I was scanning a bunch of news feeds a day or two ago and ran across a video of Newt Gingrich making his standard plea that we eliminate all capital gains taxes. This is not a new idea for Gingrich (or others), since he talks about it in this 2008 article as well.
It's actually part of a standard supply-side economic / political argument: give the rich even more money and they'll rev up the nation's capital engines and make the rest of us rich. Our fates are tied up together: America's prosperity depends on keeping the country's wealthy happy. And we HAVE to free up our capital gains to keep up with China! (As Jon Stewart points out, it's odd to brand the Democrats as "Socialists" and then urge them to adopt the policies of a Communist country! And not just Tea-Bagger-style "communists" but actual Communists.)
Setting aside the fact that the Bush tax cuts of 2001 & 2003 seemed only to help the economy melt down (and got us huge budget deficits and a doubling of the national debt), I just can't get my head around the reluctance to tax the money earned by other money. (But of course the only people making money off of investments are those wealthy enough to have investments worth talking about. So this particular argument comes from a decidedly self-interested quarter.) It seems to me that income from investments should be the most highly taxed of all since a person has done absolutely nothing of value to earn that income. Reducing taxes on wages earned is an argument I understand; not taxing the money that MONEY earns is not.
Underlying the issue is the simple reality that our government needs money, now more than ever. And not just to feed the beast, but to pay for the feeding we--Republican and Democrat alike--have already done. We've already spent the money and we must make good on the debt. Conservatives say they want massive spending cuts. But they want none of their pet programs touched and in any case had years of Republican rule during which they failed to make those cuts--on the contrary, spending went waaaay up and tax revenues got waaaay slashed and our fiscal situation got waaaay worse. Demanding of Democrats a Republican solution which even Republicans-in-power cannot accomplish seems not to be productive thinking. No, you had your chance. Now would seem to be the time to STFU and let Democrats attempt to bumble their way to a workable solution. As Bill Clinton managed to do. (Remember that? That time of economic prosperity and budget surpluses and shrinking deficits? Which we last saw under a Democratic administration?)
The obvious target seems to me to be defense spending. Wikipedia says that the US spends nearly as much on its military budgets as the rest of the world combined. How can that possibly be justified, especially when our budgets are so far in the red? Why should our country spend NINE TIMES what China does on defense, or somewhere around three times what Europe spends collectively (Europe--which sits in the midst of all the nations who would bring them--and us--harm)?
Forget taxing or not taxing capital gains; here's your obvious source of money. We may somehow not agree that basic health care for all citizens is more important than Star Wars research funding; but we should prioritize paying up what we owe and not going further into debt.
2 comments:
Actually, the obvious place to look is entitlement programs. While defense spending is certainly huge (and could stand to be trimmed), entitlements (SS, Medicare, Medicaid, etc) are twice the size of defense. And the population demographics don't help. I think at somepoint we are either going to have to start raising the cap on the SS and Medicare taxes, means testing benefits, or both.
I could not disagree with you. SS and Medicare / Medicade are each about the size of our defense budget, so there's plenty to look into there as well.
But I wonder if our per capita expenses in these matters is so far out of line relative to other countries as our defense spending seems to be. (It seems that Gulf nations meet or exceed our defense spending as a percentage of GDP, but that's about it.) Health care for a country's citizens costs what it costs--within reason.
But I wouldn't take anything off the table. I agree that SS is going to need to be overhauled, though many people will hate to have to start looking at all the years they paid in as a fee rather than a "savings program" (which it hasn't been for decades; people have been funding their elders' retirement checks for a long time now).
It's much easier for me to criticize than it will be to fix the problem. I'm just not convinced that giving big investors a break on their earnings is the solution we've all been waiting for...
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