[tomjohnson3]

> The theory in taxing capital gains at a lower rate than ordinary income is that the wealth that was invested that produced the capital gains has already been taxed once when it was earned.

Whenever someone argues this point (not fw, in this case) and alludes to being double-taxed, I like to remind them that only the gain (minus any loss) is taxed...so there is no double-tax. ...and why someone would invest in stocks or startups vs bonds is that the rate of return is potentially much greater. I don't think there needs to be an extra incentive (in the form of lower tax rates) for investors. ... That argument seems to be a smokescreen.

On another note: I'd love to see a tax rate (or fair analysis) based on discretionary income.

A progressive tax system addresses this a bit...and, in my opinion, this is why moving to a flat tax would benefit the rich and hurt the poor.