Subscribe to Dollars & Sense magazine. Recent articles related to the financial crisis. Investment Tax Cuts Help Mostly the RichThis piece from the NYT business section does a great job of explaining why cuts to the capital gains tax have been so regressive. There's a nice chart with the original article, too.By FLOYD NORRIS Published: January 10, 2009 MORE Americans than ever before have learned firsthand the perils of investing in the stock market, as the value of retirement accounts like 401(k) plans plummeted over the last year. Never before has the pain of a bear market in stocks been spread as broadly in the United States as this one has, a fact that has intensified the economic impact of the collapse in share prices that began in late 2007. But while the pain of the bear market has been spread widely, the tax benefits of stock ownership have become more concentrated among the wealthy. That seeming paradox stems from the differing treatment of profits on capital gains, depending on whether the stock or other asset is held in a taxable account or a retirement account. Most Americans hold stocks, and stock mutual funds, in their retirement accounts, principally in 401(k) accounts. Those accounts are not taxed until the money is taken out, usually after retirement. But then, the money is fully taxed at ordinary income tax rates, regardless of whether or not it came from capital gains. As a result, the reduction of the tax rate on long-term capital gains to 15 percent in 2003, and the accompanying reduction of the tax on most dividends to the same amount, provided no additional benefits to most Americans. But it produced substantial benefits for those who owned stocks in taxable accounts. Read the full article. Labels: capital gains tax, dividend tax, regressive taxation, tax policy Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Toles and The Onion on InequalityTom Toles' recent cartoon in The Washington Post lampoons (most, i.e. orthodox) economists' puzzlement over the growing income and wealth gap. The suggestion made by Toles' alter ego (the tiny cartoonist in the corner) that we "start outsourcing those economists' jobs" reminds us of Dean Baker's suggestion, in The Conservative Nanny State (excerpted in the July/August 2006 issue of Dollars & Sense): "If government policies ensure that specific types of workers (e.g. doctors, lawyers, economists) are in relatively short supply, then they ensure that these workers will do better than the types of [less-skilled] workers who are plentiful."The current issue of Dollars & Sense examines the income and wealth gaps: in John Miller's rejoinder to the editors of The Wall Street Journal that the wealthy are taxed, if anything, too much; in James Cypher's article on the growth of the income and wealth gaps since 2000; and in Ramaa Vasudevan's "Ask Dr. Dollar" column on the alleged "double-taxation" of corporations. See also Chuck Collins's article on Washington State voters' collective decision not to repeal the estate tax. And don't miss The Onion's incisive reportage on the structural issues underlying Sunday's Academy Awards cermony: Oscars Reveal Widening Gap Between Best, Worst Dressed. An excerpt:
Labels: Dean Baker, dividend tax, estate tax, Halle Berry, income inequality, Paula Abdul, Tom Toles, wealth inequality Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). Representative Mica (R-Fla) Distorts on Corporate TaxesRepresentative Mica Distorts on Corporate TaxesThis issue's Dr. Dollar answers a question from Sandra Holt, a constituent of Congressman John Mica, who represents the 7th congressional district in Florida. A visit to Mica's official U.S. House of Representatives website confirms Sandra's suspicion that her member of congress is engaged in double talk on corporate taxation. On a page entitled "Protecting Jobs and the Economy," Mica says that he supports: "... efforts to spur business activity and keep more jobs here at home by reducing the corporate income tax. The United States has one of the highest corporate income tax rates, especially when compared to many of our primary economic competitors, such as Britain, France and Germany. Higher taxes on the returns to corporate capital inhibit the competitiveness of U.S.-based companies in foreign markets. With such a high tax burden to bear, many corporations are unfortunately attempting to cut costs by relocating abroad and taking good-paying jobs with them. Instead of punishing businesses for attempting to make a profit, I believe we need to reduce their incentive to sacrifice American jobs by lowering corporate income taxes." [Emphasis added.]But as Ramaa Vasudevan shows in her Dr. Dollar column, corporate taxes in the United States are not high compared to other developed countries: "Is the U.S. corporate tax burden higher that that of its competitors? Comparisons of 29 developed countries reveal that only three—Iceland, Germany, and Poland— collected less corporate income tax as a share of GDP than the United States. This represents a reversal from the 1960s, when corporate income tax as a share of GDP in the United States was nearly double that of other developed countries."Nor are corporate taxes burdensome: In 2002-03, U.S. corporations paid an effective tax rate of only about 23%. Forty-six large corporations, including Pfizer, Boeing, and AT&T, actually received tax rebates (negative taxes)! Far from being a crushing burden, corporate income tax in the United States has fallen from an average of nearly 5% of GDP in the fifties to 2% in the nineties and about 1.5% (projected) in 2005-2009.We submitted the following to the comment section on Mica's website: Dear Representative Mica, We eagerly await a response from the congressman. Labels: "double taxation", corporate taxes, dividend tax, John Mica Please consider donating to Dollars & Sense and/or subscribing to the magazine (both print and e-subscriptions now available!). |
