Thread: Increase Ordinary Income Tax Rates or................

Should we really increase Ordinary Income Tax Rates? Ordinary Income is earned. I believe we should tax Capital Gains and dividends progressively as we tax Ordinary Income. By this I propose raising the Capital Gains Tax to 30% for catpital gains income between $500,000.00 and 1Million and 35% for income over 1Million and I believe capital gains income $250,000 to under $500,00.00 taxed at 25% and under $250,000.00 taxed at 10%(as the majority of these income earners claim gains on the sale of their homes and rarely have gains other than sale of home above $500k. These individuals normally represent the middle-class)

Any thoughts?

I am amazed that nobody has an opinion on this topic. When you actually are paid a wage for performing a job/service, you should be taxed fairly and IMO equally. In other words I believe we should all pay the same tax rate on our "Ordinary Income earned". The reason that the Millionaires and Billionaires that Obama and Democrats speak about pay a lower effective tax on their earnings is because the majority of their earnings are "Capital Gains Income" and not "Ordinary Income". So if Obama and the Democrats really want Millionaires and Billionaires to pay an equal amount of taxes on their earnings as those of us that only pay taxes on our "ordinary income" then they would have to increase the tax rate on Capital Gains of 1Million+. But Obama and Democrats don't only want to raise Ordinary Income Taxes on "Millionaires and Billionaire", they want to include couples filing jointly with Adjusted Gross Incomes over $250,000.00. I hardly consider these couples to be Millionaires and Billionaires as if each earns $150,000.00/yr their taxes will increase regardless of the number of dependants and those they are paying college tuition for or paying health insurance premiums for if under 27 years old; the will pay a higher tax rate than a single person that earns under $200,000.00 and has no dependants. Even with the tax credit, which Bush put into place, it is still not fair and equal. And, those families earning under $500,000.00 with say 4 dependants are not likely to benefit from the same tax breaks as Millionaires or are they likely able to shift their income to purchase investments and live off of their "Capital Gains". Most people only see a capital gain on their real estate, such as their home if they sell and make a profit and do not buy another home. Most ordinary wage earners have few investments in stocks or real-estate(other than their primary residence) other than those in their Retirement accounts and those earnings are not taxed until they retire and begin to withdrawal the money and then it is not taxed at the capital gains rates, that is unfair IMO

Government doesn't need more money as far as I am concerned. They need to learn how to not spend so god (*)(*)(*)(*) much of it first.

Originally Posted by hudson1955

Should we really increase Ordinary Income Tax Rates? Ordinary Income is earned. I believe we should tax Capital Gains and dividends progressively as we tax Ordinary Income. By this I propose raising the Capital Gains Tax to 30% for catpital gains income between $500,000.00 and 1Million and 35% for income over 1Million and I believe capital gains income $250,000 to under $500,00.00 taxed at 25% and under $250,000.00 taxed at 10%(as the majority of these income earners claim gains on the sale of their homes and rarely have gains other than sale of home above $500k. These individuals normally represent the middle-class)

Any thoughts?

You have not explained WHY the federal government needs to raise taxes on anyone/anything??

IMO maximize the cash in the private sector (people's/business's hands) and minimize government.

There is a cause and effect in the application of taxation. Taxation is usually used to control; like a carbon tax is meant to control carbon emissions. If you arbitrarily increase capital gains taxes, do you actually believe this is a positive action to take?

Lastly, it is stupid to talk about increasing federal taxation until the federal government can prove it is fiscally responsible...

There is a big problem when the capital gains tax is lower than the ordinary income tax and it is a problem that directly effects job growth in the US economy.

When the capital gains tax is lower than the income tax people with money are encouraged to gain all their income from capital gains, i.e. from speculating in the equity and commodity markets. This encouragment is created by lowering the risk of speculative gambling in the markets relative to direct investment whose gains are subject to ordinary income tax.

The formula is pretty simple. A high capital gains tax requires outsized gains from market investments to offset losses and taxes thus providing encouragement to make direct investment in business, where gains are taxed at a lower rate and investment can bring even more favorable tax treatment. It is more work for the investor as management, but creates more jobs and wider economic growth.

If you are at all concerned with the economic future of the US it is quite bleak a long as the current tax regime continues but will accelerate appreciably if the republicans get their way and remove the capital gains tax completely because then there will be absolutely no reason for any business to do anything but sell off all their assets and invest all their money in the markets.

Originally Posted by OldManOnFire

You have not explained WHY the federal government needs to raise taxes on anyone/anything??

Weak economy, aging infrastructure, job crises, huge deficit and a debt that needs to be paid off, just to name a few...

...Lastly, it is stupid to talk about increasing federal taxation until the federal government can prove it is fiscally responsible...

Since the U.S. already has numerous debt obligations, medicare, veterans benefits, other public debts, and foreign debts,
and since we already know (or most of us anyway) that austerity further weakens economies and lowers tax receipts,
what you propose here presents a classic catch 22, as there is not likely to be a fiscally responsible way to
balance the budget without either raising tax revenue on high earners, or reneging on some of our debt.

Don't you agree that a large part of being fiscally responsible includes being able to balance spending with revenues?
Don't you agree that that entails cutting back spending and increasing revenues, and not just one or the other?

