Can someone smarter than me answer this?
Why does Mitt say that taxes on Capital Gains have already had taxes paid by the income that was originally derived, therefore they deserve a lower rate of taxation?
It seems to me that Capital Gains are "new" income and have nothing to do with the original tax levied on the income that originated those investments.
This is not a rhetorical question. I'm not an expert on this.
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But there are taxes on many exchanges of money, so all money gets taxed over and over.
But they try to make it some special victimization - a corporation is an entity of itself, so when it makes a profit, that money is taxed. Then it gets paid in dividends to shareholders - so that money is taxes. The "argument" is that therefore the same money is taxed twice. The corporation pays taxes on it, then the shareholder who received the dividend does.
Your income is taxed and then you pay sales tax, so it would be the same there. But the right never whines about that one!
And when Mitt says that money was already subject to corporate taxes that MAY BE as high as 35% he fails to tell you that the corporate is 35% but rarely is that paid by our corporations. Im any cases no corporate taxes are paid because of all the loop holes. It's just more hooey.
Sure you may have paid taxes on your income and then you decide to invest some of that income which has already been taxed as income. When that income earns profits you only pay the capital gains rate on the profit...but that profit is really new money, isn't it? Just my take.
the need to keep track of "Cost Basis".
If an individual is a regular buyer of ....oh...say Ford stock, just to keep with my example above, and they purchase shares on a regular basis, they may have bought shares in one lot at $9.00 a share, 3 months later at $15.00 a share and 3 months after that at $11.00 a share. One look at a chart of Ford over the last 18 months will show a rather wild swing in price. A strategy to minimize Capital Gains is to use either "FIFO" (First In, First Out) or "LIFO" (Last In, First Out"
accounting for shares sold AND there are other strategies as well, such as averaging.
There are numerous articles on this subject available from a quick Google search, so I won't go into any more detail (primarily because I am not an accountant!) but if anyone that might read this runs up against such a scenario, it is better to have the information than not.
I'll have to read through these again later today.
Capital gains are a result of putting capital at risk, and having that risk pay off. People lose money in investments too, and the only recourse they have is to write their losses off against their own capital gains.
It's similar to gambling winnings and losses - Gambling winnings are taxed as ordinary income; gambling losses can be written off only to the extent they offset your own gambling winnings.
Winnings from hobbies are treated in a similar way - You have to pay taxes (as ordinary income) on money you make from a hobby, e.g. prize money for winning a car race or having your dressage horse come in first place in a competition. 
But you can write off hobby expenses only to the extent that they offset your hobby income.
As for the idea of taxing capital gains at a DIFFERENT, and LOWER rate than earned income, that's something that's always open for discussion. Reasonable arguments can be made in any direction you choose.
