All Income Should Be Equally Taxed

From the WSJ:

W. Reynolds (Letters, Oct. 10) describes several government policies that led to the current crisis in mortgage financing, including excess risk-taking encouraged by Freddie Mac and Fannie Mae as well as the mortgage interest deduction. He forgets to mention one other aspect: the exclusion from capital gains for profits realized on the sale of a house.

Giving tax-advantaged status to certain forms of income inevitably leads to excess investment directed towards the pursuit of that income type, resulting in bubbles that must eventually burst — such as the tech-bubble of the late 90s, fed by investments chasing tax-preferred capital gains.

Efficient allocation of capital requires that returns, whether they be in the form of wage income, profits from a sole proprietorship, capital gains, dividends, or interest, be on an equal footing. Advantaging investment returns that come in the form of capital gains over other returns necessarily distorts the natural flow of capital to its most efficient and proper use.

Take it from this Adam Smith/Milton Friedman devotee, the U.S. would be a lot better off if all forms of income, from all sources, were equally taxed.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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