Mitt Romney's capital gains-heavy tax return has prompted a good deal of debate about the preference the current code gives to investment income. As Ezra and I have written, there's some disagreement among economists about this. Models suggest it should help growth, and studies find that it affects when people sell assets, but it's hard to find a clear empirical correlation with investment or economic growth.
But it's worth taking a step back and noting that how unusual U.S. policy in this area is. Robert Carroll and Gerald Prante of Ernst & Young calculated the "integrated capital gains tax rate" of the United States and other countries by taking both the capital gains rate and the corporate tax rate into account. They found that the U.S. rate, 50.8 percent is far above the 41.7 percent average for the OECD, and that only Denmark, France and Italy exceed it:
If you don't take the corporate tax rate into account, the U.S. top capital gains rate of 19.1 percent is above the OECD average of 17.4 percent, but not by much. More generally, the United States taxes capital and income much more than other rich countries, which tend to rely more on sales taxes such as VATs. The following graph breaks down where each country got its money in 2010, according to the OECD (click to enlarge):
The United States has the lowest consumption tax reliance of the countries featured, with only Korea and Luxembourg topping its investment tax reliance and only Spain, Germany and Austria relying more heavily on income taxes.
Dylan Matthews on the case for a capital gains tax preference.
Ezra Klein on the case against one.
Robert Carroll and Gerald Prante on the U.S. v. foreign capital gains tax rates.
Martin Feldstein, Joel Slemrod, and Shlomo Yitzhaki on how capital gains tax cuts boost asset sales.