Capital Gains Should Be Taxed At Rate Of Earned Income

The United States has two huge economic problems. First, it is the most unequal of all the developed countries when it comes to wealth and income -- and even more inequality than some third world countries. Second, it has an enormous national debt that is now growing at about a trillion dollars a year.

What has caused this? The obvious answer is the economic policy of the Republicans (trickle-down economics). They want you to believe that whatever is good for the richest Americans is good for all Americans, and the answer to every economic problem is just to give more to the rich.

Part of this economic policy is to make sure the rich are not having to pay their fair share of taxes. They just made this worse with the tax reductions of 2017 -- reductions that mainly went to corporations and the richest people. This only made both problems worse -- increasing both the national debt and the country's inequality.

Several Democrats have offered solution. Rep. Ocasio-Cortez proposed a 70% tax on any income over $10 million. Sen. Warren has proposed a wealth tax. And Sen. Sanders is proposing a small tax on stock market trades. These are all good ideas, in my opinion, but there is a simpler idea that would go a long way toward solving both the debt and inequality. Bill Gates, one of the richest men in the world, says the most effective way would be to eliminate the capital gains tax and tax all income at the same rate. I agree.

Currently, the top earned income tax rate is about 39.6%. But most of the rich don't pay that. Instead of the earned income rate, they pay a capital gains tax rate which is much lower (20%), because much of their income is derived from the stock market (investments and dividends). Note in the chart above that the top 1% get more than half of their income from capital gains (51.9%), which means they only pay a 20% tax on that income. And when you consider the top 0.1% (the super rich), that capital gains income goes way up. In essence, they pay a smaller tax rate than many in the middle class.

This is not only unfair, but it makes no sense. All income should be taxed at the same rate -- the earned income rate. It's time to do away with the special capital gains tax rate.

There Are 2 Tax Systems - One For The Rich And One For Us

(Cartoon image is by Dave Granlund at davegranlund.com.)

If you listen to the Republican politicians, you might be convinced that the rich in this country are overtaxed (and need another tax cut). That is not even remotely true. The rich are currently paying less in taxes than at any time since World War II. Part of it is because their income is taxed differently than that of working Americans (taxed at a lower "capital gains" rate, instead of the "earned income" rate paid by most Americans).

But that is just part of the problem. Their ability to hire an army of CPS's and tax lawyers, and the ability to hide money overseas, has resulted in them paying a lower percentage of their income in taxes than most in the middle class must pay. This has created, in effect, a different tax system for the rich than is applicable to ordinary Americans.

The New York Times has written an excellent article on this. I post only a portion of it below, but I urge you to read the whole article. It is quite shocking.

With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy, the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the “income defense industry,” consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means. . .

Operating largely out of public view — in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service — the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans.

The impact on their own fortunes has been stark. Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to I.R.S. data. By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent. . .

The ultra-wealthy “literally pay millions of dollars for these services,” said Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, “and save in the tens or hundreds of millions in taxes.”. . .

While Democrats like Bernie Sanders and Hillary Clinton have pledged to raise taxes on these voters, virtually every Republican has advanced policies that would vastly reduce their tax bills, sometimes to as little as 10 percent of their income.

At the same time, most Republican candidates favor eliminating the inheritance tax, a move that would allow the new rich, and the old, to bequeath their fortunes intact, solidifying the wealth gap far into the future. And several have proposed a substantial reduction — or even elimination — in the already deeply discounted tax rates on investment gains, a foundation of the most lucrative tax strategies. . .

Each of the top 400 earners took home, on average, about $336 million in 2012, the latest year for which data is available. If the bulk of that money had been paid out as salary or wages, as it is for the typical American, the tax obligations of those wealthy taxpayers could have more than doubled.

Instead, much of their income came from convoluted partnerships and high-end investment funds. Other earnings accrued in opaque family trusts and foreign shell corporations, beyond the reach of the tax authorities. . .

Organizing one’s business as a partnership can be lucrative in its own right. Some of the partnerships from which the wealthy derive their income are allowed to sell shares to the public, making it easy to cash out a chunk of the business while retaining control. But unlike publicly traded corporations, they pay no corporate income tax; the partners pay taxes as individuals. And the income taxes are often reduced by large deductions, such as for depreciation. . .

