You are viewing the NationofChange archives. For the latest news and actions, visit the new
Get Email Updates | Log In | Register

Article image
Robert Reich
NationofChange / Op-Ed
Published: Thursday 15 November 2012
Capital gains should be taxed the same as ordinary income.

The President’s Opening Bid on the Grand Bargain (III): The Difference Between “Broadening the Tax Base” and Raising Taxes on the Rich

Article image

The President says he wants $1.6 trillion in tax hikes. Republicans say they won’t raise tax rates but might be willing to close some loopholes and limit some deductions and tax credits. Is compromise in the air?

Not a chance. True enough, such “base broadening,” as Republicans like to call it, could conceivably generate $1.6 trillion in additional tax revenues over the next decade.

But, wait. Didn’t the President just win a second term? The major issue decided in last week’s election was that the rich should pay more. So, presumably, that $1.6 trillion should come out of the pockets of the wealthiest Americans.

“Broadening the base” has nothing whatever to do with the rich paying more. That’s because a lot of tax credits and deductions help the middle class and the poor.

If we end the Earned Income Tax Credit, for example, some of the poorest Americans will end up sacrificing. That tab was $63 billion last year.

Or if the “loophole” is tax-free employee health care, or the home mortgage tax deduction, or tax-deferred 401K accounts, most of the added tax revenues will come out of the pockets of the middle class.

So when Republicans talk about “broadening the base,” watch your wallets. Now that the President has set his goal on $1.6 trillion in additional taxes, the question is whether the rich are going to cough up $1.6 trillion more.

There’s no way that $1.6 trillion can come out of the pockets of the wealthy merely by capping the deductions the wealthy take advantage of.

If Republicans won’t budge on raising tax rates but insist on broadening the base, Democrats should take aim at the biggest tax loophole of all for America’s wealthy: the preference for capital gains.

Capital gains are now taxed at only 15 percent (the major reason Mitt Romney pays a rate of under 14 percent on over $20 million of annual income). Capital gains should be taxed the same as ordinary income. That way, under a progressive tax system, the wealthy would pay far more — on the way to $1.6 trillion.

This article was originally posted on Robert Reich's blog.

Author pic
ABOUT Robert Reich


ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at Robert Reich's new film, "Inequality for All" is available on DVD
and blu-ray, and on Netflix in February.

Some good posts about the tax

Some good posts about the tax cuts for the rich. I think they should actually raise the taxes on the rich and not just do away with the tax cuts. I think over 10 years is long enough to see how it worked to bring jobs from the 'job creators.' So where is the jobs?

I think the people that are benefiting the most from our political/economic system should be the ones paying for the system by which they benefit. Why should the people struggling to get by pay for the privilege of struggling to get by?

Many Republicans want cuts to

Many Republicans want cuts to what they call entitlement programs mentioning Social Security as one of them to lower the deficit. House Speaker John Boehner is one leading the push for the cuts. It is pretty scary when we have leaders in our government that are making decisions that affect our daily lives that don’t even know how Social Security works.

“Social Security has nothing to do with the deficit. Social Security is totally funded by the payroll tax levied on employer and employee. If you reduce the outflow of Social Security, that money would not go into the general fund to reduce the deficit.”—Ronald Reagan, October 7, 1984 (quoted by Sen. Bernie Sanders on Democracy Now)

The fact is Social Security brings in more money than it pays out. In 2011 the government received $819 billion which was 36% of the federal income and paid out $725 Billion that was 20% of the budget. Since people that make over the required amount don’t have to pay into Social Security so it is the lower wage earners that pay the cost. Although part of the Social Security for some workers is paid by their employers that is still part of the workers wage package in which they have earned from their labor.

What is also obscene is the wage earners in 2011 paid $1,092 billion in income tax which is another 47% or the federal income that alone with the S.S. they pay is 83% of the Federal Income while the corporations that are the only ones benefiting from the economic recovery only paid $181 billion or only a miserly 8% of the federal income.

“In their newly released study, the Northeastern economists found that since the recovery began in June 2009 following a deep 18-month recession, 'corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent' of that growth.”

So now that the corporations and the 1% rich get most of our GDP, in which we are number one in the world, why haven’t the honest, hard working people seen any of this? The workers get far less services and benefits from the taxes they pay than any other industrialized nation in the world, and they want to cut us back even more.

So how come the corporations have more power and receive more money than the majority of Americans that are wage earners? The answer is simple: after our taxes, mortgage or rent, food, and all the expenses of providing for our families we have nothing left. But the corporations have plenty left to contribute billions to political campaigns and lobbyist. We used to have organizations that advocated on our behalf that were called unions and over 60% of the American workers were in unions but now only 7% are in unions and we really have nobody advocating on our behalf with any power anymore.


