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ANTI-MARKET, PRO-RICH PEOPLE. Atrios discusses one relevant part of Krugman's terrific column today: taxing some of the fees of fund managers at lower rights to incentivize risks although they aren't actually taking risks. I think it's also worth noting this argument:
There’s a larger question one could ask: should we even be giving preferential tax treatment to true capital gains? I’d say no, because there’s very little evidence that taxing capital gains as ordinary income would actually hurt the economy. Meanwhile, the low tax rate on capital gains is one main reason the truly rich often pay lower tax rates than the middle class.Targeted capital gains tax cuts also provide an opportunity to see a conflict between "free market" and "pro-business" principles. A "free-marketer" would presume that the market would produce the most efficient allocation of resources between wages, capital investment, etc., and hence taxes should distort this allocation as little as possible. People who support capital gains tax cuts, conversely, are implicitly arguing that the market gives too little incentive to invest (and the solution -- how about that! -- is a tax cut that overwhelmingly benefits rich people.) It's not surprising what side most Republicans (and, as Krugman says, all too many Democrats) are on...--Scott Lemieux
