> If we cut capital gains taxes to zero and added an equivalent amount to corporate profits (say, a 40% annual tax rate instead of 35%), the government would make an equivalent amount of money from the same economic activity, and Buffett's theoretical tax rate would go down. Similarly, if corporate income taxes were zero and his capital gains were taxed at 40%, he'd pay much more than his secretary, but the government would collect the same amount.
Neither of these are equivalent. The "only capital-gains tax" scenario creates incentives for foreign investors in US corporations. The "only corporate tax" scenario creates incentives for US investors in foreign corporations.
The current scenario seems to be a "get some tax revenue from whomever we can" strategy, but it might be worth tinkering with the ratios, especially to determine whether a more capital-gains-heavy, corporate-tax-light regime might increase overall tax revenue, by altering in the US's favor the flow of foreign capital, domestic capital, corporate relocations, and corporate expenditures.
I should have considered that. If you either a) assume we're only talking about US citizens, or b) assume that this law would also force foreign investors to pay, the point still stands.
Neither of these are equivalent. The "only capital-gains tax" scenario creates incentives for foreign investors in US corporations. The "only corporate tax" scenario creates incentives for US investors in foreign corporations.
The current scenario seems to be a "get some tax revenue from whomever we can" strategy, but it might be worth tinkering with the ratios, especially to determine whether a more capital-gains-heavy, corporate-tax-light regime might increase overall tax revenue, by altering in the US's favor the flow of foreign capital, domestic capital, corporate relocations, and corporate expenditures.