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December 13, 2006

Framing Capital Gains

[Posted in response to How do we talk about capital gains tax rates? 12/13/2006]

Framing involves understanding the core motivating values and principles first. Then developing positioning based on that, then perhaps looking for metaphors, as well as illustrative stories.

The taxing of capital gains is clearly in the domain of the economy.  A progressive view of the economy is that “we’re all in this together”, as Jared Berstein puts it in his book. The economy is tied to prosperity and fulfillment in life (the “pursuit of happiness”).  Part of the progressive brand is tied to expanding opportunity and prosperity for most people -- that is,  expanding the middle class (reducing poverty by moving more people up the ladder of the middle class) and strengthening the middle class (increasing disposable income of the middle class).

For most people, the primary source of income is wages.

The rich are well off and don’t need special considerations and tax breaks.

There is no guarantee of good returns, not even positive returns, from speculative investments, whether stock or real estate.  [However, capital gains from homes can be “rolled over” into a new home, effectively delaying capital gains; IRAs offer deferring of taxes to later, presumably lower income periods in retirement -- these policies both reinforce savings by the middle class and economic “enfranchisement” through home ownership and savings.]

Capital “invested” in the stock market is really a buy-sell transaction between two people with different ideas of the future value of the stock relative to other stocks -- it is not investing the corporation in a way that helps the corporation; it provides no money to the corporation to invest in its business.  The benefits to the corporation are only very indirect.  Essentially, the stock market is betting on the future prosperity of the USA, with people choosing segments they think will do better than the average.

Several Republican family members of mine actually agree with most of this -- that the rich and capital gains don’t need special rates and that the “trickle-down” from the rich or “trickle-out” from stock investments is minimal.


  1. we should reward work, not penalize it by taxing it at a higher rate
  2. taxes should favor work (middle class) over wealth (rich)
  3. taxes on capital gains need no special advantageous rates
  4. there may be societal goals of encouraging savings or home ownership to encourage (i) economic “enfranshisement” and (ii) retirement capital that might moderate (c) for specific circumstances

Capital gains should be taxed at no lower rate than income, although one could imagine a progressive capital gains tax for retirement income (or as now with IRAs and 401(k)s deferred tax) up to a certain amount and preferential capital gains for a primary residence, as now.

The core progressive values to express are opportunity and prosperity, followed by fairness (to the broad population -- the working, middle class).

So, we might say something like:

  • We believe in having a fair and simple tax system that doesn't unduly burden the working class to the profit of those who have already made the most money from our system. The responsibility to pay taxes should be shared equitably with those having gotten the most from the system paying the most back into the system to increase opportunity for the next generation.
  • Taxes must encourage work & saving and must support families and the communities they live inreward work, not existing wealth
  • Taxes must be sufficient to pay for desired services for the common good, either by agreeing to reduce current benefits or by increasing taxes. 
  • Taxes should be levied fairly across economic sectors of society, reflecting the broad base of benefits across the sectors. 
  • Make civic investments when times are good, provide greater support when times are bad.

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