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06.15 This all-male council in Texas just voted to ban abortion [1:59 video; Bad assumptions foment ignorant actions...]

06.14 The Trans Mountain pipeline is a disaster – but Trudeau can make it right

06.14 The Pentagon emits more greenhouse gases than Portugal, study finds

06.14 Climate crisis: Alaska is melting and it’s likely to accelerate global heating

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06.12 'This is not a "what if" story': Tokyo braces for the earthquake of a century

06.12 Plant Species Have Been Disappearing 500 Times Faster Than Normal, Thanks to Humans

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06.12 Politics as Usual and Planetary Destruction

06.12 Most 'meat' in 2040 will not come from dead animals, says report

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06.10 Conservatives should change how they think about global warming. I did [Another crisis issue conservatives won't acknowledge...]

06.10 Scottish Power to build vast battery to improve wind energy supply [Who won't understand this?]

06.10 Greenpeace activists board BP oil rig as it is towed out to sea [Fossil fuel company conduct should be illegal...]

06.09 Racism as a Public Health Crisis

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06.07 The Other Climate Threat is Fear & Apathy: We can Fix this by Voting in a Manhattan Project

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06.07 For 'Challenging Us All to Confront the Realities of the Climate Crisis,' Greta Thunberg and Fridays for Future Movement Win Amnesty's Top Human Rights Award

06.07 Purpose in Life Protects Against Cognitive Decline Among Older Adults

06.07 All New British Columbia Light-Duty Vehicles Will Be Zero Emissions By 2040

06.07 Caribbean Solar Update: Curacao Solar Saves 10% In Energy Costs; Montecristi In The DR Doubles To 116 MW

06.07 Santiago (Chile) Adding 200 Electric Buses In 2019

06.07 Single-Payer Reform—“Medicare for All”

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06.14 Texas Progressive Jessica Cisneros Announces Primary Challenge to Unseat "Trump's Favorite Democrat" in Congress

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06.13 Where do the 2020 Democratic candidates stand on the key issues?

06.13 Hidden Figures Way: Nasa renames street to honor black female mathematicians

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06.13 What’s actually in the Green New Deal, explained with a video [7:30 video]

06.13 Even the 1% Know They Aren't Paying Their Fair Share: New Poll Shows 60% of Millionaires Support Warren's Ultra-Wealth Tax

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06.14 Justice Denied, Delayed, or Done Right? Serious Concerns as Prosecutors Throw Out Charges in Flint Water Crisis Cases [A very flawed prosecution using suspiciously limited evidence has been thrown out, a stronger case will be brought using newly found, voluminous evidence.]

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06.12 'Sea Rescues Have Been Criminalized' as German Boat Captain Faces 20 Years in Prison For Saving Refugees

06.11 Hundreds of North Korean execution sites identified, says rights group

Economics & Corrupt Capitalism

06.11 Capitalism isn't 'broken'. It's working all too well - and we're the worse for it

06.11 The problem with billionaires fighting climate change? The billionaires [Bloomberg's sanity to control greed to save the life-on-earth (and continuing profits) is unfortunately rare]

06.09 Elizabeth Warren’s economic nationalism vision shows there's a better way [As like championed by Economist Joseph Stiglitz]

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06.15 Africa’s Lost Kingdoms

06.15 Homophobic and transphobic hate crimes surge in England and Wales

06.15 Extinction Rebellion protesters stop rush-hour traffic in London

06.15 Hong Kong leader suspends extradition bill amid protest pressure [1:37 video]

06.15 The US must stand with the people of Hong Kong [But this attacks Xi's authoritarianism, which Trump is most envious of for himself...]

06.14 As Angus Taylor ducks, weaves and dithers, China zooms past

06.13 What does it mean to be genetically Jewish? [Doing a mental dance with archanery: could a significant number of Russians and Palestinians be intentionally included or excluded as genetically Jewish? And why would Israel do this?]

