![]() This practice encourages executives to obsess over short-term stock-market performance at the expense of the long-term success of the corporation. It encourages corporate executives to take stock-based compensation, because it’s taxed more lightly than the same amount of salary income would be. The tax break for capital gains also enables the oversized financial sector to wield enormous influence on the U.S. Preferential treatment for capital gains meant that the federal government forewent $109.5 billion in taxes in 2016, a giveaway second only to the tax exclusion for employers’ contributions to employees’ health plans. And 96.2 percent of the households in the top 1 percent of the income distribution are white. In 2016, for example, nearly 76 percent of all capital gains went to households earning more than $1,000,000, according to estimates by the Tax Policy Center. ![]() Because the wealthiest households earn the bulk of capital gains every year, the tax code’s preference for this form of income overwhelmingly benefits the rich. This is because income received from profits on the sale of investments is taxed at a lower rate than the same amount of income from salaries and wages. Thanks to this tax break for capital gains, households keep more of their income from investment after taxes than they keep from their wages and salaries. ![]() 1 This preference fuels inequality and financialization alike. But there’s another front in the battle for tax justice: the tax code’s preferential treatment of income from capital gains (that is, from profits on investments). And a majority (52 percent) concurred that “our government should redistribute wealth by heavy taxes on the rich.”ĭebates about federal taxes tend to focus on the tax rates levied on ordinary earned income and on tax deductions taken mostly by wealthy households. In 2016 Gallup found that 61 percent of Americans agreed that “upper income people” paid “too little” in taxes. Polls suggest that Americans won’t stomach a tax plan that will enrich the rich at the expense of the rest. With Republicans controlling both the White House and Congress, the stage is set for massive tax cuts to reward those brilliant members of the 1 percent-unless popular ire over Trump’s tax filings can be translated into demands for tax justice. In the first presidential debate, he famously boasted that his ostensibly legal tax avoidance strategies prove he’s “smart“-and by extension, so are the rest of the rich who do likewise. Trump’s already said a lot about his taxes. So we may never know the truth about Trump’s income and charitable contributions, about the conflicts of interest and the “emoluments” from foreign powers. Last Saturday, tens of thousands of protesters across the country joined the Tax March, although most realized Trump won’t divulge anything about his taxes unless Congress or the courts take action. Julia Ott ▪ April 18, 2017Īs chair of the Reconstruction Finance Corporation and then of the NYSE, Emil Schram (pictured at right, 1939) helped shape tax policy to serve his peers (Library of Congress) From the 1920s to today, American tax policy has evolved to reflect one principle-the investor comes first-with disastrous implications for the rest of us.
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