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Health Care & Environment
12.17 Brazilian police foil million-dollar fraud to export precious wood to China [clear-cutting forests harshly impacts all life above and below ground-level for decades; it decreases oxygen production and seguestration of CO2 and increases area, frequency and duration of drought]
12.13 English rivers polluted by powerful insecticides, first tests reveal [Are similar tests of U.S. waters conducted by the EPA anymore? We think not...]
News Media Matters
12.17 A Report to Our Readers
US Politics, Policy & 'Culture'
12.17 'Making America Stupid Again': Outrage Over Forbidden 7 Words You Can't Say at Trump's CDC [“Stupid is as stupid does.” –Forrest Gump]
12.16 Poverty in US set to increase due to Donald Trump's policies, says UN official [oligarchy-controlled countries are wonderful for the very rich]
12.16 Republicans Despise the Working Class [oligarchy-controlled countries are wonderful for the very rich]
12.17 Venue of last resort: the climate lawsuits threatening the future of big oil [something else Republicans are packing the courts for...]
12.15 Who Pays for Judicial Races? The Politics of Judicial Elections 2015-16 [desperately packing the courts at all levels to protect white power & unregulated capitalism]
12.13 US Concern Over 'Pervasive' High-Level Corruption Surging Under Trump: Poll [anyone surprised?]
12.17 Trump’s Misuse of Intelligence on Iran [immoral behavior that could lead to War]
Economics, Crony Capitalism
12.17 How a Philadelphia nun became the unlikely face of conscientious capitalism [Why don't we teach morality in Law & Business schools?]
12.16 The Republican Tax Bill Provides Huge Benefits to People Who Don’t Work. But Only if They’re Rich. [oligarchy-controlled countries are wonderful for the very rich]
12.16 The United States Is Now as Unequal as Russia. And That’s Before the Tax Bill. [oligarchy-controlled countries are wonderful for the very rich]
12.16 EU to force firms to reveal true owners in wake of Panama Papers [what are the chances oligarchy-controlled countries (esp. America and Russia) ever agree to fight tax evasion and money landering? International agencies must all mandate common regulations as a condition for UN membership, trade agreements, world bank loans, etc.]
12.15 FCC Chair Ajit Pai 'Shows Just How Dumb He Thinks Americans Are' With Video Mocking Net Neutrality [he won't discuss how giving more monopoly power to cable ISPs will increase consumer costs and stifle innovation]
12.13 The “Death Tax” Cargo Cult [we lack for morals and sanity in U.S. media & politics]
International & Futurism
12.17 Africa’s new elite force: women gunning for poachers and fighting for a better life [a good model that converts victims of abuse and cruelty into positive activists with good jobs...]
12.14 Israeli undercover soldiers seen arresting Palestinian protesters [Palestinians need more and better weapons for a fair fight]
The Spurious, Curious Case for Low Taxes on Capital Gains
It’s nonsense to claim that buyers of stocks deserve a tax break when they sell their shares at a profit. A tax break? For making money in the market?These are heady times for backers of low taxes on capital gains. Presidents Clinton and Bush both cut the capital gains rate, bringing the current levy on long-term gains down to 15%. That’s the lowest in more than 70 years, “gloriously low” in the words of economist Ben Stein, and it means that profits on stock market transactions are now taxed at a lower rate than the wages of average Americans.
There’s no good reason for this preferential treatment, and powerful reasons to end it. Leading the list is the simple fact that stock market “investors” are almost never real investors in the first place.
A potent blend of myth, propaganda and misimpressions. Let’s look instead at some truths.
It’s routine on Wall Street these days for trading volume to run in the billions of shares. On any given day, only a tiny fraction of those billions has any valid claim to growing jobs or businesses or the economy. On many days not a single share qualifies as a bona fide investment.
Almost all the time, all that’s happening is money changing hands as shares move from sellers to buyers. Not a cent goes to the companies whose shares are traded. No jobs are created (except in the financial community, which is not the point here). No businesses are expanded. Investments are really being made not in the economy but in personal portfolios.
The only genuine stock market "investments" are those in initial public offerings (IPOs) and secondary offerings. In those cases alone does the money move on to do the work it’s purported to do.The only genuine stock market investments are those in initial public offerings (IPOs) and secondary offerings. In those cases alone does the money move on to do the work it’s purported to do. All the rest is aftermarket noise as the players place their bets at the tables down on Wall Street.
Securities markets clearly play an energizing role in the American economy. All the same it’s nonsense to claim that buyers of stocks deserve a tax break when they sell their shares at a profit. A tax break? For making money in the market?
Now for more reasons why this is poor policy.
Income is income and should be taxed at the same rates no matter where it comes from; what’s good for the goose is good for the gander.There’s a fairness issue that flows from taxing one kind of income differently from another. Income is income and should be taxed at the same rates no matter where it comes from; what’s good for the goose is good for the gander.
There’s the issue of income inequality, which has soared in America lately. According to the David Cay Johnston book Perfectly Legal, the top one percent of taxpayers controls about half the nation’s financial assets. Two-thirds of the income of the 400 highest-income Americans comes from long-term capital gains. Undeniably, the benefits of tax breaks for capital gains flow overwhelmingly to the already-wealthy; undeniably, preferential rates on capital gains exacerbate income inequality.
Finally there’s a tax equity issue which our forebears even considered a moral issue. In 1924 Congress first differentiated between earned income (wages and salaries) and unearned income (e.g., capital gains and dividends), and taxed the unearned income at higher rates. It was deemed the right thing to do; old-timers would have shuddered at the notion of taxing wages at higher rates than capital gains.
Those were the days. Now it’s 2007.
Under the trumped-up cover of spurring economic growth, average American workers have to pay higher taxes on their wages than if they made the same amount of money in the stock market.Under the trumped-up cover of spurring economic growth, average American workers have to pay higher taxes on their wages than if they made the same amount of money in the stock market. They’re getting stiffed by carrying a heavier relative tax burden, getting fewer services or some of both.
The latest capital gains tax cut is set to expire in 2010, and the new Democratic Congress has indicated that it has no plans to visit the issue until after the 2008 elections. This gives them plenty of time to look beyond the propaganda, and to consider taxing capital gains at least as much as earned income. A political pipedream? It was the rule not long ago: from 1988 to 1992, long-term realized gains were essentially taxed at the same rate as other income.
Then the K Street apostles went forth and preached, and the spurious, curious case became gospel.
Copyright 2007 Gerald E. Scorse. The author holds an M.B.A. from Baruch College. His House testimony on capital gains tax reporting helped lead to a reform bill now before Congress.
Copyright © 2007 The Baltimore Chronicle. All rights reserved.
Republication or redistribution of Baltimore Chronicle content is expressly prohibited without their prior written consent.
This story was published on March 16, 2007.