Why Don't We Have Tax Brackets For Capital Gains?

I don't have any insight into the actual thought process Congress went through, but there's a very simple reason why progressive taxes make sense for income but not for capital gains. Income is smooth, capital gains are irregular, but taxes are paid yearly. Income is generally recurring and consistent. So someone who made $250k last year really is likely better off than someone who made $50k. Even if they have some ability to choose what year income occurs in, they can only shift it a little bit. Capital gains, on the other hand, build up for years before they are sold and realized. And, it's relatively easy for people to choose how much to realize in any given year. Congress also has an old fashioned sense of investment which assumes that the money is actually going to fund some enterprise that will bear fruit years down the line. Putting some money into an ETF for a couple years so it can grow isn't the primary way they think of investing. In this model, someone who has a regular $100k capital gains each year for ten years should pay the same in taxes as someone who has a one-time $1M gain. It's also worth noting that 1) short term capital gains are taxed at ordinary income (progressive) rates, 2) long term capital gains actually do have progressive tax brackets of 0%, 15%, 18.8%, and 23.8%, 3) state income taxes may not differentiate about long term capital gains (CA does not) and 4) income taxes actually allow

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