If you were thinking: “what tax change could I implement that would be most helpful to the wealthiest households?” you’d quickly come to the same conclusion as Rubio: zero out taxes on capital gains and dividends. That’s because taxation on these forms of income, currently taxed at a top rate of 23.8 percent, is highly concentrated: according to the Tax Policy Center, 79 percent of the tax take from this asset-based income comes from the top 1 percent, 5 percent from the bottom 90 percent.
This is madness. Capital gains are not directly earned. It’s making money off of money. Therefore, they should be taxed at the highest prevailing rate at minimum, but the argument could be made that they should be taxed at a higher rate than all other forms of income. If investors want preferential tax treatment, then they should have to leave their money in one place long enough for it to do some good. The tax code could be updated to incent that, but there’s no argument to be made in favor of taxing unearned income at a rate that’s less than the highest rate which labor pays.