Saturday, February 23, 2013

It's NEVER a Good Time to Tax the Rich

Weren't "good" economies the reason for lowering taxes in the past? So if the economy is "bad" now, shouldn't we raise them?

As the March 1st deadline approaches for a budget sequester, a new Pew Research survey finds that the majority of Americans don't want spending cuts, but instead, want to increase spending or maintain it at current levels.

Mitt Romney earns most of his money with "carried interest" (averaging about $20 million a year), but according to Roll Call, there's a rumor that some Republican lobbyists might agree to close the carried interest tax loophole in anticipation of the sequester.

In one year alone Mitt Romney had reported paying as little as 13.9 percent in capital gains on $21.7 million he earned as carried interest. Will he soon have to start paying the top marginal rate of 39.9 percent?

Mitt Romney and his money.

The "carried interest" loophole allows investors, whose personal income is generated mainly from "investments" (aka unearned income, such as stocks, bonds, annuities, vested stock options, real estate, rental income, dividends, silver, wine, art, gold, etc.), to pay taxes according to the capital gains tax rate of 20%, which is significantly lower than the top marginal rate of 39.9% on earned income (such as regular hourly wages or managerial salaries).

Some anonymous Republicans are only just now finally admitting that, by eliminating this loophole, its impact on the economy would only be "minimal", and they would consider changing the tax code --- but not because we need the additional revenue --- but because it would "primarily hurt Democratic campaign donors".

Republicans have argued against similar tax increases in the past on the grounds that it would "discourage work and investment and harm economic growth." (Bla, bla, bla...they always have a reason to not tax the rich)

But closing this loophole wouldn't really be a tax increase, it would just be changing the definition of their source of income, then taxing them accordingly --- carried interest would be taxed as regular wages ("unearned income" vs. "earned income").

Waiters are taxed on their tips, why aren't multi-millionaires taxed in the same way on their carried interest? Shouldn't the people with the least get the better tax break? I'm mean, it's not the same as if the rich were buying in bulk and expecting a discount.

But the rumor about eliminating the carried interest loophole is most likely false. A spokesman for Senate Minority Leader Mitch McConnell (the Republican from Kentucky) rejected the premise that Senate Republicans would support eliminating the carried interest loophole. (As we've learned over the past two years, his Tea Party supporters would rather we have NO taxes or government at all.)

Michigan Democrat Senator Carl Levin introduced a bill that only mentions carried interest but suggested it would be a good vehicle for raising additional revenue. However, eliminating the loophole is not included in the Senate Democratic bill to replace this year’s sequester cuts.

Some politicians claim that by taxing carried interest (aka unearned income) as normal wages (aka earned income) might not be as simple as it sounds, and there is vigorous disagreement about which "technique" to use for doing so. (As though it takes a rocket scientist to figure this out. Why not just tax Warren Buffett at the same tax rate as his secretary? Simple.What's so complicated about that?)

Private equity firms (such as Bain Capital), investment banks (such as Goldman Sachs) and hedge funds would be the most affected by eliminating the carried interest tax loophole, and argue (as always) that it would have a negative effect on economic growth at a time when the economic recovery remains "weak".

But the economy is only "weak" for the unemployed and the under-paid workers. The "investor's economy" is doing very well --- record profits, record CEO salaries and record bonuses --- remember?

Over the last four years, the stock indexes have over doubled; the Dow Jones Industrial Average recently hit a 52-week high of 14,058 and is on track to match its all-time historical high of 14,164 --- when almost four years ago on March 9, 2009 it was down to only 6,547.

Mitt Romney had said as much last year when he said the rich were doing "just fine".

Ken Spain, the vice president of public affairs for the Private Equity Growth Capital Council (a lobbyist for vulture capitalists) said, “Last year, private equity firms invested over $140 billion dollars in U.S.-based companies in every state and in every congressional district across the country. A tax hike on business investment would only serve to undermine our economic recovery and disincentivize the kind of entrepreneurial risk taking to start, save and grow businesses."

Bla, bla, bla...the same ole, same ole excuses and threats, "If you tax us more, we won't try to make more money, and we won't hire more people." Bill O'Reilly made a similar threat if Obama raised his taxes, and O'Reilly still hasn't quit his job.

We've been hearing them whine like this for the past 40 years. When WOULD have been a good time to eliminate this carried interest tax loophole? Would it have been back in 2003 when George W. Bush had LOWERED the capital gains tax rate, when the economy was doing "good"?

The rich NEVER think that ANY time is a "good" time to raise their taxes, so let's have them make that "shared sacrifice" now, because the rest of us have sacrificed enough already.

* Capital gains and corporate taxes need major reform. They call it "unearned income", so even they admit that their money isn't earned! Too Much Online | Inequality and Excess

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