Posted by Leonard Steinberg on November 21st, 2011
Who are the 1% anyway and are they really the cause of the huge wealth disparity in the USA? No, of course not: this is just being used as simplistic means to an end for political purposes. Many people who earn $ 250k/year are significantly wealthier than most, but certainly they do not qualify when it comes to the accusations being thrown at them by the OWS group. The real focus should be the o,1%: not all of them mind you as many do pay their fare share. It’s the disparity in what people actually pay in taxes rather than tax rates that should be the focus of outrage. I know of some people who earn $ 1million per year who pay double and triple the taxes of what others pay earning the exact same amount of money…..the difference being HOW they earn their income. Salaried people have virtually no deductions. Earning through capital gains alone more than halves your tax burden. Is this fair or equal (ie: constitutional)?
Capital gains are the key ingredient of income disparity in the US– and the force behind the winner takes all mantra of our economic system as reported by Forbes’ Robert Lenzner. If you want to even out earning power in the U.S, you may have to raise the 15% capital gains tax…..although that should be done prudently. Maybe adding tax incentives for job creation, at least for the next 5 years. Income and wealth disparities become even more absurd if we look at the top 0.1% of the nation’s earners– rather than the more common 1%. The top 0.1%– about 315,000 individuals out of 315 million– are making about half of all capital gains on the sale of shares or property after 1 year; and these capital gains make up 60% of the income made by the Forbes 400. It’s crystal clear that the Bush tax reduction on capital gains and dividend income in 2003 was the cutting edge policy that has created the immense increase in net worth of corporate executives, Wall St. professionals and other entrepreneurs. The reduction in the tax from 20% to 15% continued the step-by-step tradition of cutting this tax to create more wealth. It had first been reduced from 35% in 1978 at a time of stock market and economic stagnation to 28% . Again 1981, at the start of the Reagan era, it was reduced again to 20%– raised back to 28% in 1987, on the eve of the October 19 232% crash in the market. In 1997 Clinton agreed to reduce it back to 20%, which move was an inducement for the explosion of hedge funds and private equity firms– the most “rapidly rising cohort within the top 1 per cent.” Make no mistake; the battle that is to be fought over the coming attempt to reverse this reduction in capital gains will be bloody and intense. The facts are clear according to the Congressional Budget Office more than 80% of the increase in income inequality was the result of an increase in the share of household income from capital gains. In fact, you can go so far as to claim that “Capital Gains income is the most unevenly distributed– and volatile– source of household income,” according to Laura D’Andrea Tyson, University of California business professor and former chairwoman of the Council of Economic Advisers under President Clinton. No wonder the super wealthy plutocrats obtained the largest share of national income– 25% of the nation’s wealth- greater than any other industrial nation in the the period of 1979 to 2005. Make no mistake; after unemployment– this disparity between the 1%– 3 million– or the 0.1%– the 300,000– and the other 312 million citizens of the U.S. has become the major theme of the Occupy Wall Street movement– and an important national debate. OWS’s message is clouded by a kooky extremist minority (great for pictures!), but their theme message resonates with the majority of Americans.
Lenzner highlights the words of the late Justice Louis Brandeis warning to the nation that ” We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” We have to make up our minds to restore a higher, fairer capital gains tax to the wealthiest investor class– or ultimately face increased social unrest.
Yes it is true that these 300,000+ individuals constitute a large portion of the buying audience in Manhattan, and to alienate them with ridiculous taxation would be stupid. Providing incentives for employing should be a consideration. I feel 100% certain that if the capital gains tax rate was raised to 20%, it would not stop or even slow commerce: add into the equation lower unemployment, and the boost in the economy would largely off-set this raise in taxes. More importantly, tax rates could be lowered and generate more revenue, if the laws applied to all equally. Right now the disparity in who pays what and how, who gets what tax breaks, etc is simply absurd. The extremism towards taxation on the left and the right has to end: it is time to get practical.