Last year, Congress finalized a tax bill that cut the marginal tax rate on unearned income and essentially ended the Estate Tax. What is the economic argument for reducing these taxes? There is no good argument in a consumption-driven economy, unless wages will grow and thus stimulate aggregate demand. That high-income households that receive most of their income from capital gains, dividends, carried interest, and rents will spend more of their winnings on high-end consumption. As low-income households would squander any tax benefits, there is no rationale at all for cutting their taxes. Capital gains are better for the economy than wages