-Meta

Originally Posted by unrealist42

There is a big problem when the capital gains tax is lower than the ordinary income tax and it is a problem that directly effects job growth in the US economy.

When the capital gains tax is lower than the income tax people with money are encouraged to gain all their income from capital gains, i.e. from speculating in the equity and commodity markets. This encouragment is created by lowering the risk of speculative gambling in the markets relative to direct investment whose gains are subject to ordinary income tax.

The formula is pretty simple. A high capital gains tax requires outsized gains from market investments to offset losses and taxes thus providing encouragement to make direct investment in business, where gains are taxed at a lower rate and investment can bring even more favorable tax treatment. It is more work for the investor as management, but creates more jobs and wider economic growth.

If you are at all concerned with the economic future of the US it is quite bleak a long as the current tax regime continues but will accelerate appreciably if the republicans get their way and remove the capital gains tax completely because then there will be absolutely no reason for any business to do anything but sell off all their assets and invest all their money in the markets.

Greatly increasing the capital gains tax will be much more of a burden on lower and middle class people than on the wealthy. Investment money is going to find it's way to the best ROI...if you make US investment less interesting, the money just goes off-shore or wherever it will get the best ROI. ~80 million Americans own stocks and ~100 million Americans own property...both applicable to capital gains taxes...

Originally Posted by Meta777

Weak economy, aging infrastructure, job crises, huge deficit and a debt that needs to be paid off, just to name a few...


Since the U.S. already has numerous debt obligations, medicare, veterans benefits, other public debts, and foreign debts,
and since we already know (or most of us anyway) that austerity further weakens economies and lowers tax receipts,
what you propose here presents a classic catch 22, as there is not likely to be a fiscally responsible way to
balance the budget without either raising tax revenue on high earners, or reneging on some of our debt.

Don't you agree that a large part of being fiscally responsible includes being able to balance spending with revenues?
Don't you agree that that entails cutting back spending and increasing revenues, and not just one or the other?

-Meta

All those things you mention in the first paragraph are reasons not to raise taxes at this time. This year there is a $1.3 trillion deficit, and in order to balance this, taking this amount of money from the private sector will get all politicians voted out of office.

You can dwell on austerity or stimulus or debt and any word but at the end of the year, and particularly year after year after year, the USA cannot keep spending $3.5 trillion while taking in only $2.2 trillion. We have a $15 trillion GDP which is yielding $2.2 trillion in taxes; at the current tax structures the GDP will need to increase to $24 trillion in order to balance the budget.

IMO Obama and others have created a $20 trillion monster which is simply too big to deal with. If all 150 million taxpayers paid an additional $5000 per year in taxes, it will take about 27 years to pay down $20 trillion in debt. If it's more like $1000 per year it will take 135 years! Most everyone is screaming bloody murder about the potential 'fiscal cliff' yet this is only about $1000 per year per person.

My point is why pay another penny of taxes if the government will just spend that penny? If you got all Americans to chip in an extra $1 trillion in taxes, the government would just spend it. I'd like to see lots of taxes increased with spending reductions and caps...

Originally Posted by OldManOnFire

Greatly increasing the capital gains tax will be much more of a burden on lower and middle class people than on the wealthy. Investment money is going to find it's way to the best ROI...if you make US investment less interesting, the money just goes off-shore or wherever it will get the best ROI. ~80 million Americans own stocks and ~100 million Americans own property...both applicable to capital gains taxes...

That is exceedingly misleading. Sure, 80 million own stock but 5 million own 80% of it and the capital gains that the vast majority of middle class people realize are tax free anyway since they are in retirement accounts. Property gains come with huge exemptions, very few people pay taxes on that, and they are the most wealthy.

Another argument for the past few decades has been that taxing capital gains will cause the investor class to flee and deprive the government of their much needed tax revenues. Well, that has done nothing but institute a global race to the bottom in capital gains taxes which has resulted in vastly reduced revenue from capital gains worldwide. That argument has proven to be exactly wrong.

Yet a third argument is that high taxes on capital gains remove incentives to invest in business and job growth, which is debunked by my previous post.

You will have to do better to make an argument that low capital gains taxes are a good idea.

Originally Posted by hudson1955

Should we really increase Ordinary Income Tax Rates? Ordinary Income is earned. I believe we should tax Capital Gains and dividends progressively as we tax Ordinary Income. By this I propose raising the Capital Gains Tax to 30% for catpital gains income between $500,000.00 and 1Million and 35% for income over 1Million and I believe capital gains income $250,000 to under $500,00.00 taxed at 25% and under $250,000.00 taxed at 10%(as the majority of these income earners claim gains on the sale of their homes and rarely have gains other than sale of home above $500k. These individuals normally represent the middle-class)

Any thoughts?

Given the fact that tax revenues are proporately at 60 year lows and $800 billion lower than in 2000, we should really do both. Repeal the Bush tax cuts, and tax investments at the same rate as earned income (like Reagan did it).

It's something you cannot conclusively prove, but IMO it's not just coincidence we've seen the financial sector become such a big part of the economy and we've seen two massive, and disasterous, asset bubbles in the decade since investment taxes were slashed to less than half the rate of earned income.

We don't need to reward more capital and investment. We need to encourage and reward production and earning.