Capital Gains ARE taxed, but they're given preferrential treatment and taxed at a lower rate of up to 15%, and here's why:

If you make $100K a year, you have a GUARANTEED income of $100K a year. It doesn't change, you don't have any risk of losing your money. It's income, that you can count on.

If you're a trader, every time you purchase a Stock or invest in a business, that investment could go south. Just has the Millions of investors that purchased Homes at the top of the market, only to watch their investments disappear into thin air. My Sister in one year made an $85,000.00 profit on a home that she invested $20,000 in, on that $85,000.00 profit she had to pay a Capital Gains Tax of 15% or $12,750.00. Now let's think about this for a moment. My Sister paid $350,000.00 for the house, the builder made approximately 12% profits on that, of which they paid taxes on (that's $42,000 taxable income for the company) Additionally the rest of the money was used to both hire individuals to build the house, put in Tiles, a Roof, plumbing Electrical, Cabinets, ... you get the idea. Basically it's just over $300,000.00 pumped into the economy. Assuming everyone else is making around the same profit margins as the builder, you have about another $36000.00 in taxable corporate profits PLUS, about $100000.00 of that cash goes towards taxable salaries to the people actually building the house. Assuming those people are in the 15% tax bracket, and after deductions, they end up paying about 10%, you're looking at an additional $10,000.00 in Personal Income taxes collected by the government, plus $15,000.00 in Social Security Taxes. So let's look at the differences shall we?

$100000.00 income, after deductions works out to about $85,000.00 Taxable income, I don't think it's 30% anymore, I'm pretty sure it's been cut back to 27%, so that's $22,950.00 in Taxes collected by the government.

$85,000.00 profit, taxed at 15% Capital Gains rate, PLUS all the economic activity that was spurred by that....
$12,000.00 Capital Gains Tax on Original Investment.
$10,500.00 Corporate Tax (25% on $42000)
$5,400.00 Corporate Tax on smaller contractors (15% on $36000)
$10,000.00 Personal Income Tax (10% on $100,000 in Salaries)
$7,500.00 Social Security Tax (7.5% on $100,000 in Salaries)
$7,500.00 Social Security Employer Matching Tax (7.5% on $100,000 in Salaries)

Grand Total collected by Feds, $52,900.00 in Taxes, not including what the states got.

Do you now understand why Capital Gains are given preferential Treatment. The effects they have resonate out and create jobs and more importantly they create many additional revenue streams for the Government.

I know what you're thinking, what if that money was invested in Stocks, not homes. It's basically the same effect, just works differently. The company issuing the Stocks or Bonds, is doing so, because they need to invest the money in building a warehouse, purchase additional hardware, build more stores, whatever. I used to work for Home Depot, when I started working for them they had only 80 stores. Over the past several years the stock they issued helped them build an additional 2000 stores around the country. How many paychecks did that generate? How much taxable income? The point is that SOMEONE needs to be hired to provide the products or services that the investment needs, and that in turn generates paychecks that are taxed and profits that are taxed.

By the way, my sister used the money she made from her investments and bought two additional homes. Between the two she lost over $100,000.00. Doubt she will be making investments like that anytime soon, and if they end up making Capital Gains taxes much higher, I'm not sure if she'll ever invest in anything again, she'll probably just put her money in the bank.

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America is not a Socialist country, this is why the only democrats who ever win, are democrats who SOUND like Republicans (Hello Bill Clinton - Low taxes, Free Trade, Welfare Reform, Era of Big Government Over - Sounds Republican).