Let's say I won $1.4 million in the Powerball Lottery tomorrow. After paying the requisite taxes, I'd have just over $1 million in the bank. If I could get a 7% return on that $1,000,000, I'd "earn" $70,000 per year in interest and never touch the principle balance. I've paid my taxes on the initial earnings of $1.4 million, and only owe on the earnings made from investing the balance... $70k per year.
That $70k will be taxed (at today's rate) 15%... or $10,500. Of my earnings, I'd keep $59,500.
Let's say you have a job that pays you an annual salary of $70,000. You'd be taxed at a rate of 27%, or $18,900 per year, leaving you $51,100 in spendable income. Not a huge disparity here, right?
However, your salary remains the same as long as you keep your job. My income depends on the rate of return my initial investment draws each year. If my investments do well, I might earn more... but if they tank, then I earn less. Add to that the simple fact that my money is fueling the very markets that determine your company's success or failure, and I do think a lower gains tax is justified over the rate applied to labor income.
To whom would the benefit fall if the tax rates were adjusted to remove or reduce the disparity?
Increase the gains tax, and investors across the board will hoard their earnings rather than reinvest them, thus reducing the rate at which the economy grows and your company does more business. Increasing the gains tax to 20% means $3,500 more in tax revenue, but it also means I will take less risk in my investments, simply to avoid the higher tax rate. More money doing less work, in other words.
Lower the income tax, and and you have more spendable income that gets pumped back into the very economy we are trying to grow, while I can continue to do the same. A top income tax rate of 20% would mean a tax burden of only $14,000, or roughly $4,900 in additional spending cash throughout the year for you to do with as you see fit. More money doing MORE work... and the key point in Keynes economic models.
THIS is the inevitable conclusion that will have to be reached should this topic be pursued any further in the mainstream media... and it is NOT what the liberals want to hear the masses talking about.
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1 comment:
Solid, solid stuff brother. Just don't underestimate the media's ability to defy logic. I have every confidence that they'll continue to hammer Romney's returns/income/tax rate yet routinely stop short of bringing the argument to its'(your) logical conclusion.
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