The wealthy can also avail themselves of a range of esoteric and customized tax deductions that go far beyond writing off a home office or dinner with a client. One aggressive strategy is to place income in a type of charitable trust, generating a deduction that offsets the income tax. The trust then purchases what’s known as a private placement life insurance policy, which invests the money on a tax-free basis, frequently in a number of hedge funds. The person’s heirs can inherit, also tax-free, whatever money is left after the trust pays out a percentage each year to charity, often a considerable sum.

Many of these maneuvers are well established, and wealthy taxpayers say they are well within their rights to exploit them. Others exist in a legal gray area, its boundaries defined by the willingness of taxpayers to defend their strategies against the I.R.S. Almost all are outside the price range of the average taxpayer. . .

The combination of cost and complexity has had a profound effect, tax experts said. Whatever tax rates Congress sets, the actual rates paid by the ultra-wealthy tend to fall over time as they exploit their numerous advantages. . .

“We do have two different tax systems, one for normal wage-earners and another for those who can afford sophisticated tax advice,” said Victor Fleischer, a law professor at the University of San Diego who studies the intersection of tax policy and inequality. “At the very top of the income distribution, the effective rate of tax goes down, contrary to the principles of a progressive income tax system.”. . . 

For the ultra-wealthy, “our tax code is like a leaky barrel,” said J. Todd Metcalf, the Democrats’ chief tax counsel on the Senate Finance Committee. ”Unless you plug every hole or get a new barrel, it’s going to leak out.”

The Super Rich Are Not Paying Their Fair Share Of Taxes

(Image is from an excellent post of taxes for the rich at Think Progress.)

The rich and their Republican lackeys are still complaining that the top tax rate is too high, even though after the Bush tax cuts for the rich were repealed, that top rate remains below 40%. That's 50 points lower than the top tax rate was in the 1950's, when it was 90% (and the economy was booming).

But the truth is that while the top tax rate is slightly below 40%, none of the super rich pay anywhere near that. They pay an average real tax rate of slightly over 17% -- less than half of the top tax rate, and only 3 points above the average rate paid by the middle 50% of Americans.

How can they get away with that? The primary reason is because they don't pay the earned income tax rate like working Americans. They have a special capital gains tax rate of 20% (because they make their money by gambling on (manipulating?) the stock market. Then they have a range of loopholes and deductions to lower the rate below that 20%.

Folks, this just ain't right. Income is income, no matter how it is earned -- and it should all be taxed in the same way (at the earned income tax rate). It's time to do away with the special capital gains tax rate for the rich -- and force them to pay their fair share of taxes. That rates destroys the progressively of our income taxes.

The $1.34 Trillion Giveaway To The Rich

(This cartoon image is by Pat Bagley in the Salt Lake Tribune.)

When the income tax was passed in this country, it was set up as a progressive tax. That means that those who made more money paid a higher tax rate than those who made less. This was deemed fair -- because those who made the most money could not only afford to pay the most, but they were the ones who had reaped the most benefits from the economy and government (and therefore owed the most to it).

This was a concept even endorsed by conservative icon Ronald Reagan, who said a bus driver should not be paying more in taxes than a rich man. But modern right-wingers are not interested in fairness, or in what their rich buddies owe to the country that helped to make them rich. They much prefer regressive taxation -- which means the less money you make, the larger portion of your income is paid in taxes. They have come up with a variety of loopholes and subsidies for the rich and the corporations to dodge paying their fair share in taxes -- so much so that many corporations pay no taxes at all (even though they make billions in profits) and most of the rich pay a smaller tax rate than many in the middle class.

One of the most pernicious of these tax-dodging schemes is the long-term capital gains tax rate. While the working and middle class pay the earned income tax rate, most of the rich (since they make their money from investments instead of actually working for it) pay a lower tax rate -- the capital gains tax rate. During the Bush administration, the Republicans decided that money received from investments should not be taxed at the same rate as earned income, so they set up a special 15% tax rate for investment income. This is how Mitt Romney wound up paying just over 13% on over $20 million in income -- because he paid only a 15% capital gains tax rate reduced by some charitable donations (to his church).

