At a loss on capital gains logic
Letters to the Editor, October 1, 2012
My first reading of Judy Dugan’s Sept. 21 column “Wealthy benefit from their own entitlements” confused me. In that column she equated receiving federal entitlements with paying a tax rate of 15 percent on capital gains. She views getting federal disability income, food stamps, income tax credits and Medicaid the same as paying “only” 15 percent on investment income.
Really? Is paying taxes (albeit at a rate lower than formerly) the same as receiving these benefits? How could she make this argument? How could someone who is actually paying out money be compared to someone who is receiving money?
After rereading the column I understood what her rationale must be: The money that you earn is not yours — it is the government’s. It is only through the largesse of the government that you are allowed to keep any of the money that you make. So in this scenario a government that “allows” you to keep 85 percent of your money is making a “gift” to you.
But Dugan should note that the capital gains taxes that individuals pay constitute the second time this money has been taxed. Before any profits (capital gains) can be paid to shareholders they are first taxed by the federal government. Corporate tax rates can be as high as 35 percent. Adding in the individual capital gains tax can raise the effective tax rate on profits to 45 percent.
Dugan appears to view capital gains with some scorn — as income that is not earned by the toil of honest labor. But people who risk their money — and it is a risk to invest — provide the capital that American businesses need to operate. By buying stock — which is ownership in the company — these people are providing the jobs that Americans need. When you tax capital gains at excessive rates you take away any incentive to risk your money.
Who invests? Actually, a majority of Americans do.
Do wealthier Americans invest more than the less-well-off? Of course they do. And they benefit more from lower capital gains rates than those who do not. But that is not a crime. If people stop buying stock, U.S. companies and jobs will collapse.
Dugan’s attack on capital gains is also an attack on American business and American jobs. I guess we can all follow her example and become volunteers. Except who will then pay the taxes that support all the entitlement programs?
