For one, there is a respectable economic theory that supports a complete exemption of capital gains from income tax, the argument being that whereas wages and dividends or interest from investments are fruits of the capital tree, and are therefore taxable income, capital gains represent the growth of the tree itself, and are therefore not income at all.
I get a little lost in the metaphor here. Just saying that difference in value when buying something then selling something isn’t “income”? Ok, then why is it taxed at all? It’s a grand compromise? ;)
Few more explanations coming though it’s not actually clear what was used in the original tax legislation (which stipulated that long-term cap gains be taxed at half the individual’s marginal rate, subject to 25% ceiling).
