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They need to figure out something better to do with the capital gains tax. I'm not sure a straight out raise in the rate would help much.

To me the goal of a capital gains tax shouldn't be to generate revenue for the government but to control the volatility of the market. From my perspective a lot of stock value has nothing to do with the profitability of a company or its longer term prospects, but a completely artificial betting game played by computers.

Millionaires and Billionaires reap the benefits of this because they have the enough money to actually influence the market, plus they're constantly moving their money around. Regular folk with 401Ks aren't likely to move their money around a lot because they're too busy actually working on something other than analyzing market trends, plus they don't have enough money to make it worthwhile moving their money from one stock that's going to drop a point to another that's predicted to increase a few points.

Maybe they can tax large sums at a higher rate (maybe they already do), and/or a higher rate for selling off from a performing stock.

You may now eviscerate me on my ignorance of the market.

Having crossed paths with a lot of smart people, an awful lot seem to have found their way to Wall Street. They aren't inventing new machines, curing diseases, or designing bridges. A shocking percentage of our national economy is just people trading paper and occasionally financing new businesses that operate predominantly outside our borders. I don't think we'd find many economists who'd argue such a trend is independent from our nations tax policy.

@Crosswords the thing economists talk about to try to stabilize market movements would be a tax on financial transactions. Basically, it'd be a tax applied anytime you buy or sell a stock, so it'd give companies a disincentive to move their money around quickly.

The theory is that this would bring more overall stability to the market by making investors move their money in a more strategic fashion.

Buffet's very strange tax argument...

And some background.