Congresswoman Dina Titus (D-NV3) recent vote in committee against the health care bill worming it's way through congress points to an issue that keeps rearing it's ugly head.
The issue is taxing the wealthy 5% to help pay for services to the 95% of the rest of the country. Too often over the last 8 1/2 years we've been told increasing taxes on the wealthy would be bad for the economy. For some reason this argument never takes into account the negative aspect of falling wages and benefits to the rest of us. The engine of a prosperous middle class is what truly drives the economy.
The two largest tax cuts enacted during Bush 43 were the Estate Tax and the Capital Gains Tax.
In 2001 when the Estate Tax was lowered the deductible was $675,000 with a maximum tax rate of 55%. Today the tax stands at $3,500,000 deductible with a 45% maximum rate. Next year it disappears altogether, and in 2011 it returns with a $5,000,000 deductible and a 35% maximum rate. The argument used during the debate in 2001 was the need to protect small family farms. It makes a great sound-bite, but nobody spouting this nonsense (read republican/blue dogs)could point to a single family farm lost due to the tax. The real recipient of this change was the Walton family of Walmart fame who stood to save billions (that's billion with a big "B")from the drop in rates.
The most insidious tax cut was for Capital Gains. The long-term rate was lowered in 2003 to 15% for corporations and 5% for individuals. Now understand, capital gains is the profit on investments. The Capital Gains tax is the only tax paid on this income. Capital Gains represent income from investments such as stocks, bonds, increased property values, etc. In 2011, the top rate reverts to 20%.
Warren Buffet, who was one of the biggest winners of the tax cut, commented at the time that he didn't need the cut and his secretary now paid a higher percentage on her income taxes for her $60,000 a year income than he did on his investments.
There are safeguards in place to protect homeowners from paying out long-term capital gains on the increased value of their primary residence at the time of sale. Why investments should be taxed lower than regular income is the issue here. If I work for a living, my maximum tax rate is over 35 percent. If I kick back and live off my investments, my maximum rate is 5 percent as an individual. The only people truly benefiting from this rate drop are the wealthy.
The combined drop in tax revenue over 10 years from these two taxes is estimated to exceed $1 trillion dollars. Or, about what universal health care would cost this country over 10 years.
It's time to stop making excuses for why we can't fix the major problems this country faces because of money, and go where the money is.
