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Point 2: You are not paying double taxes on the income. You are paying taxes on the profit you made selling the investment. If I invest $100 and make $10, I pay

• chimeracoder 12y ago
  Capital gains tax rates are roughly half income tax rates. Currently, we say "double taxation" when we refer to being taxed at the corporate level, and then again at the shareholder level (either as long-term capital gains or as income). Shareholders don't directly feel the corporate tax (though they are still effected by it). What I meant was that, if we eliminated the corporate tax but increased the capital gains tax to be equal to the income tax rate, the tax rate that shareholders pay on the gains would be twice what they are currently paying. (The actual incidence (burden) of the tax is more complicated to calculate; I'm simply referring to the direct tax rates.) This is all very rough, of course, since marginal tax rates vary widely.