Jerry Mercks's picture

The top tax rates were, at

The top tax rates were, at one time, 90%. That wasn't necessarily to punish the rich. It was an incentive to reinvest their wealth. That was good for the country. As it is now the rich simply pay their paltry 14% tax and keep the rest. It ends up in offshore tax evading accounts. There is no incentive for reinvesting in business.

Raise the top rate to at least 50% to encourage reinvesting in American businesses. Make capital gains tax the same as income from labor.

To make Social Security solvent for the next 75 years increase the cap to $250,000.00.

The Medicare Part D program was the brainchild of the repubs. Make them come up with a way to pay for it. Repubs never pay for anything. Part D, the Iraq and Afghanistan wars, and the bush tax cuts were all unfunded. I just love the way the party that calls themselves 'fiscal conservatives' never pay for anything. While you're at it, give Medicare the ability to negotiate drug prices just like insurance companies do.

Why should luxuries be eligible for tax deductions? Yachts, private planes, and dancing horses are all luxuries. No tax deductions for luxuries.

These would be a good starting point in the opinion of someone that is not an economists.

Income is income, No matter

Income is income, No matter where it came from. Capitol Gains should be taxed just like any other income.

I agree with the suggestion

I agree with the suggestion by a few that CapGains be taxed the same as income. On top of that, set a limited number of income tax rates, but with much higher rates at the top end, to bring back the excessive profits by banksters and Private Equity vultures. And, abolish preferential treatment for carried interest.

By this formula, the incentives to become greedy SOB PE vultures are substantially reduced. If you sucked a million out of a company, you would pay the full and substantial tax rate on that million as income.

Thank you for finally saying

Thank you for finally saying it! The words CAPITAL GAINS seem conspicuously absent, even taboo, in the politico-economic conversation! Why not take the money you would get by raising that rate from 15 to 20% and use it to help small businesses, or if you prefer some other important work such as paying down the deficit. Such a move would barely be felt by the poor and lower middle class, falling, appropriately, on the back of those who have enough to let their money just sit and "earn" unearned income. I totally agree with MICKEYB59, who put it very well.

If anyone tells you that

If anyone tells you that Obama did not win a mandate, remind them that, in addition to the more than 330 electoral votes Obama received, the GOP LOST at least 7 seats in the house, and LOST 3 seats in the senate.

Considering that there were far fewer GOP house seats (than Dem) at stake in the election, the GOP got its collective clock cleaned!

This is the watershed moment

This is the watershed moment for President Obama. Elected to a second term by wary progressives who, in many instances, simply feared Romney worse. The tax cuts were "agreed" upon in '01 and '03, by everyone connected to the decision, to end in'10. The President could of, and should of, ended them right then and there.
His capitulation simply emboldened Conservatives to believe they could extend their pilfering ways indefinitely. We've had nearly "ten years" of a massive transfer of wealth from the poor and working class to the upper stratum of society. If this action was intended to create jobs it would have done so long ago. Reagan/Friedman economics only work for one class. They knew that back in '80 and the "myth" of "trickle down" still inundates us with its fetid waters.

It's hard to fathom how

It's hard to fathom how something that trickles down can inundate anything larger than a pea sized brain. Maybe that fetid smell is a stream of piss.

Judging from the tone of your

Judging from the tone of your response you're in favor of keeping the Bush tax cuts exactly where they are. My point was that the cuts were originally a "temporary" measure designed to stimulate the economy and that the signatories "agreed" that they would end in 2010. Obama then compromised and the cuts were extended. All that is "fact." It's also a fact, proven for thirty plus years and in a number of countries, that "trickle down economics" favor the wealthy by a disproportionate scale. If you've a point to make, other than quasi- derogatory superciliousness, then make it. Otherwise, contemplate the substantiality of a "pea sized brain."

Whoa,Woe. Don't judge a book

Whoa,Woe. Don't judge a book by its cover. My point is that trickle down economics only makes sense to the ideologically impaired (pea sized) brain and that it's the 1% that's pissing on the rest of us. Sorry to seem supercilious, but I couldn't resist playing off your text.

SUNFLOWERBIO, My apologies

SUNFLOWERBIO, My apologies for the misinterpretation. Battling serious health problems myself has left me rather "judgmentally impatient" at times when I shouldn't be. Just so goddamned sick of the Conservatives and the rapacious bastards they continually champion. Please forgive me. Your (original point) is well taken IMHO.

