The Only Tax Break That Matters
Posted at 11 a.m. on Nov. 19, 2012
James Kwak makes the case that neither President Obama’s proposal to raise the top income group’s marginal tax rate, nor Mitt Romney’s proposal to cap tax deductions are good ways to raise revenue.
“They pass silently over the most important loophole for the rich: artificially low tax rates on investment income, whether capital gains (profits from sales of assets) or dividends (cash distributions from corporations to shareholders).”
“Since 2003, both long-term capital gains (sales of assets held for over one year) and most dividends have been taxed at a maximum rate of 15 percent, while the top rate on “ordinary” income (from, you know, working) has been 37.9 percent, if you include the Medicare payroll tax. This is why Mitt Romney, despite his hundreds of millions of dollars of wealth, pays a lower average tax rate than many middincome Americans.”
Bottom line: “The loophole for investment income is one of the biggest ones that exist, worth about $440 billion over the next five years… Taxing income from investments the same as we tax income from labor would raise hundreds of billions of dollars in revenue almost exclusively from people who can afford it.”