Wednesday, January 25, 2012
The Economist: 'America's rich should pay more'
The Economist magazine has a balanced editorial about how and why the rich like Mitt and Warren Buffett should pay more in taxes. Thankfully, it doesn't embrace either President Obama's or Republicans' approaches.
Basically, the magazine suggests holding current income tax rates at current levels, closing loopholes, eliminating complexity and getting rid of provisions that only people like Mitt and Warren can take advantage of when filing taxes. The editorial doesn't quite come out and say what loopholes need to be addressed, but they should include the one that lets venture capitalists, hedge fund managers and other financiers to define their "incomes" as a form of "capital gains," allowing them to pay far lower tax rates than the average American taxpayer. See the post below. Somehow, the financiers have convinced Congress and the IRS that their carried over "fees" are actually a form of "capital gains," even though the gains were made on the backs of other people's and institution's investment money. This is why the argument that they're only investing their "own money" -- and thus deserve to keep the benefits of that earned money via lower capital-gains taxes -- is so bogus. They don't and didn't make their fortunes off of their own money. They made it off of others' money -- and yet get to reap the capital-gains tax benefits. It's legal. But it's wrong and unfair.
Shakespeare once said a rose is still a rose by any other name. The same applies to income: Income is still income by any other name. The issue here isn't so much legitimate capital gains. It's about who gets to claim "capital gains."
FYI: A good case could be made that Mitt, as a technically retired individual, can and should claim capital gains on past earnings. But here's the problem: When at Bain, did he pay taxes at the lower capital-gains rate or at the higher income-tax rate? Is he still receiving money from Bain and paying taxes at the lower capital-gains level? Warren Buffett, who's still working full time, says he's paying the lower capital-gains rate.
The Economist magazine has a balanced editorial about how and why the rich like Mitt and Warren Buffett should pay more in taxes. Thankfully, it doesn't embrace either President Obama's or Republicans' approaches.
Basically, the magazine suggests holding current income tax rates at current levels, closing loopholes, eliminating complexity and getting rid of provisions that only people like Mitt and Warren can take advantage of when filing taxes. The editorial doesn't quite come out and say what loopholes need to be addressed, but they should include the one that lets venture capitalists, hedge fund managers and other financiers to define their "incomes" as a form of "capital gains," allowing them to pay far lower tax rates than the average American taxpayer. See the post below. Somehow, the financiers have convinced Congress and the IRS that their carried over "fees" are actually a form of "capital gains," even though the gains were made on the backs of other people's and institution's investment money. This is why the argument that they're only investing their "own money" -- and thus deserve to keep the benefits of that earned money via lower capital-gains taxes -- is so bogus. They don't and didn't make their fortunes off of their own money. They made it off of others' money -- and yet get to reap the capital-gains tax benefits. It's legal. But it's wrong and unfair.
Shakespeare once said a rose is still a rose by any other name. The same applies to income: Income is still income by any other name. The issue here isn't so much legitimate capital gains. It's about who gets to claim "capital gains."
FYI: A good case could be made that Mitt, as a technically retired individual, can and should claim capital gains on past earnings. But here's the problem: When at Bain, did he pay taxes at the lower capital-gains rate or at the higher income-tax rate? Is he still receiving money from Bain and paying taxes at the lower capital-gains level? Warren Buffett, who's still working full time, says he's paying the lower capital-gains rate.
