Hmmm. This is where the Capital gains get a little fuzzy also. I earn money from my job, I get a paycheck. I pay taxes on it. Then I invest it and get taxed again. Isn't that a little odd?
I'll go back to my tax all income at the same rate regardless.

Here are some real numbers to look at from the IRS chart for tax year 2008...
(just for fun)
Federal Income tax #'s
Incomes between $50,000 and $75,000 pay on average 7.8% --------- (19,000,000 filers)
Incomes of at least $10 million ... pay on average from 17.9% to 28.5% ---- (11,050 filers)
$109.7 million - pay on average a rate of 18.1%

HOWEVER ... when a bunch of other Fed taxes are thrown in the numbers get a little fuzzier.
Incomes between $50,000 and $75,000 pay 22 to 23%
the $50 million earner pays 20 to 30%

finish your thoughts here.

you work
you get paid
you pay taxes on that income.

you use your money (post tax, of course) to buy something.
If it's a pack of smokes or a gallon of gas or a tv or whatever, you probably pay sales tax on it.

Are you saying that's "double taxation"?

what if you use your money to invest it? There's no tax on that investment. No tax on investments. Read my lips.
Now, when you sell it, if you make a profit, that profit is taxed.
If you take a loss, you can deduct the loss from your income (generally speaking), reducing your taxes.
If you keep it and you receive dividends, the dividends are income, and are taxed.

If you make your living buying and selling, the profit you make from those sales is your income. that income is taxed. Where the money came from to make the purchase is irrelevant.

But not if you are a hedge fund manager... then it is "carried over interest".

Nevermind, I really don't know what I'm talking about here.

Lots of people, MOST people have income from more than one source.

wages, salary, interest, capital gains, gambling winnings, lottery, dividends, "carried interest" (we'll get to this one, I promise). On and on, there are lots of different kinds of income. Different kinds of income might be taxed at different rates. This variability has lots of effects on our lives. It makes some kinds of income preferred, that is taxed at a lower rate, it can encourage people to use their money in one way or another, and this might be a desirable effect. One thing is ABSOLUTELY DOES is complicate matters, and usually confuse matters. It makes it possible to make imprecise statements that appear to contradict each other and still be literally true.

It wearies me.

Now, when you sell it, if you make a profit, that profit & principal is taxed.
How about the estate tax.

...and should be taxed at the income rate, not the capital gains rate?

Welcome to politics.

when you sell an asset, you are taxed on the profit. the principAl is not taxed. I don't know where you got that notion.

I don't have the energy or the facts on hand to discuss the estate tax tonight. Suffice to say, the estate tax follows the same political arc that capital does.

You'd think so, wouldn't you? But, it is not. If you buy and sell widgets, your profit (sales in excess of expenses) is ordinary income. If you buy and sell shares of stock, the profit (sales revenue in excess of expenses) is considered capital gains, and taxed accordingly, max 15%.

Look, I'm getting tired. My language is becoming imprecise. This is the bullshitting over beers portion of the sermon. /end disclaimer

uh ok. You are making a very good argument for my suggestion pages ago to tax it all at the same rate regardless of how derived.
thank you. nice discussion.

You're welcome, friend.

The flat tax is also a topic for another day. I think it has enormous appeal in terms of simplicity. Sometimes ideas that simple can have unintended consequences. Not a tax example, but think about the zero-tolerance policy for drugs at school. Then when a high school girl takes a Midol between classes, she's expelled. I know it's not the same thing, my point is sometimes stuff happens. I haven't thought through the flat tax arguments yet.

A related thought is to eliminate all deductions. Simple? Check. A good idea? Unknown. Sure is simple though.

One thing I will say is that our current system, at our current economic situation... we don't have enough mojo to keep from cratering. We need more federal revenue. Period. It's not possible to just starve our way to balance. Now where that additional revenue will come from will be a bloody battle royale. I'm in it, we're all in it.

flat tax is not good. Just doesn't work.
When you are less beer tired, look at the stats I posted from 2008 in post #107.
Additional revenue,apparently we do need more, BUT there is a ton of revenue available in the military budget. We just have to change philosophically. We can NOT afford to police the world.
Eliminate ALL deductions... Hate that "all" word.

Um, there is no "revenue" to be found in the military budget. There are costs to cut, to be sure, but that is not the same thing as "revenue".

96% of all government revenue comes from one primary source - taxation.