Saturday, December 10, 2011

Capital Gains vs. Income

I'm watching the Iowa Republican Presidential Debate right now, and one of the candidates (I believe it was Gingrich, but I was out of the room and my voice recognition isn't quite that sharp) said he supported 0% capital gains tax. It sounds great from a "let's get people investing" perspective, but does it really make sense? I don't think so. In fact, I spent a good bit of time fretting about it this morning in the shower.

With most of our production automated or offshored, the real value in the global economy is increasingly created by investment rather than labor. The role of humans, and especially Americans, is increasingly to provide volition strategy, and discretion to large sums of money. The labor that we can neither offshore nor automate is mostly low-value, low-paying service work. The entire concept of an income tax, though, is based on the foundation of a large, prosperous middle-class of wage employees. They no longer exist.

If our economy is mostly driven by entrepreneurs, investors, and businessmen, why are we still trying to run the government out of the pockets of the non-existent employees?