Tuesday, November 19, 2013

Capital Gains Taxed Less than Corporate Profits?

It's ludicrous that the capital gains tax rate (currently at 23.8%) is lower than the corporate tax rate (35%) because that just gives the CEOs and other shareholders more incentive to stuff profits directly into their pockets, rather than reinvesting.

The CEOs (and their corporate shills, such as Stephen Moore at the Wall Street Journal) argue that a lower corporate tax rate would solve all our problems; but "effective" corporate tax rates are sometimes lower than the capital gains tax rate (sometime corporations pay no tax at all).

It's also ludicrous that American-based multi-national corporate conglomerates are allowed to hold their overseas earnings untaxed in offshore banks. While although a forced reparation of these overseas earnings back to the US wouldn't completely solve the problem of offshoring jobs to low-wage countries, it would certainly be more of an incentive to create more jobs here if a forced repatriated tax rate was also higher than a corporate tax rate on domestic earnings.

The way the tax code is now, all the incentives are geared towards -- not reinvestment in the US and American workers --- but instead, incentivizes the manipulation of stock prices and CEO stock option grants to fill the personal coffers of corporate executives --- creating ever more income inequality.

One could argue that lowering the corporate tax rate to 25% (as in China), but also eliminating ALL the corporate tax "loopholes" --- and in conjunction to, also raising the capital gains tax rate to 36.9% (the same rate as is the top marginal rate) --- while also apply a forced reparation of overseas earnings and taxing them at 36.9% (the same as capital gains). This might be the best overall solution.

We could also impose a "maximum wage" on CEOs with a pay ratio of 50:1 to their average paid employee --- and also raise the federal "minimum wage" to $15 an hour for companies with more than 100 employees; or with gross incomes of more than $ 1 million a year (so that hedge funds managers can't screw their secretaries and janitors --- and so defense and other government contractors will also pay their employees a living wage).

And finally, the $113,700 Social Security "cap" on regular wages should be raised to $1 million (or completely eliminated) --- or just tax capital gains a regular wages and raise the Social Security payroll tax cap to $1 million.

1 comment:

  1. Check out some of the corporate tax loopholes here: