Eliminate the capital gains tax!

No, not the way you think. Restating the Obvious has not suddenly become a mouthpiece for the socially irresponsible rich.

I mean, eliminate the concept of the capital gain. Tax all income as ordinary income.

One result of that, I bet, would be a more serious attempt to simplify the Tax Code on income. If the heavy hitters who have the ear of congresspersons actually had to pay income tax -- instead of just casting slurs on the plebes who do -- then we'd likely see some action.

Joe Nocera deftly deconstructs the argument for a lower tax on capital gains in the New York Times.

Nut grafs:

In 2009, according to recent Congressional testimony by Leonard E. Burman, a professor at Syracuse University, the 400 highest-income taxpayers reaped an astounding 16 percent of all capital gains.

All of which would be justifiable if the country got some benefit in return. On “60 Minutes” Sunday night, when Romney was asked about the justification for his low tax rate, he said what most conservatives say, that a low capital gains rate is “the right way to encourage economic growth, to get people to invest, to start businesses, to put people to work.”

This is also what Forbes means when it links its list to “the American dream.” Except that there is no evidence that it’s true. In 1986, when Ronald Reagan was president, the differential between capital gains and ordinary income was eliminated — and the economy soared. The capital gains rate was higher during the Bill Clinton years than in the George W. Bush years, yet the economy did better under Clinton than under Bush.

In the printed copy of his Congressional testimony, Burman has a chart that plots the ups and downs of the economy since the 1950s with changes in the capital gains rate. There is no correlation between the two. The idea that a lower capital gains rate spurs economic growth is one of the enduring myths of conservative thought.

The American dream exists not because of the capital gains differential but in spite of it. It is the tax break that most glaringly exists to benefit the wealthy.

And over at Columbia Journalism Review, Ryan Chittum has a note in the same vein, with lots of references.