Bush’s tax cuts on capital gains are the biggest contributor to rising income inequality

While we consider how we are just days away from devastating sequestration cuts (which the Republican Party has decided is superior to closing tax loopholes for the super rich), take a look at why there’s such a huge gap in income inequality in America today:

Changes in tax law that reduced the federal tax rate on capital gains income is “by far the largest contributor” to rising income inequality in the United States, according to a new paper from Thomas Hungerford, an economist at the Congressional Research Service: By far, the largest contributor to this increase was changes in income from capital gains and dividends. Changes in wages had an equalizing effect over this period as did changes in taxes. Most of the equalizing effect of taxes took place after the 1993 tax hike; most of the equalizing effect, however, was reversed after the 2001 and 2003 Bush-era tax cuts. [...] The large increase in the contribution of capital gains and dividends to the Gini coefficient, however, is due to the large increase in the share of after-tax income from capital gains and dividends, and to the increase in the correlation of this income source with after-tax income. 

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We’ll stop talking about George W. Bush when the things he did while he was president for eight years stop affecting us today.

Money can buy tax laws that give you more money to bank in the Caymans

“The reason Romney pays a rate of only 14 percent on $13 million of income in 2011 — a lower rate than many in the middle class — is because he exploits a loophole that allows private equity managers to treat their income as capital gains, taxed at only 15 percent. And that loophole exists solely because private equity and hedge fund managers have so much political clout — as a result of their huge fortunes and the money they’ve donated to political candidates — that neither party will remove it.”

— Mitt Romney: A warrior for the wealthy? – CSMonitor.com (via robot-heart-politics)

Hilariously, Romney explained that the lower tax rate on capital gains is fair and a well-earned reward or incentive because lower tax rates on the wealthy “put people to work.” Except the Capital Gains Elite haven’t been using the savings to create jobs in America, not for a long time — instead they’ve been hording their U.S. tax savings in other countries like Switzerland or the Cayman Islands, haven’t they? Just look at Romney’s two tax returns.

And Mitt thinks the wealthy should have even more tax breaks?

The Republican Party’s favorite fairy tale: investors and job creators need more tax cuts

It’s way past time to put that Republican fairy tale called “Investors and Job Creators Need Lower Taxes” to bed:

Why Mitt Romney’s Tax Returns Undermine The GOP’s Investment Tax Argument

According to Republican gospel, taxes on investment must always be low, or else investors will simply sit on their money, refusing to do the very thing that could earn them more money. However, as David Abromowitz laid out in Bloobmerg View today, Mitt Romney’s tax returns undermine this argument.

After all, Romney made his fortune via investments made by Bain Capital, the private equity firm that he ran. And Bain’s investments between 1984 and 1999 “occurred when capital-gains rates were much higher than they are today. Yet Bain consistently attracted massive amounts of private capital, and thrived”…

[...] As billionaire investor Warren Buffett put it, “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.” It’s worth remembering that it was conservative icon Ronald Reagan who completely equalized the tax treatment of investment and wage income, rejecting the argument that a lower capital gains rate was necessary to incentivize investment.

As Pat Garofalo noted earlier:

[Would the wealthy really] squirrel away their money under the mattress if the capital gains rate goes back to the level at which it was under Clinton? In fact, business investment was stronger under President Clinton that it was under President Bush. The overwhelming majority of capital gains go to the richest households. Keeping that rate so far below the rates applied to normal income is simply a giveaway to the wealthy that doesn’t boost the economy.

And what’s Mitt Romney, the GOP’s preordained presidential candidate, have to offer? Nothing if you’re not in the top one percent. For the rest of us, it’s the same old bottom to top income redistribution scheme — only more so:

How Romney would tax us (via: azspot)

While Romney would make these two groups — the poorest 125 million Americans — pay higher taxes, the top 60 percent all would get tax cuts. The top tenth of one percent would save, on average, $464,000 a year, the Tax Policy Center’s analysis says.

His plan gives one third of his tax cuts to the top tenth of one percent of taxpayers. By comparison, Bush gave this group only one eighth of his cuts.

