Quote Originally Posted by Veldan Rath View Post
No, over here Capital Gains is after the corporation pays its taxes. (Correct Wiggin/Loki?)
Quote Originally Posted by Loki View Post
Kind of. But the value of stocks is only partially related to current earnings, and capital gains are paid only when the stocks are sold. I guess you could say the money is taxed twice, but you could that make argument about anything (i.e. a company pays a tax and then its employees have to pay a tax).
I think this logic might work better for qualified dividend payments, but not that much better. It's kinda like arguing that you shouldn't have to pay tax on the gain in value of a home after you sell it because you've been paying annual property tax. There's plenty of pseudo double-taxation around, but I don't think this is a particularly egregious example.

A much bigger issue IMO is the fact that most ordinary Americans don't really benefit from the lower taxes on long term capital gains. That's because the bulk of people's investments are tied up in 401(k)s and IRAs, which have many advantages, but have a big downside that distributions are taxed at income tax rates and not capital gains rates. I'm not sure this should change (the nature of tax-deferred growth and only partial distributions annually), but it means that outside of rich Americans who save/invest/earn far more than they can contribute to a tax protected account end up with fairly low marginal rates on the bulk of their earnings.