Re: Palin: fact vs fiction

On Thu, 04 Sep 2008 11:57:05 -0500, gumboman <gumbo@xxxxxxxxx> wrote:

So why should people on
fixed incomes be punished for their unearned income?

They're not now, they get a better deal than the slob who goes to work
for apaycheck every Friday. The point is 'income is income' and should
all be treated the same.

The average Joe who lives paycheck to paycheck has an effective
income-tax rate that is very low. With regard to capital-gains, this
is income earned over a prolonged period of time. Its gains are
systematically diminished by inflation. A 25% gain on a 5 year old
investment is not the same as a 25% gain on a 2 year old investment.
As well, capital gains taxes are paid on the profits left over after
businesses/corporations have already paid business taxes. So a 15%
capital gains tax is really usually more than 15% as the tax is
applied to profits that have often already been taxed.

Raise the taxes on capital gains, then you lessen the incentive for
people to risk their capital by investing in businesses, etc... In
the long run, less investment will mean fewer jobs and less GDP growth
than would have been the case. So if the goal is to grow the economy
and increase future job creation, then it would make far more sense to
eliminate capital gains taxes completely, than it would to raise them.


The Wall Street Journal
How We Beat the '70s
By MARK BLOOMFIELD
March 13, 2008

With rising oil prices, rising unemployment, and inflation eating away
at the economy, a powerful politician pushes for a populist tax hike
in Washington.

It sounds a little like the current state of play. But the year was
1978, the push for a tax hike came from President Jimmy Carter, and
the tax in question was on capital gains. Mr. Carter wanted to tax
capital gains at the same rate as ordinary income -- effectively
doubling the rate for many taxpayers.

He didn't get his tax hike, but he did spark a pro-growth insurgency
that reframed the tax debate.

The chief insurgent was Republican Rep. Bill Steiger of Wisconsin, who
called for cutting the top capital gains tax rate almost in half. From
its inception, the 1978 "Steiger amendment" won bipartisan support. In
the Senate, Democrat Russell Long (then chairman of the tax-writing
committee), Alan Cranston (the second-ranking Democrat) and Republican
Clifford Hansen signed up 59 Democrats and Republicans to co-sponsor
legislation to cut capital gains taxes.

Within weeks, political and popular support turned in favor of the tax
cuts as more people acknowledged that lowering the rates would reward
the middle class for saving and investing, not just "fill the pockets
of fat cats." Soon the Carter tax increase morphed into a tax cut,
bringing the top rate down to 28% from 50%.

What prompted this unexpectedly strong support for lower taxes on
capital gains? The tax on capital gains may have been seen as a tax on
the rich by some in Washington, but most Americans saw it differently.
People believe in the American Dream, the old-fashioned Horatio Alger
rags-to-riches story. A tax on capital gains is a tax on the hard work
and risk-taking people undertake to build their own wealth.

Mainstream economists know that lower capital gains taxes result in
lower capital costs, more saving and investment, and a stronger
economy. And ordinary citizens understand that low taxes on capital
gains can make it possible for them to buy a new lathe or the newest
software, which will give them the chance to compete effectively in
today's global economy. Retirement security is also at stake. Low
taxes on capital gains allow Americans to build up larger nest eggs.

The 1978 capital gains tax cut was an economic success, as we saw in
the 1980s. What followed was a period of fluctuating capital gains tax
rates. But a second round of substantial rate cuts came in 1997. Again
the result was a clear benefit to the economy. The tax cut was pushed
through by Sens. Joe Lieberman (then a Democrat) and Orrin Hatch (a
Republican), and it took the top capital gains tax rate to 20% from
28%. President Bill Clinton signed the bill into law. According to a
1999 study by David Wyss of Standard & Poor's DRI, an economic
consulting firm, the 1997 tax cut increased GDP, investment and jobs,
and raised federal tax receipts.

Today, as in 1978, we are facing pressure to put in place a populist
tax increase -- in this case to eliminate "tax breaks for the rich" --
at a time of rising oil prices and signs of rising inflation. This
pressure is coming from two presidential candidates as well as Rep.
Charles Rangel, chairman of the House tax-writing committee, who is
proposing comprehensive tax reform, which in his view includes
increasing the tax on capital gains.

But Mr. Rangel, a highly regarded and respected policymaker, is also
calling for a full-scale and honest debate on tax policy. This is a
debate we should welcome. Let's put the best economists to work and
the best research on the table. Let's look at the fact that, as a
recent study by the Organization for Economic Co-operation and
Development pointed out, nearly half of the 30 countries surveyed do
not subject individuals to any tax on capital gains. And let's
consider that not keeping our capital gains tax at its current rate
(15%) will put us at a disadvantage when competing for global capital.

On Jan. 20, a new president and a new Congress will begin work on a
new economic policy. The lessons from cutting capital gains taxes over
the past 30 years shouldn't be ignored.

President John F. Kennedy may have said it best in 1963 in a message
to Congress: "The tax on capital gains directly affects investment
decisions, the mobility and flow of risk capital from static to more
dynamic situations, the ease or difficulty experienced in new ventures
in obtaining capital, and thereby the strength and potential for
growth of the economy."

I couldn't agree more.

-- Mr. Bloomfield is president and CEO of the American Council for
Capital Formation. He served as an aide to the late Rep. William
Steiger (R., Wis.).

(end of commentary)

.

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