I have not read or even skimmed Mitt Romney’s 160-page economic plan; all I know is what I’ve seen in the headlines. So all of this is subject to revision. But:
1) I gather that he’s proposing to shift a greater percentage of the tax burden onto upper-income taxpayers — that is, to make the tax system more progressive — via a steeply graduated tax on capital income (with the zero bracket extending up to the $200,000 income range). Reasonable people can disagree about how progressive the tax system ought to be, and I disagree with Mr. Romney; I’d like to see it made less progressive, not more.
2) Be that as it may, we might at least agree that for a given degree of progressivity, efficient taxes are better than inefficient taxes. Continuing to tax capital income violates that principle. If you want to make the rich pay more, the most straightforward and efficient way to do it is with a steeply graduated tax on labor earnings, not by taxing capital. A tax on labor earnings distorts the incentive to work, but a tax on capital distorts both the incentive to work and the incentive to save.
3) In other words, there are two separate issues here: Should the rich pay more, and if so, how should we make them pay it? I think Romney is wrong on the first, and I’m virtually sure he’s wrong on the second. You don’t have to tax capital to tax the rich.
4) There are a number of popular misconceptions that I expect to arise in comments, for the sad reason that not everybody has read or digested all of my previous blog posts on this subject (try typing the word “capital” into the search box on this page). Let me try to pre-empt one of them: There are a lot of retired rich guys whose income consists entirely of dividends and capital gains; a tax on labor income, you might think, would not touch them at all. The reason that’s wrong is that dividends flow from savings; if you raise the tax on labor income, these guys will have save less and earn smaller dividend streams. (That doesn’t apply to the ones who have already retired today, but it does apply to all future generations, the effects on which collectively dwarf whatever happens today.) So a steeply graduated tax on labor earnings does hit more or less the same population as a tax on capital, but it does it without nearly as many destructive side effects.
Edited to add: And if it’s really really important to you to sock it to the currently retired rich, you can do it with a steeply graduated consumption tax. You still don’t need to tax capital income.