The rate was raised to 20% by president Obama, but only for the richest Americans -- those who would have to pay the top rate of 39.6% if they paid the earned income rate (so they are still getting a 19.6% tax break for receiving their income through investments instead of working for it). And there are still many in the top 5% of the richest Americans who still pay the 15% tax rate.

How much is this "subsidy" for the rich costing this country? Over the next 10 years, it will cost the government about $1.34 trillion in revenue. Just think of what this $1.34 trillion could do for this country. For starters, we wouldn't have to be cutting programs that help veterans, children, the poor, the unemployed, and the elderly. Unfortunately, the Republicans don't care about those groups. They only care about their true constituency -- the rich and the corporations. They would rather hurt ordinary Americans than make the rich and the corporations pay their fair share in taxes.

A special lower tax rate for the rich has never made sense. The only thing it accomplishes is to further increase the huge gap in income and wealth between the rich and the rest of Americans. Republicans will tell you that it creates jobs, but that is a lie. Only an increase in demand creates new jobs, and letting the rich pay a smaller tax rate than many in the middle class does nothing to increase demand.

It is time to restore some fairness to our tax system, and a good start toward that would be the elimination of the special lower capital gains tax rate. All income should be taxed at the earned income rates, regardless of its source (work or investments). But that can only be done by voting the Republicans out of power, and then putting pressure on the Democrats.

Why Do The Rich Pay A Lower Tax Rate Than Workers ?

The chart above is slightly out of date, since the capital gains tax has been raised to 20% (instead of 15%) and the top earned income tax rate is 39.6% -- but the point of view is still valid. And that point is that the rich get a special lower tax rate than workers can get. They only have to pay a 20% tax rate on long-term capital gains income (investment income), instead of the top tax rate of 39.6% on earned income (income that derives from work performed). It is this provision (in addition to loopholes) that allow the rich to pay a smaller tax rate than middle class workers (and a perfect example is the 13% tax rate paid by Mitt Romney on an income of over $20 million).

The idea of taxing those who let their money work for them at a less rate than those who must work for their income is a Wall Street-inspired Republican idea. The idea promotes the notion that capital (money) is more important than labor (work). This is a ridiculous idea. The truth is that capital could produce exactly nothing without labor, and labor could do little with capital. In other words, both are necessary for the production of any product/service.

And since both capital and labor are necessary, the income derived from each should be taxed at the same level. It is ludicrous to think the rich should be able to save 19.6% off their taxes simply because they didn't have to work for that money. That defeats the whole purpose of having a progressive tax structure (which says that those who make the most should pay a higher tax rate).

It is time to eliminate the special long-term capital gains tax rate (and other special tax rates that allow the rich to pay less than others). It is time to tax all income as earned income, regardless of how it was earned.

It's Time To Eliminate "Capital Gains" Tax

(The image above is by the inimitable DonkeyHotey.)

Did you ever wonder how it is that Mitt Romney could pay only a 13% tax when he made over $20 million in income? The reason is something called a "capital gains" tax. If Romney had worked for his income, it would have been classified as earned income and he would have had to pay about 36% minus his personal deductions (which was the top tax rate at the time). But since it was investment income (classified as a capital gain), he only owed a 15% tax rate (which was lowered to 13% due to personal deductions).

This is one of the most unfair parts of our tax system -- that the rich get to pay a much smaller tax rate of their income (which is mostly capital gains, or investment income) than the middle class (who actually have to work for their income). It hasn't always been like that, and conservatives haven't always touted the value of a special capital gains tax rate. In fact, conservative icon Ronald Reagan didn't support giving the rich a special and lower tax rate than ordinary Americans. He thought the rich should pay more because they made so much more.

It was only after George Bush became president that the special capital gains tax came into being. Bush fell for the ridiculous Wall Street argument that a lower capital gains tax would spur investment and create jobs, so he lowered the capital gains tax to only 15% (less than half of what that income was being taxed at). Of course it didn't spur investment or create new jobs. The money just went into the bank accounts of the very rich, while the Bush administration presided over one of the worst periods of job creation in our history.

When President Obama raised the top tax rate from about 36% to nearly 39%, he also raised the capital gains tax rate for the very rich from 15% to 20%. That is still only about half of what they should be paying (if their income was taxed as earned income, like it has been in the past, and like the bottom 90% of all Americans have to pay). What should have been done is to eliminate the capital gains tax altogether, and return to taxing all income at the earned income rate.

