Tonight you will probably hear a lot of pompous self-righteousness from Barack Obama on "fairness". I am pretty sure that he will cite Mitt Romney's effective tax rate of 14% as an example of why the current tax code is unfair and favors the rich.

Before I get into the "fairness" of capital gains taxes, please read the article below, on how Mitt Romney's effective tax rate is actually higher than most Americans:

Is Romney's effective tax rate lower than yours?

President Obama in his State of the Union Address will make the case that Capital Gains rates should be higher, which I completely disagree with, and find unfair. If you are a investor/trader, you should be joining in with me here.

Capital Gains are taxes that are paid on top of taxes you have already paid. Double taxation. To give you an example of how unfair and unproductive this tax is, just look at this scenario. You and your neighbor both make $70,000 a year, you both pay taxes on that money. The next year, you decide to invest your money in stocks. You make money on that money, and now have to pay taxes on it again. Your neighbor puts the money under his mattress. He pays no additional taxes on the money. Do we really want to encourage that type of money management? Additionally, why should you have to pay taxes twice?

Unfortunately, the unfairness does not stop there. Let's say you had a very good year that year, and made $50,000 in profit on your investments. You will be facing a pretty substantial tax bill the following year. However, in that following year, you have a miserable investing year, losing all of the $50,000 that you made. Do you get the taxes back that you paid last year? Can you deduct all $50,000 from your income this year? No, you cannot. Is that fair? No.

So tonight when Obama talks about fairness and Mitt Romney, please be a little skeptical. It is not as simple as he will make it out to be, and it certainly has nothing to do with "fairness"...

¶ 1/24/2012 09:37:00 AM