(Community Matters) The myth that lower capital gains sustainably spurs economic growth and jobs creates an inequity that threatens democracy. We’re taxing the wages of men and women in the military, teachers, fire fighters, janitors and other laborers at higher rates than most investors while Nordquist’s grand strategy of robbing the treasury (not funding two wars nor the largest increase in entitlements in several decades) to justify shrinking government could result in drastic cuts to the infrastructure that supports economic mobility. Intentional or not, we’re pulling up the ladder behind the 5%* of Americans who are upper middle class and rich.
Hey, don’t get me wrong – I think the Forbes 400 is a great list and if you look at all the jobs created by those represented, and/or their families, I say well done. The reason I am posting is because the capital gains inequity as a catalyst for investment is such total bullshit – Nocera in the NYTimes
Nocera: In the printed copy of his Congressional testimony, Burman has a chart that plots the ups and downs of the economy since the 1950s with changes in the capital gains rate. There is no correlation between the two. The idea that a lower capital gains rate spurs economic growth is one of the enduring myths of conservative thought.
The American dream exists not because of the capital gains differential but in spite of it. It is the tax break that most glaringly exists to benefit the wealthy. If you have any doubts about that, all you need to do is read the latest Forbes 400
Professor Burman (Daniel Patrick Moynihan Professor of Public Affairs, Maxwell School, Syracuse University): The heated rhetoric notwithstanding, there is no obvious relationship between tax rates on capital gains and economic growth. Figure 4 shows top tax rates on long-term capital gains and real economic growth (measured as the percentage change in real GDP) from 1950 to 2011. If low capital gains tax rates catalyzed economic growth, we’d expect to see a negative relationship–high gains rates, low growth, and vice versa–but there is no apparent relationship between the two time series. The correlation is 0.12, the opposite sign from what capital gains tax cut advocates would expect, and not statistically different from zero. Although not shown, I’ve tried lags up to five years and using moving averages, but there is never a larger or statistically significant relationship.
for the equally nerdy, Burman’s congressional testimony
* I use household incomes of $167k and above for this characterization, some would argue that upper middle class begins at $250k (another 1.5%)
Community Matters 
This has long been one of my pet peeves. On both theoretical and practical grounds, I can see NO REASON to tax capital gains at a lower rate than wages.
If we were a laissez-faire society (we’re not, but if we were), we would want to tax all forms of economic activity at the same rate. We would not discriminate in the tax code against labor and in favor of investment.
The supply side argument is that we need a lower capital gains rate to spur investment. Maybe (MAYBE) this made sense when we had a shortage of supply of investment capital. But those days of sky-high interest rates are long over. We are awash in capital. Interest rates are approximately zero. We DO NOT have a shortage of capital on the supply side. We have a shortage of demand. We have a shortage of jobs. But we DO NOT have a shortage of capital.
So why are we taxing labor at a higher rate than capital gains? There is no good reason for this. Anyone who says it creates jobs is not paying attention.
I am also miffed that self-styled progressives and liberals seem to ignore this injustice. Yes, it involves taxes, but it’s not that difficult to understand.
I totally agree. I have been preaching about this injustice for years. It is very relevant considering the positions of the two political parties. DanC is right in that cutting the capital gains tax for a short term may make a little sense if there was a dearth of capital, but that is not the case. The low cap gains rate is one of the big reasons we are seeing an acceleration of the accumulation of wealth at the very top over the last few years.