Buck McKeon tax plan: no gain, no pain

Republicans have long wanted to eliminate the capital gains tax. This will, they promise, encourage investment, stimulate our economy, and provide bottled hot water to dehydrated babies. Now that the invisible hand of the free market has reached out touched us all with its middle finger, the stock market crash has done for the grand old party what decades of political corruption could never achieve. Republicans have finally eliminated the capital gains tax — by eliminating capital gains.

Representative Buck McKeon, however, hasn’t quite figured this out. He’s a little slow on the uptake. Grand old dinosaur that he is, McKeon lumbers about the halls of congress bellowing the same tired nonsense.

Here, for example, is a hilarious bit from a recent email titled “The road to financial recovery,” which Buck sent to his constituents:

At a time of economic uncertainty, Congress should do everything in its power to encourage investment to help spur economic growth. To that end, this plan immediately and completely suspends capital gains taxes for individuals and employers on newly acquired assets for the next two years. This will not only encourage investment, but it will boost the value of sagging 401(k) accounts on behalf of workers and retirees.

It’s nice to know Buck can still warble the golden oldies.

Unfortunately, suspending the capital gains tax will do nothing to boost 401(k) accounts, which are now crashing in sympathy with the stock market. As the L.A. Times reports:

So far this year, the average worker’s 401(k) account balance has dropped between 21% and 27%, depending on the worker’s age and time with his or her employer, according to the Employee Benefit Research Institute.

People invest in stocks because they think they’ll make money. If they believe a stock is declining in value, they won’t invest. And today, the stock market is crashing like a junkie:


click to enlarge (image from dshort.com)

No capital gains tax reduction will restore investor confidence until stocks find a bottom. Sometime next year, or the year after, stocks will reach their nadir, the lowest circle of this free market hell. Then begins the anabasis, the long climb back up. Investors once again will profit — at least those with substantial cash reserves, like Andrew Carnegie and John D. Rockefeller did after the Panic of 1873, buying up rival companies at fire-sale prices. The future captains of industry who profit from the coming misery can, must, and will pay capital gains taxes on those profits.

Of course, everyone hates taxes. That’s perfectly understandable. We love our freeways, but don’t want to pay for them. We admire public school teachers, but hope someone else will cover their wages. We support our troops, but please, God, not with our tax dollars. Yes, someone needs to pay our troops a decent salary, arm them with the equipment they need, and provide full health benefits to veterans, but does it really have to come out of our hard-earned taxes? Can’t we just let Chinese and Saudi investors pay for our military?

What? We’re already doing that?

Hmm.

Oh wait, I know, let’s just put magnets on our cars and call ourselves patriots.

We long for the easy way out, the free ride, something for nothing. For most of us, its human nature. For Republicans, it’s the party platform.

I agree with Joe Biden: paying taxes is an act of patriotism.

But here’s the thing about Republicans and taxes. Business conservatives are okay with taxes as long as the government doesn’t tax rich people or the companies they own.

Republicans love to tax work more than wealth.

What do I mean by that?

If you’re an average Joe earning your living through a salary, you pay federal income taxes of up to 35%. But if you’re a wealthy Joe making your living by chatting with your broker, you pay a long-term capital gains tax of 15%. Nice work if you can get it.

The capital gains tax is a regressive tax because it's lower than the tax on ordinary income: the more money you make, the lower your effective tax rate. The tax burden is shifted from the rich to the poor.

Warren Buffet (whom I greatly admire) didn’t get rich from any salary, but from investments. The source of his income gives him a huge tax break compared to most of the working world. And he knows it, too:

Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent.

But a 17.7% tax on wealth is still too much for for that rich man's lackey, Buck McKeon. He doesn’t want wealthy people to pay any taxes.

Remember, billionaires get most of their money from investments, not salary. It’s not ordinary income, but extraordinary income. If you reduce the capital gains tax to zero, you’ve essentially eliminated income taxes for the rich.

Coming soon: Buck McKeon’s plan to eliminate the sales tax on yachts and Learjets.

Agree? Disagree? Please leave a comment.