Newspaper logo  
 
 
Local News & Opinion

Ref. : Civic Events

Ref. : Arts & Education Events

Ref. : Public Service Notices

Travel
Books, Films, Arts & Education

11.19 How DNA Is Reshaping How We See Ourselves—and Our History

11.18 Lobbying Used to Be a Crime: A Review of Zephyr Teachout’s New Book on the Secret History of Corruption in America

Letters
Open Letters:

Ref. : Letters to the editor

Health Care & Environment

11.21 We need a new law to protect our wildlife from critical decline

11.20 CO2 emissions must be zero by 2070 to prevent climate disaster, UN says

11.20 UK pledges £720m to climate change fund for poor countries

11.19 The Real Roots of Midlife Crisis

11.19 New York snowstorm: Four dead as 'wall of snow' buries Buffalo [video, photos]

11.18 Bottom line on climate change: It’s costing you money

11.17 The Weekly Health Quiz

11.17 Thalidomide: how men who blighted lives of thousands evaded justice

11.17 The new strain of cannabis that could help treat psychosis

11.17 The Crapified Magic of the ObamaCare Marketplace

News Media

11.19 Fox News misleads about Jon Stewart: Sean Hannity, Bill O’Reilly and the insane new partisanship

11.16 FAIR BLOG

Daily FAIR Blog
The Daily Howler

Justice Matters

11.21 Icelandic bankers jailed for reckless loans made before crash

11.20 Stripping Neighbors of Money: Pressure Mounts for EU Crackdown on Tax Havens

11.19 Horrific stories about Bill Cosby were out there for years. Why are we only now listening to these women?

US Politics, Policy & Culture

11.21 Ferguson Protests Are Coming to Your City

11.21 The U.S. government thinks China could take down the power grid

11.21 Obama on immigration: 'We are and always will be a nation of immigrants'

11.19 Hillary’s Silence on Iran and Immigration Reform

11.19 America Is the Developed World's Second Most Ignorant Country

11.19 Imperfect Union: The Constitution Didn't Foresee Divided Government

11.19 Senate Republicans block landmark NSA surveillance reform bill

11.19 Senate rejects Keystone XL pipeline bill (For Now) [Related 'Cowboys and Indians' alliance]

11.17 Two Detroits, Separate and Unequal: A Journey Across a City Divided

11.16 Full Show: The Bare Knuckle Fight Against Money in Politics [25:19 video and transcript]

High Crimes?

11.19 Elephants are being wiped out, but not enough people seem to care

11.18 Modern slavery affects more than 35 million people, report finds

11.17 The State Secrets That Senator Mark Udall Should Reveal

Economics, Crony Capitalism

11.20 WSJ Reports: Bank of North Dakota Outperforms Wall Street

11.20 Elizabeth Warren Blasts FHFA’s Mel Watt: “You Haven’t Helped a Single Family” [5:23 video]

11.19 Firestone and the Warlord [1:23:41 video documentary]

International

11.20 Putin's Reach: Merkel Concerned about Russian Influence in the Balkans

11.20 The 'Caliphate's' Colonies: Islamic State's Gradual Expansion into North Africa

11.20 Teeth and Bones: Mass Abduction Reveals a Decaying Mexican State

11.19 3rd Possibility: Coming Civil War in West Bank/ Jerusalem?

11.18 Putin says west is provoking Russia into new cold war as ‘spies’ deported

11.18 Three Ways Cities Try (and Fail) to Solve Homelessness

11.18 South Dakota Sioux tribe calls Keystone XL pipeline approval 'act of war'

11.17 A Cuban Brain Drain, Courtesy of the U.S.

11.17 Revealed: how coalition has helped rich by hitting poor

11.17 Iran and US close in on historic nuclear deal at Vienna talks

We are a non-profit Internet-only newspaper publication founded in 1973. Your donation is essential to our survival.

You can also mail a check to:
Baltimore News Network, Inc.
P.O. Box 42581
Baltimore, MD 21284-2581
Google
This site Web
  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.



Copyright © 2010 The Baltimore News Network. All rights reserved.

Republication or redistribution of Baltimore Chronicle content is expressly prohibited without their prior written consent.

Baltimore News Network, Inc., sponsor of this web site, is a nonprofit organization and does not make political endorsements. The opinions expressed in stories posted on this web site are the authors' own.

This story was published on September 13, 2011.

 


Public Service Ads: