Just watching Maria Bartiromo on MTP just now. Once again a supposed expert on the financial world repeated the constant lie that an increase to the capital gains tax or the tax on dividends will be a tax increase on the the millions of middle class families who have their savings in their 401ks or IRAs.
Here is the email I sent to Ms Bartiromo:
Please fact-check your statement that the dividend and capital gains tax rate affects people with their money in 401k and IRAs.
You should be aware that the dividends and capital gains in those accounts are not taxed in the year they are earned. The tax is only imposed when funds are withdrawn from the account. At that time, the withdrawn funds are taxed the same as ordinary income.
If it is true that middle class families have their investments held almost exclusively in qualified funds, when those people pay taxes on their capital gains or dividends they will pay the ordinary income tax rates, not the preferred rates given to people who hold capital assets in non-qualified accounts.
To report that allowing an increase to the tax rate for capital gains and dividends will affect most middle class tax layers is highly misleading. Increasing those rates could affect the market based on a perception that taxes on investment income will increase, but it will not change the tax rates for people who take distributions from their 401k or their IRAs.