Romney would also eliminate estate and gift taxes, a policy that I believe would damage the spirit of striving that has served us so well until now, replacing it with a new era of dynastic wealth.

Continue…

Can you imagine? Romney and the GOP might as well just say, “Let them eat austerity.” What an outrage.

Capital gains and earned income: tax it all according to the same rate schedule

“Treat all income the same. Tax it all according to the same rate schedule. A dollar is a dollar, whether you got it from your labor or your inheritance or your hedge-fund fees or your stock sales. It isn’t the only thing we could do to improve the tax code, but it would be the most transformative, and it expresses a principle that few would be able to argue against. [..] I’d like to see Mitt Romney—and any Republican, for that matter—be forced to answer this question: Why should investment income be taxed at a lower rate than income people work for?” — Beyond the Buffett Rule (via ryking)

Tell me why this weird, awkward, robotic multi-millionaire, singing “America the Beautiful” Bill-Murray-lounge-style in the video below, should pay a lower tax rate than average working and middle class Americans? And if you’re a GOP base voter whose knee-jerk reaction is to defend the idea that millionaires should pay less tax, but you’re not — and, unless you win the lottery, will never be — a millionaire yourself, please describe the methods by which the Republican Party brain-washed you. It’s really important we understand what happened, for the survival of future generations.

It will never stop unless we make it stop:

Romney’s New Loophole For The Rich – The former Bain executive has pledged to eliminate capital gains taxes for households with income under $200,000. Roberton Williams explains how this would work in reality:

Nearly 80 percent of households already pay no tax on gains and dividends—either because they have no investment income or because they’re in the 15-percent tax bracket or below. This cut—about $40 billion in 2015—can only help the remaining 20 percent. Not surprisingly, the bulk of benefits go to high-income households. And, because the threshold would apply only to non-gains and non-dividend income, households in the top 1 percent would get nearly a tenth of the tax savings.

Wealth inequality is a threat to Capitalism: Obama is right, Romney is wrong

The GOP and Mitt Romney are rabidly defending his wealth, and the wealth of the one percenters. President Obama (and, incidentally, the Occupy Wall Street protesters) are trying to educate the nation on the reality of our wealth inequality. It comes down to TAX LAWS which favor the wealthy and place the burden of our nation’s treasury on the shoulders of the working and middle class. Less money in the treasury, by the way, then places additional burdens on the poor, working, and middle classes because there will be austerity: cuts to government programs and services.

State of the Union 2012: Barack Obama is right — wealth inequality is a threat to capitalism: Jonathan Kay

Income inequality in the United States now stands at its highest rate since the Great Depression. At Occupy protests and in activist circles, this fact usually is cast as a social justice issue, which is why too many conservatives snidely dismiss it. In fact, free market capitalists are the ones who should be most concerned about inequality. A mass market consumer economy cannot function when earners cluster at the poles: Poor people buy very little, and wealthy people spend only a small fraction of their income on retail goods and services. The income of America’s middle class — the people who fuel the retail economy — has been stagnant, in real terms, for three decades.

[...] Why are Republicans and their supporters so out of touch with economic reality? The conventional explanation is class mobility: Americans, including poor Americans, refuse to soak the rich because they believe they’ll be rich one day, too. And there likely is some truth to this, despite the fact that economic mobility is now lower in the United States than it is in Canada and many European nations.

But I’d say an even better explanation is: Americans’ pure, undiluted ignorance about how unequal their society has become.

In recent years, a Harvard business professor named Michael Norton has been surveying Americans about wealth distribution in America, comparing their perceptions with fact. The reality in the United States is that the richest fifth of the population controls about 85% of the country’s wealth (while the poorest fifth controls about 0%). But when Norton’s survey respondents were asked to state the share of wealth that they believed was controlled by the richest fifth of Americans, the number they came up with was closer to 60%. Even more tellingly, when Norton asked survey respondents what would be the ideal percentage of wealth that should be controlled by the richest fifth, the average figure reported was only 35% — a full fifty points below the 85% reality.