The Republicans (creators and protectors of the special capital gains tax rate) have been whining that our deficit (and national debt) is too large. But one of the most significant things that could be done to lower the budget deficit (outside of cutting the bloated military budget) would be to raise the capital gains tax rate to equal the earned income rate. This special tax rate for the rich is going to cost our government about $161 billion in revenue this year (and could pour nearly $2 trillion into the government coffers over the next 10 years). That's not pocket change.

This special tax rate for the rich is both unfair to other Americans (who work for their money and pay a higher rate) and is costing the government hundreds of billions in revenue every year. It should never have been created, and it needs to be done away with as quickly as possible. There is simply no legitimate reason for the rich to be taxed at a lower rate than hard-working middle class Americans.

Increasing The Wealth Gap In The U.S.

It is no secret that the gap between the rich and the rest of America has grown much larger in the last three decades or so, and now is larger than at any time since before the Great Depression -- and is still growing. The reason for this huge growth in that gap is because of policies instituted by the GOP -- policies that still have not been completely eliminated.

There were many factors involved -- like the stagnation of most workers' wages, the war on unionism, the huge growth in CEO compensation, the issuance of huge Wall Street bonuses, etc.

But according to a new report issued by Thomas Hungerford, an economist with the Congressional Research Service, there is one element of those Republican policies that has had more effect on the widening gap between the rich and the rest of America than any other facet -- the capital gains tax. The capital gains tax used to be taxed at the same rate as earned income. But the Republicans decided that the rich shouldn't have to pay as high an income tax rate as others, so they adjusted the capital gains tax rate by making it a different tax rate than that applied to other forms of income.

They couldn't lower the regular earned income tax rates below those paid by the middle class. That would have caused a real uproar. But they knew that the rich make a larger part of their income off of capital gains than other Americans. As the bottom chart above shows, the bottom 80% of Americans earn next to nothing from capital gains (about 0.7% of their income). But that's much different for richer Americans -- where it makes up 18.8% of the income for the top 20%, 28.1% of the income of the top 5%, 38.2% of the income of the top 1%, and a whopping 51.9% of the income of the top 0.1% (the richest Americans).

Lowering the capital gains tax, first to 20% and then to 15%, gave the richest Americans a huge tax break (since they would otherwise be paying about 36% on that income) while maintaining the tax rate paid by most Americans (who got most of their money from earned income, not capital gains). This allowed the really rich to earn enormous amounts of money while paying a smaller tax rate than the middle class (like Mitt Romney, who only paid a tax rate of about 13% on over $20 million in income).

President Obama put a band-aid on this unfairness last December, when he negotiated an elimination of the Bush tax cuts on the richest Americans. That raised the capital gains tax from 15% to 20% (but left it still way below the top rate for earned income of 36%). So the richest Americans are still getting a huge tax break -- simply because they earn a large part of their income in a different way than most Americans. And the gap in wealth between the rich and the rest of America continues to grow larger each passing day.

This is simply unfair to most Americans. There is no legitimate reason why the income of the rich should be taxed differently from the income of most Americans. All income should be taxed the same -- using the progressive rates of the tax on earned income. It is time to eliminate the special tax rate on capital gains (investment income). It is time to return fairness to the American tax system.

The Rich Have Different Rules

I believe this is a serious problem in the United States -- that in our supposedly "progressive" tax system the rich are taxed at a far smaller rate than middle class workers. The reason this happens is that they have gotten Congress to declare that the type of income they mostly make (investment income or "capital gains") is somehow more important to the welfare of this country than the type of income (earned income) that the middle class mostly makes.

What makes this even more egregiously unfair is the fact that to make earned income requires real (and hard) work, while investment income requires no work at all -- just using money to make more money. Willard Mitt Romney is a good example of this. He didn't work a single day in 2010, and yet he made over $21 million (which was taxed at the lower income rate of investment income). In fact, because he gave money to his church, he didn't even have to pay the 15% tax rate of investment income.

