Returning dividend and investment tax rates to sustainable levels

More Chips For Tax Reform

By STEVEN RATTNER, NYT

Almost lost in the tug of war over whether the top income tax rate should be 35 percent or 39.6 percent is another consequential tax issue: the proper rate for capital gains and dividends.

It was the absurdly low rate on those forms of income - just 15 percent - that yielded Mitt Romney's embarrassingly small tax payments. And that's what also led to Warren E. Buffett's lament that his tax rate was lower than his secretary's.

So as we scurry around looking for new revenue to help address the yawning budget deficit, let's zero in on this special preference.

President Obama has proposed much of the needed adjustment, including eliminating the special treatment of dividends and raising the tax on capital gains to 20 percent for the rich.

Personally, I would go further and raise the capital gains rate to 28 percent, right where it was during the strong recovery of Bill Clinton's first term, and grab hold of a total of $300 billion of new revenues over the next decade.

(More here.)