Judging from the number of tax preparation services, computer tax programs and statistics put out by the Internal Revenue Service, my guess is that most Americans, particularly those living between the relatively more affluent coasts, know very little about how personal income taxes are computed. As such, it may come as a shock to them that Mitt Romney, our multimillionaire Republican contender for his party’s presidential nomination paid less, as percentage of his income, in taxes than did the average working stiff.
Capital gains, dividends, and so-called “carried interests” are taxed at a preferential rate of 15 percent. Moreover, this income is not subject to Social Security or Medicare tax and you can deduct your losses (should you have them) from your gains.
For the life of me I cannot understand why capital gains and dividends are taxed at a lower rate than the paltry income I garner from a bank certificate of deposit. And investor assumes certain risks when making an investment choice, but so does a gambler at a casino or racetrack. Making a type of investment which has both risks and rewards should not carry with it a tax advantage not bestowed on more conservative investors.
So “thank you” Mr. Romney for highlighting this inequity to the public. Hopefully, your unintended candor will ignite an effort for serious tax reform in this country.
You "invented" nothing by purchasing a stock. You took a risk in the hope of making a better return. Bravo! But that doesn't mean the government should reward you with a lower tax rate. By your logic, lottery, casino, racetrack, betting winnings, all of which involve risk, should be tax free. It doesn't work that way.
BTW, I'm not a tax expert but I believe you can net gains and losses in any one tax year and can deduct, against ordinary income, up to $3k over losses which exceed gains (another provision that shouldn't exist).