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08.15 RIDE FOR THE OVERRIDE

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Ref. : Letters to the editor

Health Care & Environment

08.23 Can New York City Waterproof Its Subway?

08.23 Report Shows Whopping $8.8 Trillion Climate Tab Being Left for Next Generation

08.22 Historical documents reveal Arctic sea ice is disappearing at record speed

08.22 Iraqi children pay high health cost of war-induced air pollution, study finds

08.21 The Link Between Health Spending and Life Expectancy: The US is an Outlier [the U.S. is the only 'advanced country' with for-profit healthcare without price controls...]

08.21 'Paradise Lost': How To Help Our Oceans Before It's Too Late

08.21 Dieselgate in Europe: How Officials Ignored Years of Emissions Evidence

08.21 Louisiana floods: state faces soaring recovery costs and disease concerns [related: Louisiana Loses Its Boot]

08.20 It’s Not Just Texas. Maternal Deaths Are High Across The U.S. [how do U.S. Blue States compare to Red States?]

08.20 Elon Musk leads Tesla effort to build house roofs entirely out of solar panels

08.20 Coincidence? Texas Slashed Women's Health and Maternal Death Rate Soared

08.20 'BernieCare' Can Save ObamaCare

08.20 As Louisiana Floods Rage, Republicans Are Blocking Modest Climate Action

08.20 Dakota Pipeline Construction Halted Amid Ongoing 'Defiance of Black Snake'

News Media Matters

Daily: FAIR Blog
The Daily Howler

US Politics, Policy & 'Culture'

08.23 The Clintons’ ethics test: Government watchdogs weigh in on the Clinton Foundation’s latest maneuvers

08.23 One Answer to School Attendance: Washing Machines

08.23 Twenty Years Since Welfare 'Reform'

08.23 Clinton’s Transition Team: A Corporate Presidency Foretold [the 'assumed' proviso should be said and promised: "...if it helps the public...]

08.22 Why Donald Trump is Reaching Out to Black Voters [an appeal to gain votes from ALL the uninformed and uneducated]

08.22 What We Can—and Can't—Learn From the Floods in Baton Rouge

08.22 How Chicago Youth View Police, From School to the Streets

08.22 Chicago's Inescapable Segregation

08.20 Hillary Clinton’s Ethics Problems Are Worse Than She Understands

08.20 Hillary’s Neoconservatives

08.19 Vote for the Lying Neoliberal Warmonger: It’s Important

08.19 11 Dangerous Right-Wing Kooks, Cranks and Operatives Surrounding Donald Trump

08.19 US justice department announces it will end use of private prisons

08.19 Ukrainians saw Paul Manafort's political impact up close – and it wasn't pretty

08.19 The lies Trump told this week: from opposing the Iraq war to San Bernardino

Justice Matters

08.22 Mapping 'Pre-Crime' in Rio

High Crimes?

08.23 UK in denial over Saudi arms sales being used in Yemen, claims Oxfam [US too...]

Economics, Crony Capitalism

08.22 As Resistance Mounts, TPP Becoming 2016 Election's Third Rail

08.21 The death of neoliberalism and the crisis in western politics

08.21 Trump and Clinton's free trade retreat: a pivotal moment for the world's economic future

08.20 U.S. Army fudged its accounts by trillions of dollars, auditor finds

08.20 'Flash Boys' IEX stock exchange opens. Its goal: Rein in high-frequency traders

08.20 'Good to Be King': The Very Good Loans Key Lawmakers Get from Wall Street Banks

08.19 Sanders: Aetna's Obamacare Threat Shows What "Corporate Control Looks Like"

08.19 Sanders Condemns Obscene Levels of Inequality Documented in New CBO Report

International

08.23 Congress Must Take Action to Block Weapon Sales to Saudi Arabia

08.22 Israel planning new Squatter settlement near Bethlehem to ‘cut Palestine’s West Bank in two’

08.22 A Lawless Plan to Target Syria’s Allies

08.22 After 10 Years, US B-52H Resumes Operations in Afghanistan [is killing more, faster our policy objective?]

08.22 In Response to Indiscriminate Saudi Bombing, MSF Evacuates Northern Yemen

08.22 Anti-Austerity Leftist Announces Challenge to French President Hollande

08.22 Philippine police anti-drugs operations have killed 712 since July, Senate hears

08.21 ‘Criminals are the law in Syria’

08.21 This helpful chart reveals if a robot is coming for your job

08.21 A regime of networks but no clear leaders: Why Iraqis fear victory

08.21 Sadiq Khan: We cannot win with Corbyn... so I will vote for Owen Smith

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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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