Skip to main content

Weren't "good" economies the reason for lowering taxes in the past? So if the economy is "bad" now, shouldn't we raise them?

As the March 1st deadline approaches for a budget sequester, a new Pew Research survey finds that the majority of Americans don't want spending cuts, but instead, want to increase spending or maintain it at current levels.

Mitt Romney earns most of his money with "carried interest" (averaging about $20 million a year), but according to Roll Call, there's a rumor that some Republican lobbyists might agree to close the carried interest tax loophole in anticipation of the sequester.

In one year alone Mitt Romney had reported paying as little as 13.9 percent in capital gains
on $21.7 million he earned as carried interest. Will he soon have to start paying the top marginal rate of 39.9 percent?

Mitt Romney and his money.

The "carried interest" loophole allows investors, whose personal income is generated mainly from "investments" (aka unearned income, such as stocks, bonds, annuities, vested stock options, real estate, rental income, dividends, silver, wine, art, gold, etc.), to pay taxes according to the capital gains tax rate of 20%, which is significantly lower than the top marginal rate of 39.9% on earned income (such as regular hourly wages or managerial salaries).

Some anonymous Republicans are only just now finally admitting that, by eliminating this loophole, its impact on the economy would only be "minimal", and they would consider changing the tax code --- but not because we need the additional revenue --- but because it would "primarily hurt Democratic campaign donors".

Republicans have argued against similar tax increases in the past on the grounds that it would "discourage work and investment and harm economic growth." (Bla, bla, bla...they always have a reason to not tax the rich)

But closing this loophole wouldn't really be a tax increase, it would just be changing the definition of their source of income, then taxing them accordingly --- carried interest  would be taxed as regular wages

Waiters are taxed on their tips, why aren't multi-millionaires taxed in the same way on their carried interest? Shouldn't the people with the least get the better tax break? I'm mean, it's not the same as if the rich were buying in bulk and expecting a discount.

But the rumor about eliminating the carried interest loophole is most likely false. A spokesman for Senate Minority Leader Mitch McConnell (the Republican from Kentucky) rejected the premise that Senate Republicans would support eliminating the carried interest loophole. (As we've learned over the past two years, his Tea Party supporters would rather we have NO taxes or government at all.)

Michigan Democrat Senator Carl Levin introduced a bill that only mentions carried interest, but suggested it would be a good vehicle for raising additional revenue. However, eliminating the loophole is not included in the Senate Democratic bill to replace this year’s sequester cuts.

Some politicians claim that by taxing carried interest (aka unearned income) as normal wages (aka earned income) might not be as simple as it sounds, and there is vigorous disagreement about which "technique" to use for doing so. (As though it takes a rocket scientist to figure this out. Why not just tax Warren Buffett at the same tax rate as his secretary? Simple. What's so complicated about that?)

Private equity firms (such as Bain Capital), investment banks (such as Goldman Sachs) and hedge funds would be the most affected by eliminating the carried interest tax loophole, and argue (as always) that it would have a negative effect on economic growth at a time when the economic recovery remains "weak". 

But the economy is only "weak" for the unemployed and the under-paid workers. The "investor's economy" is doing very well --- record profits, record CEO salaries and record bonuses --- remember?

Over the last four years, the stock indexes have over doubled; the Dow Jones Industrial Average recently hit a 52-week high of 14,058 and is on track to match its all-time historical high of 14,164 --- when almost four years ago on March 9, 2009 it was down to only 6,547.

Mitt Romney had said as much last year when he said the rich were doing "just fine".

Ken Spain, the vice president of public affairs for the Private Equity Growth Capital Council (a lobbyist for vulture capitalists) said, “Last year, private equity firms invested over $140 billion dollars in U.S.-based companies in every state and in every congressional district across the country. A tax hike on business investment would only serve to undermine our economic recovery and disincentivize the kind of entrepreneurial risk taking to start, save and grow businesses."

Bla, bla, bla...the same ole, same ole excuses and threats, "If you tax us more, we won't try to make more money, and we won't hire more people." Bill O'Reilly made a similar threat if Obama raised his taxes, and O'Reilly still hasn't quit his job.

We've been hearing them whine like this for the past 40 years. When WOULD have been a good time to eliminate this carried interest tax loophole? Would it have been back in 2003 when George W. Bush had LOWERED the capital gains tax rate, when the economy was doing "good"?

The rich NEVER think that ANY time is a "good" time to raise their taxes, so let's have them make that "shared sacrifice" now, because the rest of us have sacrificed enough already.

