Local Gov’t Stories, Events
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Books, Films, Arts & Education
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Health Care & Environment
02.27 TRUMPCARE VS. OBAMACARE
02.27 Only China Can Save the Planet [Republicans cede renewable energy dominance to China, as if only fossil energy has worth. Could they be more stupid?]
02.27 With Obamacare in jeopardy, California considers going it alone with 'single-payer' system [with population larger than Canada, California could achieve better single-payer efficiencies than Canada's, with even greater efficiency when more states join in a common insurance market]
02.26 Scott Pruitt vows to slash climate and water pollution regulations at CPAC [another immoral idiot speaks]
02.25 Revealed: thousands of children at London schools breathe toxic air [you can't see the most dangerous pollution, the particles are too small which makes them dangerous]
02.23 Climate scientists face harassment, threats and fears of 'McCarthyist attacks' [sociopathic behavior...]
News Media Matters
02.26 Revealed: how US billionaire helped to back Brexit [and Trump] [at what point is the label "traitor" apropriate?]
US Politics, Policy & 'Culture'
02.26 'Incredibly Disappointing': Democrats Choose Tom Perez to Head Party [not changing is not the answer; can a party taking large campaign donations from healthcare companies ever support price-controlled single-payer?]
02.26 Trump national security adviser wants to avoid term 'radical Islamic terrorism', sources say [McMaster seems an unusually sane member of Trump's administration]
02.25 Steve Bannon: Trump is 'maniacally focused' on executing promises [videos; will increasingly unregulated and immoral capitalism save us?]
02.26 Hate Crime Is Feared as 2 Indian Engineers Are Shot in Kansas [two foreigners walk into a red state bar...]
Economics, Crony Capitalism
02.27 How Russia Is Using Oil Deals To Secure Its Influence In The Middle East [countries should get off of fossil fuels so the world can breathe]
02.27 Twilight of the Technocrats? [caring for people and morals have to become prime factors!]
02.27 THE LONG HISTORY OF DEPORTATION SCARE TACTICS AT THE U.S.-MEXICO BORDER [why can't we have altruistic policy to help people avoid becoming refugees? perhaps it is bad governments that should be helped...or punished. is U.S. drug policy the root problem?]
02.26 HOW PETER THIEL’S PALANTIR HELPED THE NSA SPY ON THE WHOLE WORLD [technology East Germany's STASI would have loved!]
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.