Over the past 30 years, Congress has gradually lowered the top tax rate on capital gains from 40 percent in 1977 to the preferential rate of 15 percent today. In fact, the only significant increase in the capital gains tax rate in the last few decades was when it was paired with an even larger tax cut for high-income earners, a reduction in the top rate for ordinary income from 50 percent to 28 percent. (It should be noted, however, that Mitt Romney does benefit from the carried interest loophole, a defect in the tax code that allows private equity and hedge fund partners to reclassify their compensation as capital gains and thereby enjoy the 15 percent rate on all of their income, not just their capital income. But this loophole only exists because capital income enjoys a preferential tax rate in the first place.)
Why is the government favoring Mitt Romney’s income (and that of Hedge Fund managers) over that of most Americans?