“The closer countries to what our respondents wanted [America to look like] are countries that are amusingly dissimilar to us, such as countries like Sweden,” Norton told an interviewer. “And I should say, the other thing that we found is not just that people think things should be fairer in some sense than they are, but that there’s wide agreement about that. So if we look at very rich people and very poor people, or if we look at Republicans and Democrats, all of these groups think that wealth should be more equally distributed when we asked them these questions than it actually is.”

leftish: JON STEWART:  It might be nice if Romney thought his TAX RATE was WRONG!

Related: 

Mitt’s tax returns and the politics of envy (we’re all envious about his effective tax rate)

Pages and pages are devoted to foreign entities in which Romney is invested. Many are located in places like Luxembourg, Ireland and the Cayman Islands, all famous tax havens. None shows much income. “These entities are not evading one dime of taxes.” — Brad Malt, Romney’s trustee

“I will not apologize for success.” The Huffington Post

Bowing to increasing political pressure to provide more detail about his vast wealth, the former private equity executive released tax returns indicating he and his wife, Ann, paid an effective tax rate of 13.9 percent in 2010. They expect to pay a 15.4 percent rate when they file their returns for 2011.

Wow, his taxes will GO UP from 13.9 percent to 15.4 percent? No wonder Mitt wants even more tax cuts for the wealthy / himself. If he paid 13.9 percent in 2010, I wonder what effective tax rate he paid in prior years…

Romney’s tax rate is below that of most wage-earning Americans because most of his income, as outlined in more than 500 pages of tax documents, flows from capital gains on investments.

Under the U.S. tax code, capital gains are taxed at 15 percent, compared with a top tax rate of 35 percent for wage earners.

Wage earners are disposable plebeians. That’s why we pay a higher effective tax rate on our incomes.

[...] Romney’s campaign officials stressed that his tax rate is based mostly on income from investments that are held in a blind trust. Romney’s holdings include an undisclosed amount in funds based in the Grand Cayman Islands and other overseas entities.

Romney advisers stressed that the holdings in the Caymans – along with those in a Swiss bank account that was closed in 2010 after an investment adviser decided it could be politically embarrassing to Romney – were reported on tax returns and were not vehicles to avoid taxes.

Sure. Of course that has to be SAID. We’ll never know, one way or the other. Can you imagine how many “Romneybot, Inc.” accountants, campaign managers, and public relations personnel worked 24/7 to give us the return that was released today?

They also stressed that Romney, whose holdings are in three blind trusts, makes no decisions as to how his money is invested.

Hahaha, you see? Mitt doesn’t know how his $250 million is managed or in which foreign accounts in the Caymans and Switzerland it’s hidden! He just spends it! Trust him.

What’s a Blind trust? It’s a trust in which the fiduciaries, namely the trustees or those who have been given power of attorney, have full discretion over the assets, and the trust beneficiaries have no knowledge of the holdings of the trust and no right to intervene in their handling. Blind trusts are generally used when a settlor (sometimes called a trustor or donor) wishes to keep the beneficiary unaware of the specific assets in the trust, such as to avoid conflict of interest between the beneficiary and the investments. Politicians or others in sensitive positions often place their personal assets (including investment income) into blind trusts, to avoid public scrutiny and accusations of conflicts of interest when they direct government funds to the private sector. — Wikipedia

Billionaire investor Warren Buffett, who is calling for raising taxes on high-income Americans, said he blames Congress, not Romney, for the governor’s tax rate. “It’s the wrong policy to have,” Buffett told Bloomberg Television’s Betty Liu in an interview yesterday. “He’s not going to pay more than the law requires, and I don’t fault him for that in the least. But I do fault a law that allows him and me earning enormous sums to pay overall federal taxes at a rate that’s about half what the average person in my office pays.” —  Warren Buffett speaking about capital gains tax rates vs. earned income tax rates

Related: 

Reagan’s Tax Reform Act: the only time there was fair taxation between capital gains and earned income

Source: ThinkProgess / NYTimes

Today’s Republican Party would never go for this type of ‘income redistribution’ socialism! It lasted only two years though: 1988 – 1990. What’s that tell you?