Right. First of all, one thing I would disagree with Professor Milligan on is that, even if you try to lump capital gains and dividends and interest together, you're not going to simplify the system. First of all, capital gains are only taxed on a realized basis, when people actually sell assets. That already creates an important differentiation, and a lot of tax law is built on trying to cope with that differentiation from other sources of income.
Also, for dividends, and in the case of capital gains too, we know that if a company is paying corporate income taxes, it's actually reducing its value and in fact the capital gains and the dividends. The reason we've had dividend tax credits, especially for small firms, and lower capital gains taxes on shares has been as a way of trying to recognize that the income the owner gets has already been subject to one layer of tax, and that's at the corporate level. So you're going to have those kinds of differentiations.
In the case of small business, I think there is an issue of building a company and of people having sufficiently low costs of capital to grow their company. Taxes, especially capital gains taxes, can impede risk-taking, because governments are there to share the gain, but they don't necessarily share the loss entirely, although we've tried to deal with that in the tax system.
But because we don't have a perfect system of capital income taxation—we will never get there—sometimes you have to do some offsetting incentives. That's where I think we need to rethink this, but what I'd like to do is rethink incentives by which we can actually encourage growth and not have very high marginal tax rates, such that if a company grows, then they're facing much higher levels of taxes on their income, should they grow.
It's very similar to low-income people trying to—