06.13 Two oil tankers struck in suspected attacks in Gulf of Oman

06.13 Theresa May’s carbon emissions plan will fail if the chancellor remains complacent

06.12 Hong Kong: police use rubber bullets as protesters vow 'no retreat' [1:34 video]

06.12 French medics warn health service is on brink of collapse

06.12 Leaked documents reveal Russian effort to exert influence in Africa

06.12 Extending the US Embargo on Cuba & Hurting the People [Doing what's cruelest]

06.12 Annexation Without Citizenship Is Apartheid

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  Print view: The Ideal Capital Gains Tax Reform

TAX FAIRNESS:

The Ideal Capital Gains Tax Reform

by Gerald E. Scorse
The tax code—which now makes no distinction between true investments in companies and personal investments in portfolios—should recognize and reward the difference.

Warren Buffett recently enraged the Right by chastising Congress for “coddling” millionaires and billionaires. In a widely quoted op-ed, he urged lawmakers to “raise rates immediately on taxable income in excess of $1 million,” including capital gains. Buffett is right, but not entirely. The ideal reform would make some capital gains tax-free.

President George W. Bush cut the levy on long-term gains to 15 percent. By comparison, the federal income tax alone is 25 percent on the wages of middle-class workers. Including payroll taxes and Medicare, income from work is commonly taxed at more than twice the rate as income from wealth.

Advocates of tax breaks on capital gains claim that investments in the stock market grow jobs and grow the economy. For all but a trace amount of the billions of shares that change hands every day, that’s patently not true. Almost none of the money that flows through Wall Street goes to companies or grows jobs; it simply grows portfolios.

Except for the exceptions.

Small companies with big dreams use initial public offerings (IPOs) to help make those dreams take root and flourish. Later on, companies sometimes issue secondary offerings that raise capital for further expansion.

Investing in offerings like these really does spur the economy. The money goes not into portfolios but to companies that put it to use and create jobs. The tax code—which now makes no distinction between true investments in companies and personal investments in portfolios—should recognize and reward the difference. Capital gains from true investments should become tax-free; capital gains from aftermarket investments should be taxed at the same rate as ordinary income.

Buffett’s call for higher taxes on ultrahigh incomes said nothing about taxing wealth income at the same rate as work income. For that we turn to the recent recommendations of two bi-partisan panels, and to a Republican icon.

Ronald Reagan’s Tax Reform Act of 1986 levied equal taxes on capital gains, dividends, and ordinary income such as wages. In exchange, Reagan won another round of marginal rate cuts and a reduction in tax brackets. His speech at the signing ceremony called the bill “a sweeping victory for fairness” and “the best job-creation program ever to come out of the Congress.”

Reagan’s tradeoff—lower marginal rates in return for equal taxes on all income—is strikingly similar to the one proposed by both of the blue-ribbon, deficit-reduction bodies that weighed in late last year. The chairmen's report of President Obama’s fiscal commission (Simpson/Bowles) and a plan from the Bipartisan Policy Center (Rivlin/Domenici) both called for lower marginal rates. Likewise, both came down in favor of equal taxes on all income.

In 2011, for the second straight year, a special bi-partisan panel has been charged with putting America’s fiscal house in order. The new Congressional “super committee” has an extra incentive: the deal that raised the national debt ceiling mandates across-the-board spending cuts unless ways are found to lower the 10-year deficit by at least $1.5 trillion.

The committee can borrow from Simpson/Bowles and Rivlin/Domenici. It can embrace Ronald Reagan. If it does, one provision that might re-emerge is the return of basic tax fairness: the same rates on capital gains, dividends and wages.

And while tax breaks routinely deserve to be taken away, there’s one exception that deserves to be put in place. Capital gains from investments in job-creating IPOs and secondary offerings should be made tax-free.


Gerald E. Scorse, who writes from New York City, helped pass a bill that tightens the rules for reporting capital gains. Mr. Scorse's stories are republished in the Baltimore Chronicle with permission of the author.



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This story was published on September 13, 2011.

 

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