*Capital gains and corporate taxes need major reform. They call it "unearned income", so even they admit that their money isn't earned! Too Much Online | Inequality and Excess

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

  •  Consider the parable of the unjust steward (3+ / 0-)
    Recommended by:
    DWG, NoMoreLies, BusyinCA

    in the Bible. He'd been fired, so, in revenge and to earn himself the good graces of his master's debtors, he wrote down their debts.
    That's essentially what Congress is doing for their rich cronies by writing down their taxes. Since, like the unjust steward, it's their job to manage their masters' (our) assets, the disposition of the income is within their purview and, since they aren't taking anything for themselves, not technically theft. Just more poor management, and disloyal. Instead of the Constitution, they're serving special interests to, indirectly, serve themselves. The solution is the same as it was two thousand years ago -- firing.
    There's an irony in Willard's assertion that he enjoys "firing people who provide services to me." He seemed unaware that it was himself who was angling for a position from which he should be fired for poor performance.
    The Party of No are do nothing folk. It is almost impossible to charge people who do nothing with crimes. Even ordinary folk charged with loitering are hard to prosecute. Doing nothing is everyone's right. That's why we pay people to work. So, when it comes to public officials who don't deliver or deliver selectively, we might charge them with "public services fraud." But, the judicial process to which everyone who's charged with a crime is entitled, is very slow. Especially for members of the House, de-election goes quicker.

    We organize governments to deliver services and prevent abuse.

    by hannah on Sat Feb 23, 2013 at 02:40:03 AM PST

  •  Lowering taxes and gutting the public sector (2+ / 0-)
    Recommended by:
    NoMoreLies, ShoshannaD

    does not create jobs or prosperity. More evidence of Scott Walker's assault on Wisconsin. From the Milwaukee Journal-Sentinel:

    The last time that Wisconsin appeared in a national ranking of the Quarterly Census, it was for the 12 months through June 2012. Then, Wisconsin ranked 42 out of the 50 states in private-sector job creation, a decline from a rank of 37 in the previous period, from March 2011 to March 2012.

    That makes Wisconsin a laggard in job creation even by the glacial standards of the national recovery, which has moved far too slowly to absorb the millions of unemployed left over from the 2007-'09 recession.

    Just as troubling, Jacobsen said, is that Friday's report also shows that average private-sector wages in the July-September period of last year fell 1.2% from the same quarter in 2011.

    Be radical in your compassion.

    by DWG on Sat Feb 23, 2013 at 02:52:52 AM PST

  •  Bud - if you want to write a diary about (3+ / 0-)
    Recommended by:
    sewaneepat, johnny wurster, nextstep

    carried interest at least learn about what it is, how it is earned, who earns it, and why it is taxed at long term capital gains rates. I continue to be amazed that you know so little about the tax topics in your diaries and how much misinformation you are spreading here at DKOS. This diary has so many errors of fact that I don't have the time or patience to write about all of them.

    "let's talk about that"

    by VClib on Sat Feb 23, 2013 at 05:00:31 AM PST

  •  re tax rates: (3+ / 0-)
    Recommended by:
    sewaneepat, VClib, nextstep

    "vested stock options" are typically taxed as compensation, eg at top marginal rate.  things.like art, gold, silver, diamonds,.are taxed at 28%.  annuities, bonds, rental real estate are all taxed ad ordinary income and hit with top rayed of 43.4%.

  •  While I agree with your sentiment that (2+ / 0-)
    Recommended by:
    NoMoreLies, VClib

    carried interest and unearned income (capital gains and dividends) should be taxed at ordinary income rates, I cannot tip or recommend this diary because as has been pointed out, your facts are wrong.

    Carried interest is not the same as capital gains and dividends. In fact, carried interest is actually the compensation a hedge fund manager or private equity manager earns for managing the fund so it would seem to me to be by definition earned income.

    Investors  receive proceeds from capital gains and dividends but that is not the same as carried interest. Just because the tax rate is the same does not mean that they are the same thing.

    And as johnny wurster pointed out, several of the income categories you listed are neither carried interest nor unearned income and are taxed at ordinary income rates.

    BTW, there is one category of unearned income that is taxed at ordinary income rates and that is interest income.

    You can't scare me, I'm sticking to the Union - Woody Guthrie

    by sewaneepat on Sat Feb 23, 2013 at 06:30:23 AM PST

  •  The rich never think they should have to (0+ / 0-)

    give up any of their money to anything. That's why they're rich. But if you throw them a big party where they can wear a new ensemble chosen especially for the event, with expensive food and entertainment, they might be persuaded to contribute to their charity, especially if you flatter their egos.

    "The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

    by Lily O Lady on Sat Feb 23, 2013 at 07:54:45 AM PST

  •  Well, I think we can all agree that if you tax the (0+ / 0-)

    rich it hurts the poor. Why argue about how they accumulate their lucre or wether it is one type of free ride or another? Just don't tax them and sit back and watch the pie grow higher.

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site