Capital Gains or Ordinary Income?

[Klukie]

How are those at the top making all their cash? If it is through Capital Gains, then why don't we zero in on that particular tax and adjust it upward to help offset all of the thievery that caused this mess. The legal system doesn't want to go after these criminals, so maybe the people can via the IRS. Can someone with economic skills weigh in on this?

[Lasher]

1. Capital Gain and Dividend tax cuts are not getting as much attention as they deserve

The current 15% rate on dividends (also on capital gains) applies only to holdings in taxable accounts and not 401(k)s or IRAs. 30% of households own some stock in taxable accounts, but that ownership of stock in these accounts is much more prevalent among high-income households than among low- and moderate-income households.

Over half — 54 percent — of all taxable capital gain and dividend income flows to the 0.2 percent of households with annual incomes over $1 million. More than three-quarters — 78 percent — of this income goes to those households with income over $200,000, which account for about 3 percent of all households.

In contrast, only 11 percent of taxable capital gain and dividend income goes to the 86 percent of households with incomes of less than $100,000. Only 4 percent of this income flows to the 64 percent of households that have income of less than $50,000.

For those making less than $100,000, taxable capital gains and dividend income makes up an average of 1.4 percent of total income. For those making over $100,000, this income accounts for 12.2 percent of total income on average; for those making over $1 million, the share rises to an average of 31.4 percent.

http://www.cbpp.org/cms/?fa=view&id=1008

The current 15% capital gain and dividend rate is probably the most unfair of all the George W. Bush giveaways to his wealthy benefactors.

[Klukie]

2. Thanks for that info

I think the dems ought to go after this as a single issue.

[Lasher]

3. No charge

I'm glad you brought up the subject. People are focused on federal income taxes, and inheritance taxes to a lesser degree. Capital gain and dividend tax cuts are pretty much under the radar. There is no good reason for this to be taxed as anything other than ordinary income.

When I cite these figures I am careful to point out the difference between equities in taxable accounts and the assets a worker's 401(k) or IRA account. Apologists for the affluent will try to obfuscate by blurring this distinction.