Why is it that someone like Warren Buffett or Bill Gates (or Mitt Romney) can buy an expensive piece of art (or a horse) and then a year later sell it for a $1 million profit and only pay a 15% capital gains tax (if they report the sell to the IRS) and pay no Medicare or Social Security taxes?
But a neurosurgeon who goes to work everyday for a whole year must pay a 35% federal income tax rate AND pay for Medicare taxes on 100% of his/her earnings and Social Security taxes on the first $110,000 he/she earns?
A firefighter or cop risks their lives everyday and earns $50,000 a year and has to pay a 25% tax rate on their income and pay Medicare and Social Security taxes on 100% of their incomes, but Mitt Romney can sit back and do nothing for a whole year and only pay a 15% tax rate on carried interest and no Medicare or Social Security taxes at all.
It's common knowledge that multi-millionaires and billionaires earn most of their income with capital gains.
A fair and honest and fiscally responsible way to fix the tax code would be to tax capital gains income earned from stocks, dividends, SWAG investments, carried interest (etc.) as ordinary wages.
Also, tax capital gains income for Medicare and Social Security (which is currently exempt), while removing the $110,000 “cap” for Social Security taxes. Everyone else earning $110,000 a year or less pays this tax on 100% of their wages.
Then create a 0.5 percent tax on stock trades over $1,000 so that we can at
least take in some tax revenues from the banker's financial speculations --- in
case they ask for another bailout.
The Republicans and the banker Andrew Mellon created the preferential tax treatment of capital gains for the wealthy back in 1921, and this should be repealed. That way, the actual marginal tax brackets could be left as they are, and the rich would be taxed just like everybody else. Then we could properly fund government, fix our infrastructure, and pay off our debt --- and do so without cutting defense or Social Security.
We could also hire more IRS auditors to go after all the tax dodgers, bringing in more revenue.
Then we should leave these tax rates permanent, building a surplus in boom times and having extra resources available during recessions. Only temporarily raise taxes to pay for military conflicts, that way everybody has skin in the game when voting to go to war.
It's insane to have a capital gains tax rate of only 15%, which is LOWER than the corporate tax rate. The "statutory" corporate tax rate may be 35%, but the average EFFECTIVE tax rate that they actually pay is usually between 18% to 23%. (Go to "investor's relations" on a Fortune 500 website and download their annual reports to see their tax liability).
With the low and preferential tax rate on capital gains, corporate profits will be funneled into the CEO's pockets rather than reinvested into the business and workforce. Low capital gains tax rates only promotes wealth extraction and hording, not reinvestment into the economy.
More jobs will just go overseas for cheaper labor if the capital saved on foreign labor just goes back into the pockets of the CEOs paying a low tax rate on their personal incomes.