It should make no difference how income is made. Capital gains (investment income) should be taxed at the same rate as earned income -- and those who make larger incomes should be taxed at a larger rate. That was the original idea of our progressive tax system, and we need to return to it.

I know that those of the right, who have bought into the propaganda of the rich, will accuse me of class warfare for promoting such a simple idea of fairness in taxation, or even worse, advocating income redistribution. I don't really care what they think or say. The "class war" has been going on for quite a while now. It was started when the rich, through their Republican puppets, decided they shouldn't have to pay a larger tax rate than other Americans (or even as large a tax rate as working Americans).

As for "income redistribution", income is always being redistributed in every society and every economic system. Our system has been tilted to favor the rich, so that far too much of our national income goes into their pockets, while the rest of America must fight for the crumbs left over. We used to have a fairer system, where all Americans could get a share of the economic pie. The rich still got rich, but other Americans also shared in the bounty this country had to offer. We need to return to that. It is a simple matter of fairness.

Republicans Are Wrong About Taxes

When Mitt Romney released his 2010 tax return last Tuesday most people were shocked to find that although he made millions of dollars, he only paid a tax rate of 13.9% -- far below what most middle class families would pay. Mitt and his Republican cohorts have been scrambling to justify his tiny tax rate. They say it's just free enterprise and is legal. They are right about the legality, but what they failed to say is that they are the ones who made it legal. It was a part of the Bush tax cuts that lowered the capital gains rate so low (while keeping the rates on earned income much higher), thus giving the super-rich a break that working people don't get.

About a third of Romney's income (about $7.4 million) was from something called carried interest, which is currently taxed as a capital gain with a 15% tax rate. But most top investors, both here and in other countries, don't think that is fair. They think carried interest should be taxed at a higher rate. That was the majority opinion in a poll of 1,209 investors by Bloomberg News on January 23rd and 24th. Here are the results:

Worldwide Investors
15% rate is justified...............21%
15% rate not justified...............66%

United States investors
15% rate is justified...............27%
15% rate not justified...............67%

As we can see, even a representative sample of Mitt's fellow investors think he should be paying more in taxes. This shouldn't really surprise us, since multi-billionaires Warren Buffett and Bill Gates have both been calling for higher taxes for the rich. In addition, a group of millionaires have joined them in asking for higher taxes. It looks like there are some of the rich that appreciate what this country has allowed them to do and want to pay their fair share of taxes to help those who haven't been as fortunate.

But those people aren't alone in calling for higher taxes for the rich. In his State of the Union speech President Obama called for the rich to pay a minimum tax rate of 30%. And a majority of Americans agree with the president. In a new Rasmussen Poll (a poll known to lean toward Republicans), it was shown that 55% of the population agrees with the president, while only 32% disagree. Other polls have shown an even larger percentage calling for higher taxes on the rich.

I'm sure most Republicans in Congress are in that 32%, because their solution to every problem facing this country is to cut taxes for the richest Americans. But they are swimming against the current on this issue, and if they don't temper their tax-cutting efforts for the rich they could find themselves at a serious disadvantage in the coming elections.

The Democrats are in the power position on this issue, and the weird part is that they could significantly raise taxes on the rich by simply doing nothing (except blocking Republican efforts to cut those taxes). The Bush tax cuts, which mainly benefitted the rich, not only lowered the top tax rate for earned income but also lowered the tax rate for capital gains. All the Democrats have to do is let those cuts expire at the end of this year.

As the chart above (from Under The Mountain Bunker) shows, letting the Bush tax cuts expire combined with a raise in the capital gains rate already approved in the Affordable Care Act and another provision that limits deductions for the rich would effectively raise the capital gains tax to about 25% in January of 2013. It wouldn't be quite up to the 30% President Obama wants, but it would be a good start (and if the Democrats hold their ground it couldn't be stopped by the Republicans).

The Democrats have the public on their side in this issue, and if they're smart they beat the drums on this all the way to election day. If they can get some more Democrats elected in November, maybe they can up the minimum tax rate for the rich to at least 30%. If not, at least they can make sure the minimum rate goes to about 25%.

Perry's Ridiculous Tax Giveaway To The Rich

A lot is being made over Rick Perry's new "flat tax" plan. He himself claims that he his plan would simplify the tax system, but that's laughable. It actually makes the tax system even more complex. Why? Because he wouldn't do away with the current system of income taxes. He just adds a flat tax plan of 20%, and then gives taxpayers their choice of which plan they want to use.

