Whats Fair When it Comes to Taxes?

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Originally Posted by mlmpetert

Im honestly not trying to be a dick, but i dont understand your comment. Forget carried interest for a minute thats a different issue, the author is speaking from a boarded view on long term capital gains in general.

Ive read before the reason Capital Gains are taxed at a lower rate is because they have effectively already been taxed. Non-speculative long term equity ownership can/should be thought of as ownership on a firms future profits. Long term increases in the price of a stock are primarily driven by earnings. Speculative or short term equity ownership is not thought as an ownership of future profits and that is why its taxed at higher ordinary income rates.

Since the firm is already taxed at the corporate rate taxing profits made from capital gains is effectively double taxation. This is from the taxman himself:



Corporations

Capital Gaissn is the amount you make over your investment. So if I paid $100,000 for a rental property and then sold it for $150,000 then my capital gain would be $50,000. I then only pay the reduced tax rate on the $50,000 not the $150,000. The resaon I have heard for the lower tax rate was to incourage people to invest their money.