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11.15  The long read:  The plastic backlash: what's behind our sudden rage – and will it make a difference? [the world wants to throw-up...]

11.15 Claws out: crab fishermen sue 30 oil firms over climate change [workers are waking-up...]

11.15 Trump administration to cut air pollution from heavy-duty trucks [behaving ignorantly again...]

11.14 Backed by Ocasio-Cortez, Youth Climate Activists Arrested in Pelosi's Office Demanding Democrats Embrace 'Green New Deal'

11.13 What would a smog-free city look like?

11.13 Global report highlights Australia’s renewables potential amid mixed signals for coal

11.13 Interior department whistleblower: Ryan Zinke hollowed out the agency

11.12  This Land is Your Land:  The Zinke effect: how the US interior department became a tool of industry [behaving ignorantly again...]

11.12 Planned Parenthood's new president warns of 'state of emergency' for women's health

11.11 Trump responds to worst fires in California’s history by threatening to withhold federal aid [behaving ignorantly again...]

11.11 Interior department sued for ‘secretive process’ in at-risk species assessment [behaving ignorantly again...]

11.11 Keystone XL pipeline: judge rules government 'jumped the gun' and orders halt [behaving ignorantly again...]

11.09 Rainforest destruction from gold mining hits all-time high in Peru

11.09 A new way to make steel could cut 5% of CO2 emissions at a stroke

11.08 Medicaid’s stunning victory

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11.15 Democrats Won Big. Can They Go Bold, Too? [it's about suppressing the influence and leadership by Republican-like Democrats who counsel 'íncremental' (no) change, such as Nancy Pelosi, Steny Hoyer, Hillary Clinton, Chuck Shumer and Joe Biden]

11.15 Pentagon Officials Forced to Make Fewer Public Appearances to Avoid Provoking Trump [...by revealing Trump's huuuge ignorance]

11.15 REPUBLICANS USED A BILL ABOUT WOLVES TO AVOID A VOTE ON YEMEN WAR [if there are 'defense industry' profits to be made—including congress-critter insider-trading—and political 'donations' to be had, we mustn't stop killing innocent civilians!]

11.15 Big Oil v the planet is the fight of our lives. Democrats must choose a side

11.14 The Real Florida Recount Fraud

11.14 Telling NRA #ThisIsOurLane, Doctors' Photos Show Blood-Soaked Reality of America's Gun Madness

11.14 At Freshman Orientation, Young and Growing Progressive Caucus Makes Clear It Will 'Fight Like Hell' for Bold Democratic Agenda

11.13 'You Sound Nervous': Gillum Mocks Trump as President Demands End to Florida Recount

11.13 Kyrsten Sinema wins Arizona Senate race in breakthrough for Democrats

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11.09 Trump administration blocks asylum claims by those crossing border illegally [Making America Less Great Again...]

High Crimes?

11.14 The Guardian view on Yemen’s misery: the west is complicit [WAR CRIMES]

11.10 US stops refuelling of Saudi-led coalition aircraft in Yemen war [But there are a few children still alive. It's too soon!]

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11.15 The Earth is in a death spiral. It will take radical action to save us [fossil fuel burning, un-recyclable plastic production/use and methane gas release must cease ASAP.]

11.14 Brexit: May tells her cabinet, this is the deal – now back me

11.11 Tax reform: down with the ‘stepped-up basis’

International & Futurism

11.15 Cuba to pull doctors out of Brazil after President-elect Bolsonaro comments [terms must be negotiated for fairness to Cuba's health professionals without disruption of healthcare for Brazil's poor]

11.14 'Appalling' Khashoggi audio shocked Saudi intelligence – Erdogan [Exposing a psychopath?]

11.14 Israel and Hamas launch hundreds of attacks in Gaza clash

11.14 Mueller seeking more details on Nigel Farage, key Russia inquiry target says

11.13 Austin's Fix for Homelessness: Tiny Houses, and Lots of Neighbors

11.13 Portugal Dared to Cast Aside Austerity. It’s Having a Major Revival.

11.13 Caravan marks one month on the road: ‘We keep on going, laughing or crying’

11.13 Letter Shows Einstein’s Prescient Concerns About ‘Dark Times’ in Germany

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  Print view: The Naked Truth about Capital Gains
TAXING MATTERS:

The Naked Truth about Capital Gains

by Gerald E. Scorse
Monday, 22 November 2010
Regarding investment income, Simpson/Bowles is a Democratic dream come true.

When it comes to taxes on capital gains, the emperor suddenly has no clothes. He’s been stripped bare, in bipartisan fashion, by the co-chairs of President Obama’s fiscal commission.

The chairs are Republican Alan K. Simpson and Erskine Bowles, a Democrat. Their initial report included a call for equal taxes on capital gains, dividends and ordinary income such as wages. This upends the current tax code, and it contradicts almost the entire history of capital gains taxes in America.

Implicitly, it also rejects the K Street claim that tax breaks for capital gains grow jobs, grow businesses and grow the economy. If the claim had any truth, Messrs. Simpson and Bowles would never support equal taxes on all income as a way to help cut the national deficit.

Liberals instinctively attacked the right-leaning aspects of the report. House Speaker Nancy Pelosi, in full “no” mode, labeled its recommendations “simply unacceptable." Not quite, Madam Speaker; à propos investment income, Simpson/Bowles is a Democratic dream come true.

Income from wealth and income from work were taxed at the same rate in only two widely-separated times in America—from 1916-21, and after Ronald Reagan’s Tax Reform Act of 1986. President Clinton restored the tax break on capital gains in 1997, cutting the rate on long-term gains from Reagan’s 28 percent to 20 percent. Six years later, President Bush lowered the levy to 15 percent and did likewise for dividends. The Bush cuts were written to expire in 2010, but it’s not certain they will. Even if they did, the capital gains rate would still be less than the rate on middle-class wages.

The Simpson/Bowles recommendations could die a quick death: a unified final report needs the votes of 14 out of the commission’s 18 members, comprised of nine from each party. If a super-majority of 14 can agree, their report arrives at the White House on December 1.

But the proposals are now on the table, so the genie is out of the bottle. President Obama and Congress were already facing a showdown on extending the Bush tax cuts. Now, in addition, Congress and the Administration have a rare opportunity to set a new course for the nation’s fiscal future.

They could start by revisiting the tax code and creating capital gains tax breaks that really would grow jobs and stimulate the economy. Small companies with big dreams raise seed money through initial public offerings (IPOs) and secondary offerings; larger companies sometimes do the same (e.g., the resurgent GM). In a move that would give a built-in boost to the market for new issues, capital gains on these investments could accrue tax-free. Interest on corporate bonds, now taxed as ordinary income, also deserves a tax break. Corporate bonds raise the money to build corporate infrastructure, much like municipal bonds raise money to build local infrastructure. Interest from municipal bonds gets tax breaks; why not corporate interest?

How to pay for these new tax breaks? Easy: the money would come from ending the unproductive tax break on stock market gains, along with the 2003 tax break on dividends.

In 1986, President Reagan essentially traded tax breaks on capital gains for another round of cuts in the marginal rates. A generation later, the initial draft from Obama’s fiscal commission holds the makings of a similar endgame.

One major milestone has already been reached. The notion that investments deserve a lower tax than wages has been vaporized. The emperor has no clothes, and really never did.


©2010 Gerald E. Scorse. The author, who writes from New York City, helped pass a bill that tightens the rules for reporting capital gains. His stories are published in the Baltimore Chronicle with his permission.



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This story was published on November 22, 2010.
 

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