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10.22 The story behind a devastating photo of human greed [where were Don Jr. and Eric at the time?]

10.22 Power lines and electrical equipment are a leading cause of California wildfires

10.21 Vikings Razed the Forests. Can Iceland Regrow Them?

10.21 Pressure Mounts on Insurance Companies to Consider Their Role in Opioid Epidemic [like Monsanto's practices to make captive agricultural consumers for more profit, non-addictive pain medication is less prescribed versus addictive opioids]

10.20 Introducing Halo Top: the 'healthy' ice-cream taking over America [Uses Stevia as a sugar substitute (not an artificial sweetener) that has no carbohydrates, calories, or artificial ingredients.]

10.20 The case against sugar

10.20 Global pollution kills 9m a year and threatens 'survival of human societies'

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10.23 Sanders Confirms He'll Remain Independent for 2018 Re-election Run [it would be contradictory for real progressives to join (or be in) a neoliberal-dominated political party]

10.23 In state capitols, women see rampant sexual harassment

10.22 Trump’s Pick for Puerto Rico’s Environmental Cleanup Might Actually Do the Right Thing

10.22 IT DIDN’T JUST START NOW: JOHN KELLY HAS ALWAYS BEEN A HARD-RIGHT BULLY

10.22 Donald Trump Is Rush-Shipping Condolences to Military Families

10.22 Trump and His ‘Beautiful’ Weapons

10.21 51 GOP Senators Just Voted To Cut $1.5 Trillion from Medicare and Medicaid To Give Super-Rich and Corporations a Tax Cut [what makes sociopaths smile?]

10.21 The Tax Debate We Need

10.20 Ahead of Senate Vote, Warren Lists Everything Wrong With GOP's 'Garbage' Budget [1:33 video]

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10.23 Trump 'will help pay' legal bills of White House staff and aides in Russia inquiries

10.17 Trump could remake judiciary for ‘40 years’ — with controversial picks [America will become more like Malta; facilitating corporate/mafia criminality to the maximum]

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10.19 SOCIALISM, LAND AND BANKING: 2017 COMPARED TO 1917

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10.23 China speeds ahead of U.S. as quantum race escalates, worrying scientists [recently, democracies are more dysfunctional and vulnerable to incompetent or bribed leadership]

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10.23 How the Catalan crisis could send shockwaves across Europe

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10.22 Russia accused of supplying Taliban as power shifts create strange bedfellows [is it war profiteering/capitalism, or is there a political power objective? the US supplies arms to dubious countries and militia groups worldwide...]

10.21 Under Trump, Brags Mike Pompeo, CIA Will Be 'Much More Vicious Agency' [imagine an administration made up of willfully ignorant sociopaths—oh, right]

10.20 Archaeology fossil teeth discovery in Germany could re-write human history

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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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