Taxing income vs. dividends and capital gains

[Cato1]

I think Democrats would have an excellent chance at taking a lot middle class votes by pushing for making dividens and capital gains to be taxed at the sames rates as earned income. Why do we have a harder tax burden on people who work for a living than on idle snobs who live on unearned income? What has the child of a multimillionaire living on family wealth ever contributed society? Still, he or she is likely to be taxed a whole lot less than a hard-working professional.

[Vincardog]

1. right

[LSparkle]

2. Couldn't have said it better myself

This Administration in particular values wealth over work, and we need to call them on it. They may call it "class warfare" but it's only tax fairness! Why should unearned income receive preferential treatment over money people have earned through hard work? What kind of "values" does that reflect? John Edwards came the closest in the last election to broaching the subject, and I hope our representatives don't overlook this winning issue.

[Salviati]

3. It would need a name like:

The Tax Fairness Act

"What, you're in favor of unfair taxation?!"

and sell it by asking whether or not the "Investor Class" thinks that they're better than your average working Joe, and thus is worthy of a lower tax rate.

[BlackVelvetElvis]

4. My mother is 70 and disabled-hardly an "idle snob".

Her only income is from my father's pension, SS and her dividend checks.
Without those dividend checks, she couldn't pay her bills.
I'm sure many seniors are in the same position.
Why not make corporations pay their fair share and get off the backs of us who work for a living?

[Cato1]

8. Nobody is suggesting...

"Without those dividend checks, she couldn't pay her bills."

..."taking away" your mother's dividend checks. This dividend income should simply be taxed at the same rates as earned income.

[tx_dem41]

10. In other words....

after the tax rate is applied....she won't be able to pay her bills.

[Cato1]

12. Really?

So what happens to the middle-class tax payer when his or her income tax rate goes through the roof? I don't understand the opposition to increasing taxes on UNEARNED income when an increase in taxes will happen in any case in the future. Bush is actually pushing for the abolition of cap gains and dividend taxation and all the Democrats seem to be talking about is increasing taxes on earned income.

[tx_dem41]

15. I was just responding to the other poster's situation.

Since, most people (middle class and lower) aren't affected by the dividend tax breaks (at the levels they kick in), I don't see where your "solution" applies to them at all.

[AP]

17. That's why it should be taxed progressively.

A flat rate of 15% on dividends might actually be LESS fair to a senior citizen for whom it's one of the few sources of income if, say, the alternative were that you had progressive rates such as 5% on the first 25K, 10% on the next 75k, 15% on the next 150k, 25% on the next 500k, and 33% on the next 1 mil, etc.

[One_Life_To_Give]

5. Carefull

It could hurt alot of retirement accounts.
Most of the Blue Chip stocks pay dividends. When the tax rate on them was dropped, money was moved from other places to buy those shares. I suspect about 1000 points of the DJIA value is based on that movement. Now if we change the tax policy back, we could cause a loss of 1000 points on the Dow, or about 10%. Depending on how people have their pensions and 401K's etc. invested. That could be a significant hit.

[Peak_Oil]

7. So?

You invest in the stock market, you take a risk. Should we not have put through Sarbanes-Oxley (SP?) because it might have exposed fraud and thus kept stock prices lower?

[One_Life_To_Give]

13. Tax Policy has a large effect on

Where money is invested. To a degree, congress tells investors where to put their money. If you raise the tax rate on dividends enough the money will be moved to the next best investment.

If you want to only increase revenue from dividends you need to raise the rates for not just dividens but the alternatives as well. Otherwise you just encourage the shuffling of monies from one place to another.

[mdhunter]

6. I disagree

As much as I wish it did, I don't think this issue resonates so well with the middle class. Lower middle class and working poor, maybe, but by no mean guaranteed, but not the middle class.

It's the duality of American amnesia and optimism. If you're moving up, you quickly forget where you came from and stop thinking it's so bad that work income is taxed but leisure income isn't. And that's partly because once people have found a little success, most want more, and most of those do dream of the day when they don't have to work anymore and can live off the killing they made in the market. And those people feel like they've earned - by themselves, no less - and feel that it shouldn't be taxed.

The reasonably well off, in my experience, want the tax burden to help the rich because they hope to soon become so, and have forgotten the struggles of having less.

I could be wrong, and I really, really, wish you were right (and still support making it an issue), but I guess I'm cynical.

[Peak_Oil]

9. It depends on whether

you have your money in a tax-sheltered account or not. If your money is in an IRA or a 401k or is held by a pension or an insurance company's annuity division, that money's taxed at ordinary income rates anyway. For that money, who cares? The only ones that will be hit are the people who have already maxed out their IRA, 401, 503c, life insurance, and annuity investments who own shares in regular taxable accounts. That's not quite as many people as you might think.

[Cato1]

11. My point is that...

...the huge federal deficit will eventually require an increase in tax rates. I'm sure there's a whole lot more support among the middle class for raising the rates on cap gains and dividens than on earned income.

[Old and In the Way]

14. Have a progressive tax rate on both earned and unearned income.

That addresses the poor grannies living on fixed/meager dividend checks.

[AP]

18. Yep. That's precisely it.

[AP]

16. I'd like to hear all the arguments before deciding whether they

should be taxed at the same rates as earned income, but I'll definitely tell you this: they need to be taxed progressively.

People make millions and millons of dollars on unearned income. It's crazy that it's ALL taxed at a rate lower than earned income over 22K, or whatever.

[cattleman22]

19. I would agree with you about the dividends if corporations paid no tax.n/t