Has anyone ever tried to sue the federal gov't for taxing capital gains less than income from work?

[yurbud]

There's a legal principle called ''disparate impact'' when one group is arbitrarily treated less fairly than another, and it would seem to apply here. A day trader who makes all his income from capital gains pays a lower percentage in taxes than an elementary school teacher who makes a tenth as much. How is that fair?

[RKP5637]

1. Recommend!!! n/t

[Scuba]

2. Yeah, but see that money is already taxed once at the corporate level... oh, wait, never mind.

[yurbud]

19. every dollar is already taxed somewhere. paying sales tax with income I already paid income tax on

is double taxation. That's the lamest argument ever.

[SDuderstadt]

3. So...

you're wanting to sue Congress?

There's a pretty good reason why no one has, because it's a poorly thought out idea. Although I think that tax policy should encourage investment, the tax rate on capital gains is obscenely low.

[yurbud]

20. when politicians are so corrupt that they can't do what's obviously right, the courts sometimes

intervene.

[SDuderstadt]

28. Can you give me an example when the "courts have intervened"...

in the setting of tax rates?

[yurbud]

29. there can always be a first time.

[SDuderstadt]

32. LOL!

On what grounds?

Do you think courts just look around for issues and unilaterally act?

[yurbud]

33. no, somebody has to file it, but they have attacked states on budget issues like prison overcrowding

and separate and unequally funded schools. It's not much of a leap of the imagination to go from how tax dollars are spent to where they come from.

[slackmaster]

4. A day trader faces risks that a salaried person does not

Day traders can lose a lot of money fast. Return is not necessarily commensurate with effort, so the situations are not really comparable.

[LiberalAndProud]

5. So gamblers should pay a lower percentage because they stand to lose?

It's the nature of the game. My taxes shouldn't subsidize gamblers' losses.

[badtoworse]

6. How is it a subsidy?

[LiberalAndProud]

7. Paying a higher tax on the same dollar.

If it's not a subsidy for the gambler, it's a penalty for the worker.

Either way, it's not equal treatment.

[badtoworse]

10. Why doesn't the same argument apply to marginal tax rates?

[LiberalAndProud]

11. As long as you keep some of that dollar that I can't match, good for you.

I was assuming equal incomes. It's clear that to be a just society, equal incomes should be taxed equally, dollar for dollar.


However, I'll rely on Prof. Van den Berg to explain why marginal tax rates are fair, and even necessary.

Wealth is accumulated by saving and investing income, and it is easier to save from a high income than it is to save a portion of a low income. It is, therefore, not surprising that the distribution of accumulated wealth is distributed even less equally than annual income.

http://nebraskansforpeace.org/growing-income-inequality

[slackmaster]

23. Gambling winnings are taxable as ordinary income. Gambling losses can be written off...

...but only to the extent they offset gambling winning.

Trading is not gambling. This is a false equivalence.

[arbusto_baboso]

8. So?

Cry me a fucking river. No one held guns to their heads and commanded them to pursue that career.

[slackmaster]

24. I'm just saying that gains from investments are a different critter than earned income

Tax them at a higher rate than earned income if you can convince Congress to do it. I really don't care at all.

[madinmaryland]

14. Huh? So we should reward gamblers with tax breaks?

Please explain.

[slackmaster]

25. Gambling winnings are taxable as ordinary income. Gambling losses can be written off...

...only to the extent that they offset gambling winnings.

False equivalence is false.

[DeadEyeDyck]

16. While I was laid off, I day traded last Spring

I traded securities and a little options. I made $12,000 in about two months. But I risked that amount. Someone here is going to tell me that I owe THEM some of that money!!! I called the winners as I see them. What did you do while I was doing this? I have not reached 27 years old.

[madinmaryland]

17. Why should someone who makes $12,000 in the same amount of time

as you did have to pay much more in taxes than you do?

[slackmaster]

27. Who cares? What difference does it make?

Please explain.

BTW, someone who earned only $12,000 is not going to end up paying tax on the full $12,000.

[slackmaster]

26. Congratulations on your success.

You did well.

[Jim Lane]

9. This would be an Equal Protection Clause challenge,and it would fail.

First, as to "disparate impact": It doesn't mean that it's impermissible for laws to affect different people differently. Otherwise, we couldn't have progressive taxation. Rather, "disparate impact" is a concept used in the law of employment discrimination. It refers to facially neutral job requirements or conditions that have the practical effect of discriminating against a protected class. For example, an employer that said "All applicants must be at least six feet tall" could be found to have engaged in sex discrimination. Although there are some men shorter than six feet and some women who are taller, the overall effect of this requirement would be to screen out more women than men, so it would have a disparate impact. The employer could still win a lawsuit if it could show that being at least six feet tall was a bona fide occupational qualification for that job.

When it comes to constraints on governmental action like tax policy, the principles of equal employment law aren't binding on Congress. The relevant consideration would be the Equal Protection Clause of the Fourteenth Amendment. As applied to different sources of income, the Equal Protection Clause would require that any different treatment be rationally related to a legitimate governmental interest. The test is applied very permissively. The argument would be that favorable tax treatment for capital gains encourages investment, and that would certainly be enough of a connection to satisfy the "rational relationship" test.

[yurbud]

34. I hadn't heard about different capital gains tax rates for short and long term.

I'll have to look that up, but if you've got a good link handy, I'd check it out.

[Pterodactyl]

12. I doubt it. The rates are set by congress and the president.

There are lots of different taxes for different things - work income, corporate income, gasoline purchases, and so on all set by law.

[lumberjack_jeff]

13. Why would the principle of disparate impact not also apply to progressive tax rates?

Just saying.

[Zanzoobar]

15. You beat me to it.

[yurbud]

21. progressive tax rates are based on the ability to pay. A flat tax would have a disparate

impact on poorer people. Someone living closer to the poverty line or even with an average income uses a much higher percentage of their pay just to survive than someone wealthy.

[yurbud]

30. if you want to have a truly flat tax, tax people, investments, and businesses the same

but let individuals, like businesses, only be taxed on profits, so all the costs of survival and having job, rent, car payments, insurance, food, would be subtracted from your taxable income. Actually, businesses claim entertaining clients as an expense, so all the money I spend entertaining myself should be deductible too.

[Blue_In_AK]

18. It's hard to sue the federal government.

I tried once. I got nowhere even though I had a claim that would have been enforced against any primate entity. I made it to the Ninth Circuit on appeal, got remanded and shut down again.

[FreeJoe]

22. Lot's of problems

First, the "disparate impact" test is to protect minorities or other protected classes, not "poor people." Second, day traders pay short term capital gains taxes because they don't hold their investments for a year. Those tax rates are the same as normal income tax rates.

Long term capital gains taxes are lower for two reasons. They encourage longer term investments and financial stability. They also help make up for the taxation of inflation. If you buy a stock and hold it for 10 years and its price goes up at the same rate as inflation, you really haven't made a capital gain, but you still have to pay tax on the nominal gain.

Even if you did establish that the different tax rates for income and long term capital gains had a disparate impact on a protected group, it isn't clear why the civil rights laws would trump the tax laws. They were both passed through the normal legislative process.

Finally, you can only sue the federal government with its consent. Ain't gonna happen in this case.

[librechik]

31. seems perfect for the ACLU--it's a matter of equal rights