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I'm not going to tell people what morality is and what it isn't. It really bugs me when people try to classify other people’s behavior as being moral or not.  But what bugs me even more is when a group that has taken the moral high ground on specific issues is silent about other really big moral issues.  I’m talking about the morality of our tax code.

There are a lot of different moral codes out there, and many of them look down on gambling and sloth.  It’s not universal, but a lot of Americans consider gambling and the “ill gotten gains” it creates as being less favorable than money earned through hard work and toil.  Case in point, can you think of any real successful politicians who say that their profession is Roulette?

Now think about sloth, one of the seven deadly sins.  Probably not as big of a deal these days as it once was, but the idea of sitting around, doing nothing, and leaching off the hard work of others is still considered morally “grey”.  Applying our politician test, imagine a politician that proudly announced that he simply lives off the hard work of his parents in their basement.  Would he have any chance of getting elected?

Next, think about our tax code.  If you go to work every day, punch a clock and DO SOMETHING for your job, chances are your income will be taxed at a progressive rate.  Now, setting aside the moral discussion of progressive tax rates (the topic of another diary), let’s think about someone else that makes their money off of capital gains.  They’ve taken some of their money and invested it in an asset like stocks, bonds or real estate. They took a big risk with that money, but it paid off and now their sitting on a pile of money.  Now, unlike you, that person gets taxed at the low 15% capital gains rate.  Sound moral?

If we apply our moral code against gambling and sloth, capital gains are certainly in the same category.  Without much effort, they’ve let their asset appreciate and reaped its rewards.  Sure, there was some effort involved in picking the right stock, knowing the best time to buy and sell.  Or if their capital asset was some property, they may have even worked hard to find, buy and maintain it.  And sure, they took a big risk when they gambled with their own money.  Now that they’ve succeeded, they’re about to be rewarded by a lower tax rate than if they would have punched a clock and worked each day for that money.

And what’s the punchline?  The political party that seems to be the most obsessed with “moral” issues doesn’t seem to see farther than the bedroom.  Republicans are fixated on contraception, abortion and same sex marriage.  But what’s their stance on gambling and sloth?  Reward the job creators with tax breaks!

Now before the flames start, let me be clear that I’m not saying making money off of capital gains is illegal or immoral.  Investment in our economy is crucial to its growth and function.  And although gambling is illegal in many places in the US, if we were to categorize any time we took a big risk as being immoral, we couldn’t even cross the street.  But what I’m saying is imagine a world where capital gains are taxed with a “sin tax” like cigarettes and alcohol instead of being rewarded.  Quite a different world...

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Comment Preferences

  •  But you don't need the moral argument (1+ / 0-)
    Recommended by:
    Louisiana 1976

    Wealth stratification is bad for the economy. Tax policy should be based on what's best for the economy, which is investment in a strong middle class. Unfortunately it's based on what's best for campaign contributions which is investing in billionaires who know how to grease the wheels.

  •  A 15% rate on capital gains is neither (2+ / 0-)
    Recommended by:
    SquirrelWhisperer, VClib

    moral nor immoral.  

    Tax policy is designed, first of all, to raise the needed revenue so our government can operate.  When decided how to structure taxes, legislators take into account that, as a general matter, taxing something more discourages it, taxing something less encourages it.  

    The 15% rate for long-term capital gains was put in place so as to encourage long-term investment.  Long term investment that yields capital gains is riskier than other investments, like putting the money in a bank and getting interest.  In the case of a bank, the risk of losing your initial investment is very low, but the rewards are correspondingly low.  With investment, the risk of losing everything -- even what you put in -- is much higher, but the potential for earnings on your money is also higher.  Legislators determined that, if there is a high tax rate on what your earnings from long-term investment on top of the risk, that made the reward less enticing (since you'd get far less of the gain) and thus it was less likely you'd make that investment.  That's neither a moral nor an immoral analysis.  It was simply a matter economics, in the sense that lowering taxes increases the activity subject to the tax, higher taxes (because it makes it more expensive) decreases the activity.

    Similarly, any time legislators decide that encouraging long-term investment is no longer a desirable goal, or that it should give way to other concerns, legislators can raise the tax on capital gains.  Again, that is neither moral nor immoral.  

  •  the tax code is neither moral or immoral, (1+ / 0-)
    Recommended by:

    it just is. attempting to imbue it with characteristics which are simply human constructs is a waste of time, time better spent debating which aspects of the code serve a legitimate public purpose. and i guarantee you, for every section you decide doesn't, there will be a choir arguing the opposite.

    with respect to the "max tax" on capital gains, i've been arguing this for years, and have yet to be convinced that, absent this special rate, no one would ever invest. hogwash! what are they going to do, stuff all their spare cash in their mattress? probably not. that said, there is a flock of very well paid lobbyists, with smooth, velvet baritone voices, who will convince congress that the break is needed, else all that venture capital will go elsewhere, like, oh, i don't know, the eden-like paradise of syria maybe.

    ok, i made that last part up.

  •  i have a better code section for you to be all (0+ / 0-)

    excised over: Sect. 616.

    this is the section of the code that allows the extraction industry (oil, gas, mining) to deduct, as expenses of the period, start-up costs that normally would be required to be amortized over 5 years, from the date the well/mine goes into commercial production. this can be millions of dollars, per well/mine. and that's at the normal marginal rate (35% for corps.). then there's % vs cost depletion. but really, the big issue right now is transfer pricing, with literally billions of dollars of tax revenues at stake.

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