written by Norm:
Economics Inside the Beltway
Your comments about this column are welcome ~ e-mail Norm at
No one asked me, but I think the politicians are a bunch of chickens. I
mean they are more interested in pandering to the voters than
being guided by historical facts. Being “politically correct” is the
mantra of the day on Capitol Hill.
For example, all the facts
say that the capital gains tax is regressive. That is, when you
penalize people for selling stock by taxing the profits at a high
rate, people think twice about selling. When the government increases
the tax on capital gains, people have less incentive to sell.
So what, you say? Well, when the tax on stock sales goes down, that
feeds the economy by keeping more money in people’s pockets that
they will reinvest in corporations or spend on goods and services.
That means jobs and a more robust economy.
Ah, but only rich
have stocks. Wrong. About 52% of families in the U.S. have some
stocks. It may be in stocks or bonds or in a mutual fund or
to their employer or union that invests in the market with money they
have put into a retirement fund.
At the moment
Wall Street has
a bad rap and deservedly so, but last March the market was around
12,000 and going up. Money managers and traders
were heroes. The
higher the Dow, the better, we said. But by raising capital gains tax
when stocks are sold, the politicians are
not panelizing the
brokers or hedge fund managers. They are panelizing you and me.
So why do it? Why not lower the tax when stock
is sold? Well, I think
the politicians believe that raising the capital gains tax will
increase tax on the “rich” people. And that
is currently a popular
(read, “politically correct”) position. And politicians love to cater
to the “will of the people”. How about
catering to the facts?
During his campaign, Mr. Obama said he wants to raise capital gains
tax from 15% to 28% to “restore fairness
to the tax code”.
to the Institute for Research on the Economics of Taxation, Mr.
Obama's tax hike would knock off
$2.5 trillion in capital formation
over five years, or nearly 2% of gross domestic product.
A study by former Treasury Department
economist Gary Robbins has found
from 1946-1998, about 90% of the returns to capital investment accrued
to workers in the form
of higher wages, because when workers
have more tools like computers, forklifts and robotic equipment, they
another example of politicians catering
to the voters rather than doing the right thing. How about increasing
the taxes on the “rich”.
That sounds really “politically correct”.
According to our elected officials people who earn over $250,000 a
year are the rich among
About time those people driving a Lexus
or a BMW pay their way. Well, those high rollers already pay 85% of
the taxes. What
happens when the wealthy keep more of their income?
They usually invest it in things that create jobs and income for
they also, if things go well, make more money for
Isn’t that The American Way? If they keep less of their earned income
by paying more tax, the government gets the money and spends
it their way.
But it is politically incorrect to lower taxes on
the “rich”. Even though the facts say that increasing the tax on capital
gains and penalizing the “rich” is bad for the economy and
the middle class working families across the nation.
Now, I admit that
you can find counter arguments on the above but simple
logic says that
the more money people keep, the more they will invest in companies
and expansion and the more middle America will
have to spend on things
they need. That moves the markets and creates jobs and more
income. It even creates more in tax revenue and
more in charity
So maybe the politicians need to attend a two-hour class
on Economics 101. If they did they might
learn how the economy works
in the real world. Then they could make laws and rules that make
the economy really better.
bet on it, but I’m writing my congresswoman anyway.
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