Capital Gains Tax Cuts Massively Transfer Wealth to the Top - WaPo/FDL

[WillyT]

For the very richest Americans, low tax rates on capital gains are better than any Christmas gift. As a result of a pair of rate cuts, first under President Bill Clinton and then under Bush, most of the richest Americans pay lower overall tax rates than middle-class Americans do. And this is one reason the gap between the wealthy and the rest of the country is widening dramatically.

<And...>

Advocates for a low capital gains rate say it spurs more investment in the U.S. economy, benefiting all Americans. But some tax experts say the evidence for that theory is murky at best. What is clear is that the capital gains tax rate disproportionately benefits the ultra-wealthy.

Most Americans depend on wages and salaries for their income, which is subject to a graduated tax so the big earners pay higher percentages. The capital gains tax turns that idea on its head, capping the rate at 15 percent for long-term investments. As a result, anyone making more than $34,500 a year in wages and salary is taxed at a higher rate than a billionaire is taxed on untold millions in capital gains.

While it’s true that many middle-class Americans own stocks or bonds, they tend to stash them in tax-sheltered retirement accounts, where the capital gains rate does not apply. By contrast, the richest Americans reap huge benefits. Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent.

Sources: Internal Revenue Service, Treasury Department, Congressional Research Service.
Graphic: The Washington Post. Published on September 11, 2011, 8:43 p.m.

WaPo piece: http://www.washingtonpost.com/business/economy/capital-gains-tax-rates-benefiting-wealthy-are-protected-by-both-parties/2011/09/06/gIQAdJmSLK_story.html

WaPo grphic: http://www.washingtonpost.com/business/economy/benefiting-from-lower-rates/2011/09/11/gIQA4ivOLK_graphic.html

FDL Analysis: http://news.firedoglake.com/2011/09/12/capital-gains-tax-cuts-massively-tranfer-wealth-to-the-top/

:kick:

[Tennessee Gal]

1. Excellent post!

[WillyT]

3. Thank You !!!

:hi:

[woo me with science]

2. This massive transfer of wealth has been accomplished

through many different structural features of our financial system. This article is doing exactly what needs to be done: working on identifying and exposing the contributing factors so that they can be fixed.

K&R

[Tennessee Gal]

4. You are correct, but there is another very important factor.

The Republicans have worked on "framing" the issues in ways that manipulate Americans to vote against their own financial issues. When a tax cut for the wealthy is called "tax relief" a lot of Americans fall for it and fail to understand that it vastly benefits the wealthy. Republicans have worked on this for 40 years. They have think tanks and consultants for this purpose alone. And they have invested in media outlets used to get their "framing" in the eyes and ears of the easily manipulated.

[woo me with science]

5. Excellent point.

Thanks.

[quaker bill]

6. This was the only purpose

anyone who says otherwise is full of it.

The stupid notion behind it was that there were a large number of Henry Fords, Firestones, and on that were just waiting for a bit of spare cash to create industrial empires here. It never made any sense because actual business profits are taxed at a higher rate than capital gains. So, the best place to invest these gains is not in a business, but in financial instruments where you can get more gains taxed at the preferred rate.

Through bad tax policy they created the conditions for asset bubbles and the related death spirals when the bubbles pop. They also transferred massive amounts of wealth away from those who consume most goods and services. This is how we got where we are today.

[WillyT]

7. + 1,000,000,000... What You Said !!!

Exactly !!!

[gratuitous]

8. Ummmmmm! You linked to Firedog Lake!

So, even though your post is 100% correct, with the facts and analysis to back it up, you can look forward to a storm of criticism because you love Jane Hamsher.

[Starry Messenger]

9. k&r

[Mike 03]

10. Not sure about this. I am not "ultra wealthy" at all, but I do invest in private

projects knowing that if they turn out badly I can deduct them from my taxes. It keeps them in business, and saves me from caving if the projects don't turn out well.

Is that the same as capital gains?

[LooseWilly]

12. Depends on the project, whether or not it's capital gains.

If you become part owner of some land or real estate, then sell it... that sale is capital gains (or capital loss). The partnership pass-through revenue (rental income, business profit shares, what have you), however, is "regular income", which is taxed at the same rate as "salary/wage income"... or "gambling income" for that matter.

If you are investing in a project that is organized as a corporation and which then issues you stock, then sale of that stock would be capital gains (though you would have to hold the stock for over a year, even just 366 days, in order to qualify for the capital gains tax preferred tax rate, rather than the "regular income" rate).

Likewise, if you are receiving dividends and those dividends are "qualified" (I'm not sure what exactly makes them "qualified")... then those dividends will also be taxed at the preferential capital gains rates.

[indepat]

11. Just how depraved must lawmakers be to borrow trillions of dollars to fund outright welfare

for the uber-wealthy? Only in America. :patriot: