Zuckerberg and Mitt Romney (who, as everyone knows, paid a 13.9 percent tax rate for 2010) both benefit from tax preferences on investment income -- in this case, the 15 percent tax rate on capital gains.** Zuckerberg founded a company, so he's owned shares in that company since day one, which counts as an investment. Romney benefits from the carried interest provision, which says that even though the managers of private equity funds, venture capital funds, and hedge funds are investing other people's money, most of their fees are taxed as if they were investing their own money. The carried interest provision is utter nonsense. If you are being paid to invest other people's money, you are working, and that's income from labor. It is a pure giveaway to small group of rich people who give huge amounts of money to politicians. For example, six of the ten millionaire donors to Mitt Romney's super PAC are from hedge funds or other investment firms. The bigger and more debatable issue is whether income from investments should be taxed at a lower rate than income from labor.The short answer is that there is no perfect solution. There are valid theoretical reasons to give tax preferences to investment income and equally valid theoretical reasons not to. (see link)
Increasingly, I believe our focus on theoretical arguments is misplaced. We should be focused instead on the role of government and how to pay for the things that we want. Of course, finding an answer to that question is also impossible but the path to an answer might lead to more economic growth for our country. Or not.
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