Correlation doesn’t necessarily reflect causation. Capital gains tax revenue is affected by SO MUCH more than just changing the tax it’s really unfair to say it was the cause of the drop of revenue.

But sometimes correlation does reflect causation, especially when we can identify a mechanism that links the two, which in this case is the reduced incentive and ability to invest. Furthermore, at the very least we know that raising capital gains tax is a very poor means of raising tax revenues, so why do it? For fairness? That fairness comes with a depressed economy as a price.

Income tax and capital gains tax should be the same thing, period. Capital gains from the stock market should just be factored into your income.

The problem with this is that capital gains are generated as a result of taking a risk with one’s money. Taxing capital gains at the same rate as income would be very detrimental to the ability of investors to take a risk and invest. The only possible way it wouldn’t be a killer to investment is if the government became a partner that shared in the losses as well as the gains. For example if the government wants to take $500 when someone makes $1000, it should pay him $500 when he looses $1000. But nobody wants the government to do that, right?

Income tax and capital gains tax should be the same thing, period. Capital gains from the stock market should just be factored into your income.