Wednesday, June 30, 2010

Fair is fair. I earn 50 times as much income as you. So you should pay a much higher percentage of your income in taxes than me.

If that sounds like a whack-o theory to you, if it sounds like unfair taxation, it’s because you don’t earn over $10 million a year and have a team of lobbyists at your beck and call.

But a recent article in the New York Times serves as an infuriating reminder that incomes have been massively redistributed — out of the pockets of the poor and middle class, into the pockets of the filthy rich.

The Times article in question had to do with the news that New York State, desperate for income to run schools and maintain police and other public services, is trying to enact a law that would make hedge fund managers pay more tax on some of the money they earn.

Why rich hedge fund managers pay

at lower tax rates than you and me

Seems that hedge fund managers get 20 percent of any profits they produce for their customers. This can come to million, tens of millions, even hundreds of millions of dollars a year.

But the money is only taxed as a capital gain, which has a maximum tax rate of 15 percent.

Now a special rate on capital gains has its useful purposes. It encourages people to risk money to invest in businesses that may eventually produce growth for our economy.

Heads they win, tails you lose,

either way you're screwed

Problem is, the hedge fund managers aren’t risking their own money. They’re risking their clients’ money. Heads they win, tails their clients lose.

So let’s see. Let’s say I’m a hedge fund manager and I make $50 million in commissions. I pay 15 percent of that in taxes. Meanwhile, you’re a small plumbing contractor. In 2009 you earned $68,000. Your maximum tax rate on a good chunk of that money is 25 percent.

See, we’ve got to redistribute your earnings to hedge fund millionaires and billionaires. Who says so? The lobbyist who bought your Congressman and Senator say so. As do the tea bag heads and Republicans who are still talking about cutting taxes. It’s not your taxes they’re planning to cut, pal. It’s the taxes on billionaires.

We seem to get more prosperity

when tax rates on the rich are higher

Ironically, during the post WWII boom years, we had tax rates as high as 88 percent on the top income earners. Yet that was the age of prosperity that any of us old enough to remember look back on nostalgically—when almost anyone with a middle class job could afford to send a couple of kids to college entirely out of his own pocket, buy a house, earn a nice car, and still put a few bucks away for a rainy day.

Then the Reagan administration came. They gave us a recession, along with a drop in the maximum tax rate to 50 percent. Now we’re down to 35 percent and the economy’s in the toilet.

Conclusions, anyone?

1 comment:

steve said...

i think a lot of these tax breaks date back to when the rates were higher for the wealthy. since the top rates are much lower now it would make sense to repeal the loopholes, no?