Should We Eliminate The Capital Gains Tax?

Wonderful column on the capital gains tax. I say eliminate it. I think it stifles growth and amounts to double-taxation. The entire column is a good read.

Why Tax Capital Gains?: Newsroom: The Independent Institute: Imagine a poker game. At the end of the evening, some players walk away winners. Some are losers. No real income has been produced at this event. It’s strictly entertainment. The winnings of the winners are exactly equal to the losses of the losers. Should the IRS get involved? If your answer is “no” I like the way you think.

As it turns out, however, the IRS does get involved and it does so in a very unfair way. It taxes the winner’s gains but limits the ability of the losers to deduct their losses. (Gambling losses can only be deducted from gambling winnings, not from other income.) If the IRS treated everyone fairly (symmetrically) there would be no point to taxing gambling income. The deductions by the losers would offset the gains of the winners and there would be no net revenue for Uncle Sam.