Iron Chef Olorinus wrote:
Making money is making money. Whether you make it peddling lemonade on the side of the road or paying into a mutual fund, or cleaning toilets for minimum wage shouldn't matter if you are -truly- in favour of a flat tax. I see a lot of words up there, but I don't see any explanation of why, if you are in favour of a flat tax, you aren't in favour of treating all income equally.
Different axis of income though. I already explained this. There's a difference between the method of earning and the amount of earning. It's quite consistent to say you believe that we should not treat income differently based on volume, but we should treat it differently based on type. Why should the thousandth dollar I earn be taxed at a different rate than the first? If I provided the same amount of value to my customers/boss while earning that dollar, why does the government feel I should pay a higher tax rate on it?
I've also already explained why long term capital gains should be taxed at a lower rate then income taxes. While you may not agree, there really is a difference between the guy who invested money into some venture, which then increased in value by $10,000, versus the guy who worked at said venture and was paid $10,000. One is a return on direct labor, the other is a return on investment. We need both, obviously, but each is a different side of the equation. The guy who invested the money created wealth for others. That means that if his investment increased in value, it also had to provide other taxable economic events in addition to the gain itself. This is why some argue that capital gains should not be taxed at all (but that's a whole different discussion).
Put another way, lower taxes on capital gains is why we have an investment market accessible to more than just the already rich in the first place. If you tax gains as income, then there's no reason for the rich to use a public share based system to invest in business ventures. They'd just form partnerships with other rich people directly and reap all the benefits themselves. Now if you want to create an ivory tower with the rich on one side and the rest of us on the other, then by all means, tax capital gains the same as income. But I don't think that's what most people really want.
It's just simpler to look at people earning money and paying a lower rate of taxes on it and declaring it to be unfair. But the issue isn't that simple.