Barack Obama has a surprising new plan to turn back income inequality! He gets it. Whatever you thought till now, whatever you hear others say, the man is handing you a torch to carry, if you will.
Tonight, the President will announce a remedy that goes straight to the root of the income inequality problem. A privileged wealthy few, with influence and power that accrues with capital, enjoy unfair advantages that guarantee social status for them, and their heirs, for generations. The United States started out with a revolution against an entrenched aristocracy and the struggle continues. The only people who lose are those who give up.
What President Obama proposes:
- Raise the tax rate on long-term capital gains and qualifying dividends from 23.8% to 28%, applied to the highest incomes. Raising the rate would bring it closer to the tax rate on income from work.
- The big deal is a tax on capital gains at death, rather than allow them to pass tax-free to heirs. Under current law, assets aren't taxed as long as they're held. When an asset is sold, the gain (sales proceeds minus cost) is subject to taxation. When the owner of an asset dies, and the asset transfers to an heir or beneficiary, the cost basis is reset to the asset's value at the time of transfer. The new owner's tax liability is limited to appreciation after the transfer. Prior appreciation during the original owner's lifetime is never taxed. It's a big bucks advantage enjoyed by a few. There's a complete explanation about this 'loophole' at the Tax Policy Center.
There will be objections. There will be fuss. I wouldn't be surprised to hear tales of woe. This is predictable. It has all been heard before:
- The new taxes on capital gains will wreck the economy because job creators. My answer to this is a quote from Lincoln, "Labor precedes capital."
- Capital gains are special in a way that only business owners understand because they meet payroll. That one calls for a chorus of "I Built It (with my own two workin' hands.)"
- Taxing capital gains is so unfair because double taxed, or because risk, or because losses. Boo hoo.
- Taxing capital gains includes a tax on inflation. So?
- Cutting capital gains tax brings in more revenue. It's an Article of Faith.
- Fiat money makes taxation obsolete. Just turn on the money spigot at the Fed or the Treasury or wherever it is and prosperity will reign.
- Thomas Jefferson cut the capital gains tax and the United States doubled in size. You get the idea . . .