Mr. Willard Wigglesworth Mittens Romney, Esquire most recently stepped in it when he said that it is fair to tax capital gains at a lower rate because that money was already taxed once at the corporate level. That is only sometimes true, but probably not even usually true. Many business entities are pass-through entities, meaning the tax is not paid by the business but reported and taxed at the individual level. Businesses organized as limited liability companies (LLC) and partnerships are tax pass-throughs, and Bain Capital is very fond of those kinds of businesses.
What makes Mitt even more wrong is that, in addition to income tax, most workers who made $110,100 or less in 2011 paid about 15% payroll taxes on 100% of their income when the employers share is taken into account. Additionally, those workers who make more than $110,100 continue to pay an additional 2.9% Medicare tax on an unlimited amount of earned income. Those rates are set to increase next year, too.
Here is how the Republicans have won the war of rhetoric. Notice that when Republicans talk about taxes they only discuss income taxes and how 47% of Americans don't pay them, but when they talk about the Federal budget, they include Social Security and Medicare as if they were funded by income taxes. They ignore that payroll taxes pay for those items.
This trick was very handy throughout the 80s and 90s. In those years, the payroll tax was running a surplus that went into the Social Security and Medicare trust funds. the surpluses allowed the public debt to remain low because the workers' payroll taxes were subsidizing the income tax funded part of the budget thus allowing income taxes to remain low. But now that the payroll taxes are drawing down on the trust fund and adding to the public debt, Republicans want nothing more than to shake up the budget and eliminate the trust funds all-together. That is exactly what Herman Caine's 9-9-9 plan wanted to do by eliminating the payroll tax. Eliminate the separate funding and you eliminate the trust funds.
I never understand why the Democrats have not pushed back on this issue.