5 GOP Candidates Think Super-Rich Should Not Have To Pay Taxes

I have discussed many times on this blog the unfairness of the tax system in this country, specifically that the super-rich pay a smaller percentage of their income in taxes than the middle class does. The middle class pays the regular income tax rates because most of their income is "earned income" (which means they actually had to perform work to get it), while most or all of the income of the super-rich is "capital gains" (investment income that no one had to work for) -- and capital gains are taxed at 15%, no matter how much is made.

This is not fair, but it is the way the Republicans want it (and many "blue dog" Democrats). It is their way of rewarding the rich for campaign donations (not to mention that many in Congress are rich themselves, and make large amounts of investment income). The Republicans and blue dogs would like for Americans to believe that they are keeping capital gains taxes low to protect the investments of the middle class. That is simply not true. Consider the following facts:

* The richest 5% of Americans pay 90% of capital gains taxes.

* The richest 1% of Americans pay 68.3% of capital gains taxes.

* The richest 0.1% of Americans pay 44% of capital gains taxes.

Those figures make it pretty obvious that keeping the capital gains tax at 15% is a move that only benefits the rich and super-rich in this country. Even conservative icon and demi-god Ronald Reagan knew this was unfair to working Americans. In 1986, he signed the Tax Reform Act into law which taxed capital gains at the same rate as earned income. But it didn't take long for the right-wingers to change that, and by the Clinton administration the capital gains tax has been lowered to 20%. The Bush administration then lowered them further to 15%. Tax fairness had lasted only a very short time.

The conservatives say that keeping the capital gains tax low increases investment and increased investment creates jobs. Neither is true. Jobs are only created when a business needs more workers to make or deliver their product or service, and if additional workers are not needed then the money just goes into the owners bank account. And taxes neither increase nor decrease investment.

Billionaire Warren Buffett pointed this out when he said, "I have worked with investors for 60 years and I have yet to see anyone -- not even when capital gains rates were 39.9 percent in 1976-77 -- shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off." Truer words were never spoken. Even paying a 35% income tax on investment profits means you are left with a net profit from the remaining 65% (which is money you didn't have before the investment).

But as unfair as the current tax system is, there are at least 5 GOP presidential candidates who have come out in favor of making it even worse. Jon Huntsman, Michele Bachmann, Ron Paul, Herman Cain, and Newt Gingrich have all declared they are in favor of lowering the tax on capital gains to zero. That's right, they want to fix it so that the super-rich don't have to pay any taxes at all! And it wouldn't surprise me if Romney, Perry, and Santorum also jumped on this ridiculous bandwagon very soon also.

This would cut tax revenues by a whopping $1 trillion dollars over a ten year period. And who would make up this huge tax shortfall (since it is obvious that the budget can't be reduced by cutting taxes)? The middle class, of course. And the working class -- who are the only people the Republicans would actually like to raise taxes for.

This idea is completely insane, but it shouldn't surprise any of us. Republican economic policy hasn't contained an ounce of sanity for many years.