(Bloomberg News) At least five Republican presidential candidates support eliminating taxes on capital gains, proposing even deeper cuts than former President George W. Bush endorsed and standing in contrast to advocates of higher investment tax rates such as Warren Buffett.
Former Utah Governor Jon Huntsman became the latest candidate to back a zero tax rate on income from investments in a speech yesterday, pitching the idea as part of a job-creation plan.
"We will also eliminate taxes on capital gains and dividends, which will lower the cost of capital and encourage investment in the economy," Huntsman said in a campaign speech in Hudson, New Hampshire, according to his prepared remarks.
According to published reports or their websites, Minnesota Congresswoman Michele Bachmann, Texas Congressman Ron Paul, former pizza executive Herman Cain and former House Speaker Newt Gingrich have said they back getting rid of the capital gains tax, which now has a top rate of 15 percent for most assets held for more than a year. That position puts them at odds with bipartisan deficit-reduction efforts over the past year that have called for lowering tax rates on ordinary income and taxing capital gains and wage income at the same rates.
The Republican candidates' positions also contrast with the stance taken by Buffett, the billionaire investor, and President Barack Obama, who are seeking an increase in capital gains rates for high-income Americans and maintain that the lower rates give the wealthy an undeserved tax break.
In an op-ed in the New York Times on Aug. 14, Buffett, chief executive officer of Berkshire Hathaway Inc., wrote that his 17.4 percent tax rate was lower than that paid by others working in his office because almost all of his income comes from capital gains.
"If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine," he wrote. "But if you earn money from a job, your percentage will surely exceed mine -- most likely by a lot."
Lawmakers have been arguing over the proper tax treatment of capital gains for decades.
The last overhaul of the U.S. tax code, in 1986, equalized the top capital gains and income tax rates at 28 percent. Later increases in ordinary income tax rates and cuts in the capital gains rate created today's disparity between the 35 percent top tax rate on wages and the 15 percent rate on investment income.