Apology accepted and no

Apology accepted and no offense taken. Sorry to learn about your health problems. I fully understand how stressful that can be and how it can affect one's perception. I have enjoyed your comments on many other issues and almost always agree. Hang in there and don't let the bastards get to you. Regards, Sunflowerbio

The President has a clear

The President has a clear mandate. That mandate is to restore tax rates on the wealthy to the levels they were before the Bush tax cuts. And polls show the American people favor this action.

One of the reasons the Republicans were soundly defeated, despite the money they spent on election misinformation, is because the American people are tired of Republican obstructionism.

Wake up Republicans! The American people sent you a clear message. Abandon the Grover Norquist pledge so you can do what the people want.

Repeal tax cuts for the rich.

Repeal tax cuts for the rich. Increase the capital gains tax to 20%. Aggressively pursue offshored (untaxed) wealth. Increase ceiling on social security withholding, no benefit reduction. Reduce defense and homeland security spending 5%. Shave 1% to 2% from other discretionary in part by progressive adjustment of government-employee salaries (ie the highly paid take a small cut, the low-paid take no cut). Credits for USA mfg equipment investment, and to small biz for hiring, penalties to big biz for outsourcing. Increase investment in energy efficiency and renewables.

The piece about changing the

The piece about changing the capital gains tax seems like a great place to start. No single piece of the tax code more clearly illustrates the way the code is skewed in the favor of the rich. The most valuable thing we all have is our time on earth. When you tax the income people make from their labor at a higher rate than the income from their investment, you're giving capital a higher value than human life and labor. You also increase the odds of creating the kind of vast income disparities we see today. Even though I've benefited from the current tax levels because of investments, I think the first fair thing to do is tax capital gains the same as any other income.

The 1% still thinks it is in

The 1% still thinks it is in control of the government through Boehner & Co. We the PEOPLE have soundly defeated their medieval agenda at total bewilderment of Rove & Co., despite their epic spending. If they do not do what the people want, all Mr. O. has to do is to call on his supporters to telephone their congressmen/women. Give the people each of their telephone numbers and dates to call: A-E on Mondays, F-J on Tuesdays, etc. Let the 1% stand that pressure..... It is not longer the unquestioned obedience to the dictates of the 1%. The 99% has the force of the numbers. All they need is organization. The president can provide that.....

Don't count on "Mr. O." doing

Don't count on "Mr. O." doing any of that. He could have done all that during term I, but didn't. Expect him to again try to "make nice" with the Republican thugs and delude himself that a grand bipartisan "kumbaya" moment is still possible, then roll over and cave in to just about every one of the troglodytes' demands. Why do I think that? Because "Mr. O." proved during term I that that's the way he does things.

"But, wait. Didn’t the

"But, wait. Didn’t the President just win a second term? The major issue decided in last week’s election was that the rich should pay more. So, presumably, that $1.6 trillion should come out of the pockets of the wealthiest Americans."

He was just re-elected President, not crowned King. The election didn't decide any issues. What an absurd comment.

That's not the point you

That's not the point you idiot. Since whether the wealthy should pay more in taxes was the main issue of this election, and the "yes" side won handily, the expressed will of the American electorate, not your "King" Barak, is that the wealthy must pay more. The "absurdity" here is your failure to understand that.

What do the people want? That

What do the people want? That should be the question.

Every polls show a huge majority of the American people want the Bush tax cuts for the wealthy to expire. The elected are elected to do the wishes of the people.

Obama didn't win because the people wanted him to go along with Grover Norquist. Think you lost the last election? Just wait. The people are sick to death of you Republicans.

If we're going to broaden the

If we're going to broaden the base, let's start including carbon taxes to pay for keeping oil shipping lanes open in the middle east, and make corporations start paying a fair share of taxes. Yeah, some of the costs will trickle down to consumers, but tax breaks to the wealthy certainly haven't trickled down...

Comment with your Facebook account

Comment with your Disqus account

Top Stories

comments powered by Disqus

NationofChange works to educate, inform, and fight power with people, corruption with community.

If you would like to stay up to date with the best in independent, filter-free journalism, updates on upcoming events to attend, and more, enter your email below:

7 Compelling Reasons Why You Should Support NationofChange

Our readers often tell us why they’ve decided to step up and become supporters. Here are some of the top reasons people are giving.

1. You’re keeping independent journalism alive
The corporate owned media has proven that it can’t be trusted. In a media landscape wrought with spin and corruption, NationofChange stands in very scarce company.

2. You’re sticking it to the rich, powerful, and corrupt
When you have money in this country you can get away with damn near anything, and they do. NationofChange isn’t afraid to expose these criminals no matter how powerful they are.

3. Your donation is 100% tax-deductible
NationofChange is a 501(c)3 charity. People tend to assume that many other organizations are (most nonprofits are NOT) but it’s that 501(c)3 status is a bit more rare than you think.

Read the rest...