A 1916 lawsuit by a wealthy man created the capital gains preference

Evidence

How did this happen, when the purpose of the progressive tax system is to ensure higher-income taxpayers pay higher tax rates? Just like the marriage bonus, the preferential rate was created through pressure from the wealthiest white taxpayers in the early days of our taxation system. In 1916, when capital gains were taxed the same as ordinary income, only the richest 1 percent of Americans filed a tax return. Among them was Frederick F. Brewster, who (wait for it) was paying taxes on income from his enormous wealth, didn’t like it, and decided to sue so he ultimately wouldn’t have to. — Dorothy A. Brown, The Whiteness of Wealth, 439

Categorization

• XREF: Echoes how the marriage bonus was also created through pressure from wealthy white filers, per earlier chapters. — connects to: Wealthy interests financed a staged lawsuit against the income tax — Lawrence M. Friedman, A History of American Law, 3223