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The preferential treatment of capital-gains income is a tax boondoggle that should be re-examined if we are to talk honestly about our national balance sheet.

Join me after the sweet-potato, and think about signing my petition if you agree.

I have read Daily Kos for a long time, and I enjoy the wit and intelligence that leap from the pages here.  I joined a week ago, in order to create this post, and during my seven-day wandering-in-the-desert waiting period several front-page articles have only reinforced this truth.

Capital gains, and to a lesser degree dividends, enjoy a preferential low tax rate that is presumed to stimulate investment.  This has not always been a part of our tax code, and need not remain.  Indeed, several separate bases exist for the equalization of taxation for all forms of income.

First, does reduced taxation actually increase investment or growth ?  Data compiled by non-partisan research arms of our own government reveal that there is, in fact, no correlation between the capital-gains tax rate and national growth, and no correlation between this tax rate and rate of investment.

Second, if not justified by growth, does it serve any social benefit ?  Of course, we know the opposite is true--a quick glance at the comments of one recent presidential candidate will reveal that bestowing a 14 percent tax rate on a millionaire does nothing for his sense of a common good. The same government research I mentioned earlier shows only one good correlation--the lower the capital gains tax rate goes, the greater the separation between rich and everyone-else grows.  

So, it doesn't increase growth or investment, and increases inequality.  Does it, somehow, promote a national tax goal ? Of course not.  Since most of the upper-upper income tiers are filled by investors of one sort or another, the long-standing goal of progressive taxation is inverted at the top:  those who could afford to pay more actually pay much, much less (on a percentage basis) than residents of the middle and even lower tiers, who rely on their own hard work, every day, for their income.

Fourth, it drains the national government of needed funds. Equalizing capital gains taxation would raise about $ 70 billion each year; or that money could go to reducing other, truly impactful, rates.

So to sum:  the preferential taxation of capital gains and dividends produces no investment benefit, worsens inequality and the societal ills that come with it, up-ends a professed goal of our tax system, and deprives the government of much-needed funding in the process. It is time to restore equal tax treatment to capital and labor income.

Join me, if you agree. Let the President know where we stand. Sign my petition, and make our voice heard.

White House Petition


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Comment Preferences

  •  When I was doing my father's taxes. (2+ / 0-)
    Recommended by:
    Scientician, Neon Mama

    My father was aging so I started taking over the tax preparation for him in 1999.

    Most of his income was dividends.

    If was absolutely amazing what a difference the Bush taxes made.

    Income should be income, with the exception of FICA.

    What do we want? Time Travel! When do we want it? It's irrelevant.

    by NCJim on Wed Nov 21, 2012 at 08:18:24 AM PST

  •  signed (2+ / 0-)
    Recommended by:
    Scientician, BlackSheep1

    No special breaks for the rich.

    How big is your personal carbon footprint?

    by ban nock on Wed Nov 21, 2012 at 08:22:16 AM PST

  •  I have read and read (1+ / 0-)
    Recommended by:
    Neon Mama

    The supposed justifications for this policy and I still can't make it make sense to me, not even in theory can I find a sensible way where the story about "double taxing" makes sense, or where anyone decides not to invest surplus capital at a discounted tax rates, but would not do so if income was taxed at normal levels.  If I can invest this money and make 10% returns I'm going to want to do so whether the return is taxed or not.  Maybe my net return drops to 6 or 7% once taxes are figured in, but I'm still ahead.  I still made money.

    The only plausible case I can see is a tax break equal to inflation.  If you invest $1000 and in a year, you sell it fo $1020 (2% inflation) you maybe shouldn't have to pay taxes on the $20 "gain" because it is just keeping pace with inflation.  

    But that's not like a 50% or higher tax break, or like Paul Ryan level no taxes on unearned income craziness.

    •  There is a basis in math... (1+ / 0-)
      Recommended by:
      johnny wurster

      Investment isn't guaranteed income, it's a spectrum of probability that includes losses.  By adding the various probabilities together, you can get an "expected value."  By lowering the upside, taxation can reduce the expected value close enough to zero that the risk of loss is no longer justified.

      Those who support banning cocaine are no better than those who support banning cheeseburgers

      by EthrDemon on Wed Nov 21, 2012 at 10:51:20 AM PST

      [ Parent ]

  •  It's always been part of the tax code. (1+ / 0-)
    Recommended by:
    This has not always been a part of our tax code, and need not remain.
    Of our hundred years of the income tax, there were only a handful of years in which capital gains were taxed the same as ordinary income.
    •  And the upshot: (0+ / 0-)
      Equalizing capital gains taxation would raise about $ 70 billion each year
      That relies on the questionable assumption that people would continue stocks at higher rates.  Historically, that's not the case: you look at revenue from the handful of years when cap gains were taxed at higher rates, and it's extraordinarily rate-sensitive.
  •  Another point (1+ / 0-)
    Recommended by:
    Neon Mama

    With a lower tax on capital gains, the incentive to expand a business is lower. What makes more sense, invest dollars in your company and pay 30% tax rate or invest in the stock market and have a tax rate of 15%.

  •  TELL YA WHAT (0+ / 0-)

       Let's have one progressive tax curve, and when you add up your income, multiply your investment / capital gains income by 70% before summing with earned income.  So you still get a break on investment income compared to normal income, but you don't get a flat 15 or 20% on every single dollar of it.

       This way investment income still is shown some encouragement compared to earned income, but it doesn't diverge in such a large way at larger amounts.

       Personally I would be fine with having them on 100% equal footing, but the compromise above might be an easier sell.

  •  Sweat equality? Why should actual work be (0+ / 0-)

    taxed at a higher rate?   Wouldn't that logically discourage doing actual work for a living?

    It still puzzles me how folks can split their mind to accept theories that "unearned" welfare check and/or unemployment "benefits" are a scourge which makes people prefer lack of work.   Yet same folks screech that "unearned" income from money making money will
     magically increase work.

    It makes no sense to reward a sleezeure class.  

    Where are the moneychanger cat o nine tails when we need them?  

    De fund + de bunk = de EXIT--->>>>>

    by Neon Mama on Wed Nov 21, 2012 at 11:02:37 AM PST

    •  Lower rates for services in the past (1+ / 0-)
      Recommended by:
      Neon Mama

      When I started working as a CPA in 1978 the tax rates went up to 70%.  The maximun tax rate was 50% for earned income (wages, self-employment etc).  Just the opposite from current.  Changes took place under Reagan when all rates were lowered.

      The better I know people, the better I like my dog.

      by FTL BILLY on Wed Nov 21, 2012 at 01:07:14 PM PST

      [ Parent ]

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