It's pretty obvious that most people would choose to use the old system. Most workers do not make enough money to be in the 20% tax bracket, even many in the middle class, so it just makes sense to stay with the tax system they are currently using. So who will use the new system Perry is proposing? The rich -- the only people who will benefit from the new system. For them it's a giant government giveaway.

The rich will make out like bandits with the new plan. First it reduces the tax on earned income in the top tax bracket from 35% to 20% (a 43% tax cut). Then it eliminates completely any taxes on capital gains income (which is where most of the income for the rich comes from, and is currently taxed at 15%). He also would eliminate the inheritance tax completely (which only affects those inheriting at least $5 million). And finally, he would let the rich bring home the money they've been hiding overseas to avoid paying taxes, and tax that money at only 5.25%.

I've been saying for years now that Rick Perry was long ago bought and paid for by the corporations and the rich. After seeing this tax plan, can there be any remaining doubt of that. With hundreds of millions of people being hurt by this "trickle-down" recession, it's simply amazing that Perry would come up with a plan that helps no one but the rich.

The one thing he didn't explain was how he's going to keep the deficit and debt from ballooning under this new system. With the huge giveaways to the rich, and most everyone else staying the same, there is no way his new plan will bring in anywhere near the current revenues for government (which are already insufficient). How's he going to balance the budget (and yes, he wants a balanced budget amendment)?

You know how he's going to do it. He's going to balance the budget on the backs of the poor, the unemployed, the children, and the elderly. He will do just what he did in Texas -- slash all social programs (except giveaways to his rich buddies). And he will abolish Medicare and privatize Social Security (two things he couldn't do as governor of Texas, but would love to do).

This guy was a disaster as governor, and he would be even worse as president.

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.

It's Time To Eliminate Capital Gains Tax

Does it ever bother you that the rich don't pay as high a tax rate as you probably do? Are you even aware that this inequity exists? I'm not talking about the high-powered lawyers and many tax breaks the rich take advantage of (although those need to be addressed). I'm talking about the capital gains tax, which covers most of the income of the truly rich in this country.

If you make between $30,650 and $74,200 (which covers most working people in the U.S.), then you pay a tax rate of 25% on your income. If you're doing a little better and make between $74,200 and $154,800, you pay a tax rate of 28%. Guess what the tax rate is for the filthy rich -- 15%.

That's because the really rich folks don't earn most of their money through a salary. They get their income through stocks, bonds and other investments. This kind of income is not taxed at the same rate as your hard labor is -- it is taxed through something called the capital gains tax, and the tax rate for capital gains is 15% (thanks to the Republicans).

So the real effect of this is that not only must the working and middle classes work harder for their money, they must also pay a larger percentage of it in taxes than the rich do. That really sounds fair doesn't it?

The original idea for making the capital gains tax rate lower was that this investment by the rich resulted in more jobs and growth for the American economy. But that is an archaic idea. When was the last time you saw any decent jobs being created in this country? The only jobs I see being created in the U.S. nowdays are minimum wage service jobs. The jobs that might pay a decent wage are being shipped overseas so the corporations can exploit the cheap wages in other countries.

A lot of this money is not even left in a company long enough to create anything. Many people buy and sell on the market and quickly take their profits and move on to do the same with other stocks. It is nothing more than a short-term money game to them, and one of the advantages is the super-low tax rate.

Also, did you ever wonder why many corporate executives take the lion's share of their income in stock options rather than salary? It's simple. They know that if they can manipulate the company's stock and make it rise (usually on the backs of the workers), then they can buy huge amounts of stock at reduced prices and make millions, which will be taxed as a capital gain and not as income. How's that for a sweet deal?

Frankly, because of the short-term money games being played by the rich and the corporations, the capital gains tax does very little for our country as a whole. All it does is let the rich get away with paying a lower tax rate than other Americans.

That's why I say it is time to eliminate the capital gains tax. ALL income, regardless of it's source should be taxed at the IRS rate for labor income. It's time to take the burden off the working and middle classes, and make the rich pay their fair share.