Republican presidential candidate Mitt Romney finally released his tax returns last week, revealing that less than 14 percent in federal taxes was paid, of his more than $20 million income earned last year.
Once again, the question Warren Buffett first asked this past summer is being raised: Why do the super wealthy in this country pay less in taxes than the working class? How do people making millions of dollars a year pay roughly 15 percent in taxes, while someone with a salary of $100,000 per year will pay as much as 28 percent in taxes?
This is because of the currently low capital gains tax rate. Republicans first argued that the capital gains rate needed to be lowered to 20 percent in 1981, as part of what former President George H. W. Bush called “voodoo economics.” Republicans assumed if the wealthy paid less money in capital gains taxes, they would take that extra money and create jobs by building factories and opening businesses, family farms would flourish, and the number of construction projects would grow – they used these wholesome images to justify bad policy.
In 2001, then President George W. Bush reduced the capital gains rate to an even lower 15 percent. Instead of creating more jobs and growing our economy, this tax policy created a bigger divide between the haves and the have-nots, leaving not much of a middle class in America.
Why do Republicans think it is fair for hard-working Americans to pay more of their income in taxes than the super rich who are living off of interest? The idea that capital is invested in things that grow the economy really needs to be examined again.
Once it was the family farm, a local business, your house or a company building a factory that could employ hundreds of Americans. Now Wall Street has figured out they can make money without having to go through the effort of building anything physical. They can build bundled assets, create hedge funds, and just move paper to generate billions of dollars for themselves, and the less than 1 percent who can afford to play.
In the meantime, federal, state and local governments are struggling to balance budgets, and they still have to provide critical services like police, fire and education. Corporations and their major investors are not paying their fair share.
The Republicans want to cut Social Security, cut Medicare, and cut any spending that helps the down and out. Why don’t they start cutting from the rich? Giving up billions of dollars in tax revenue is the same as giving away money to the rich. How is this fair?
Some argue that if taxes are raised, the rich will stop making more money because it is not worth the effort. Who really believes that if someone who makes $20 million a year, goes from $17,000,000 take-home pay after a 15 percent tax rate, to $14,000,000 after a 30 percent tax rate, they will quit working?
Maybe Americans would be willing to let the rich pay less in taxes if they would build something, and actually create more jobs. Since the late 1980s, when Republicans first began reducing the capital gains tax rates, most of our manufacturing jobs have moved overseas and we have lived through major stock market and housing market bubbles and busts – only a few select are even richer, while the rest of America is worse off.
When I was younger, you could come to America with nothing and work hard. Your children would get a good education, which would lead to a steady job – most Americans could count on having a better life than their parents. This was the American dream: Work hard and you will do better.
With the currently low capital gains tax rate, we are investing in the super wealthy, and I don’t think they need our help. I still believe in the idea of someone working hard and building a business, or keeping the family farm going – not in supporting the people who make millions off of moving paper.
Isn’t it time to quit this failed experiment in trickle-down economics?