Fox & Friends fruitcake watch: Media Matters reports a striking exchange from this morning’s Fox & Friends. The gang was discussing the fact that upper-end earners pay a very low tax rate on their capital gains.
Warren Buffett has said that’s unfair. Brian and Gretchen were pretty sure that Buffett’s analysis is deceptive. Such judgments involve us in apples and oranges, the latter tool thoughtfully said:
KILMEADE (9/19/11): And then the biggest story, I think, is the Warren Buffett rule, which you're about to hear is somewhat deceptive. It is not that billionaires are paying less. It's just that—they're still paying their 35 percent. It's the capital gains is which their—“It is not that billionaires are paying less,” Brian endearingly said, speaking about a situation in which billionaires are paying less.
KILMEADE: —and the investment money, is which they're being taxed 15 percent on.
CARLSON: The analogy that Warren Buffet always makes is that, why should my secretary pay more taxes than I do? But that's not really a fair comparison. Because he's talking about what he pays—the tax on his capital gains. He makes most of his money on investment income. Right now that's at 15 percent. So really, it's comparing apples and oranges, not the income that you're going out and making on a daily basis when you go to work.
This whole thing is apples and oranges, Gretchen mused. Later, she repeated her fruity analysis while chatting with Michelle Malkin.
Chelsea Rudman provided a service when she recorded this ludicrous chatter for Media Matters. We will disagree with Rudman on one basic point, however:
“The fact is, there is nothing ‘apples and oranges’ about comparing the two kinds of income,” Rudman writes. “They're both income, period.”
Not so fast, One World Breath! In our view, there is an obvious apples-to-oranges aspect to these two kinds of income. Even Carlson seems aware of this fact. To wit:
As even Carlson is able to note, people have to go out and work for their regular income. Police officers and firefighters risk their lives on a daily basis to receive those wages! In some cases, they may have to pay taxes at a higher rate than others pay on investment income—on income they acquire while sitting around doing nothing.
In that recent Washington Post editorial, the editors said all income should be taxed at the same rate (see item below). People can judge that opinion as they like. But as a simple matter of justice, it’s hard to see why you’d want to tax investment income at a lower rate, while you’re charging a higher rate on the labor-based income of policemen, teachers, firefighters.
There really are apples and oranges here. It’s just that Carlson, in her typical way, feels the pain of the idle rich while ignoring the labor and effort of people who are less wealthy.
Chelsea Rudman made a nice catch. But there really are different kinds of fruit in that federal tax barrel. Right now, federal law favors the rich pomegranate over those loathsome crabapples.
The law, in its majestic equality, permits the rich as well as the poor to pay 15 percent tax on capital gains.ReplyDelete
That's what defenders say, too. The other justification they trot out is that it's fair, because if someone is clipped @ 35% on his wages, he should get a break when he invests those wages.ReplyDelete
Problem with that is that the average guy would be better off losing that money to capital gains tax, if it saved him on the income tax earned throughout his lifetime.
There are some arcane economic reasons having to do with the time value of money for taxing capital gains at lower rates and that's why we do. But yes, the question, why is income earned by digging a ditch, or teaching a child, or even curing us of disease taxed at a higher rate than income that generated by a couple of phone calls to a broker, isn't asked nearly enough.ReplyDelete
Capital gains present different problems than ordinary income. Part of the gain from the sale may be due to inflation. If I sell an asset today for $200 that I bought for $100 in 1970 should I have to pay ordinary rates? The other problem is that capital gains tax goes away on assets held until death. A higher rate encourages people to hold onto assets so they pay no tax when they die. Sometimes it is best to encourage people to sell their assets and reinvest them in something more suitable for their needs.ReplyDelete
The above doesn't mean that capital gains rate shouldn't be changed but there are some complications in it.
About half of all capital gains goes to the top 1% of the population who own large quantities of assets and have them appreciate in value. There may be risk, but the gains can be huge. This top 1% also gets to influence economic policy no matter who controls the White House and Congress.ReplyDelete
Any argument put forth that includes the phrase "comparing apples and oranges" should be ignored. Especially when coming from those adorable spokesmodels on cable.
1. Capital Gains have been taxed at a lower rate than ordinary income for as long as I can remember. IMHO it is apples and oranges, if only for historical reasons.ReplyDelete
2. If Obama thinks Capital Gains should be taxed at the same rate, he should propose that change for everyone, not just for millionairess.
3. As was pointed out, capital gains on assets like homes are primarily inflation. Capital Gains on corporate stock is mostly due to retained after-tax earnings. These earnings have already been taxed once, so it's arguably unfair to tax them again at the full rate.
There's no rule that you can't tax the same money twice. When I go buy underwear at T.J. Maxx, with my already-been-taxed wages, I still have to pay sales tax on my purchase.ReplyDelete
Another one of these memes is never challenged by Democrats is that raising the tax on the rich penalizes 'the job creators'.ReplyDelete
The "class war" idiots also tend to ignore payroll taxes.ReplyDelete
I don't believe the current regressive tax system is being openly supported by anyone. Even Adam Smith recognized the need for progressive taxes, meaning the wealthy should pay not in proportion to their wealth, but more than in proportion. I guess he was a socialist.
While this is off-topic for this thread, I thought that Bob (and others) might be interested in this post. It discusses the Tea Party and racial resentment:ReplyDelete
Let's see, Bob is not making his presence felt in commentary and anonymity abounds--why participate? Fuck people, how hard is it to pick a moniker.ReplyDelete
The divide between capital gains tax and income tax reflects the fundamental divide in modern capitalist economies, that between capital and labor. Some people work for a living, other people own for a living. The owning class usually deludes themselves into thinking that their act of owning is so useful, so difficult, and so much morally superior to working that they use their money to convince politicians to give them special breaks.ReplyDelete
And, of course, they have their own subservient media organizations to convince the workers that they deserve these special favors.
Deep down inside the owning class knows it doesn't deserve what it has, and this knowledge manifests itself in both developing an idiotic philosophy to justify their wealth (see Rand, Ayn) and a fear that everyone will figure out their game and eventually rebel against them. One way to keep the latter from happening is to keep people blind and dumb.
So usually the fact that they're paying so little in taxes on the money gained from ownership just goes unmentioned as people debate the various income tax rates, sales tax rates, payroll tax holidays, etc. It's interesting that Fox brought up the topic willingly, but I'm guessing they don't worry about their rubes joining the socialist revolution any time soon.
--*[A]s a simple matter of justice, it’s hard to see why you’d want to tax investment income at a lower rate, while you’re charging a higher rate on the labor-based income of policemen, teachers, firefighters.*--ReplyDelete
As a simple matter of justice, it is hard to see why policemen, teachers, and firefighters are required to pay more than 15% of their incomes to the federal government. In fact, it's hard to see why that federal gun is pointed at their heads at all.
I mean, in a free country.
The Capital Gains issue is conflates with the dividend issue and they aren't anything like the same thing. One can sort of argue that dividends from a Corp. Has already been taxed and should be hit with a lower tax but not capital gains.ReplyDelete
No one pays tax twice on capital gains since the basis or price you paid isn't taxed when you sell the stock. The gain is taxed only if you sell the stock and there are ways to pass on the stock gains without paying any tax. There is no double taxation on capital gains and sometimes there isn't tax at all.
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