry. Adam gained $40k of capital last year. Bill lost $10K of capital last year. We should not tax Adam's profits, because it "compensates" for Bill's losses.