This is the Cato Daily Podcast for Wednesday, January 2nd, 2013. I'm Caleb Brown.

Taxes just went up and for some taxpayers capital gains taxes have gone way up.

Chris Edwards, Director of Tax Policy Studies at the Cato Institute outlines some key reasons

why capital gains taxes should be kept low.

For people who don't really follow this, when Barack Obama talks about paying the same

rates that Warren Buffett pays with paying the rates as his secretary,

what is he missing there?

What is he leaving out?

Well, capital gains are different than ordinary income, like wages, and they've always been

treated different virtually to the beginning of the U.S. income tax.

In fact, many industrial countries never used to tax capital gains because they was simply not considered to be income.

So, you know, in the Netherlands, in New Zealand today, if you buy a share for $10, you sell the share

a few years later for $15.

You are not taxed at all because those countries do not consider

capital gains as income.

And I believe that's the proper treatment.

Unfortunately, American policy makers are forgetting these lessons about capital gains taxes.

The capital gains are different, and if you tax them highly, you really damage the economy for a number of reasons.

Your argument here is that capital gains rights should go away, but failing that, they

should be cut.

That's right.

The optimal capital gains tax rate would be zero, like we see in a number of other countries like the Netherlands and New Zealand.

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