[/QUOTE]Capital gains need a lower effective tax rate because it requires a significant amount of risk. Everyone hears about people who make money with capital gains. Nobody ever hears about the people who lose money that way. Not every investment pays off. Not every asset appreciates.
Let me put it this way: Would you go to a casino's roulette wheel and put your money on a number 1-36 if the payoff was 10:1? Statistics say that you'd be a complete fool to do that. Why? It's simply not proportionate to risk. [/QUOTE]
It seems to me that you are over simplifying the capital gains process. Short gains seriously the effect the stability of the market. The fluctuations they cause can be profitable in the short term for the investors, but can depreciate the long term value of a companies stocks. That continues practice can cause what I have heard it called a, "crisis of confidence" in the market. That's a problem that I think can be effected by incentivising long term sales, over short term. It seems to me the solution to this issue should be a two part one, and the two need to be decisively different then the other.