This from the Citizens for Tax Justice mailing list.
Forty-four Democrats have asked House Speaker Nancy Pelosi to continue the favorable 15% tax rates on capital gains and dividends, which would expire along with the other temporary 2001 (so-called “Bush”) tax cuts and the 2009 Obama tax cuts in a couple of months.
When this happens, the rate on capital gains would go back to a maximum of 20%. The rate on dividends would go to a maximum of 15%.
Because middle-class people pay so much in other kinds of taxes, like property tax and social security, it was only seen as fair that people with very high incomes pay a fair share of the federal income tax. This social agreement started to break down in the 1980’s, and by 2001 or 2003, Congress simply became a free-for-all for wealthy people to raid the U.S. Treasury. Not simply by putting less in, but by seeking tax breaks for their businesses to create subsidies from the Treasury.
In short, the middle class of America pays for the infrastructure of America so that the well-off can use it for their various businesses.
One of these has been this favorable 15% rate on investments and the dividends from (stock) investments.
If you are a middle class single guy in New Jersey, you will pay the following taxes on your top dollar of income:
25% federal tax
5% state tax
7.65% social security tax – that’s not the employer portion
7% N.J. sales tax if you spend the money on a taxable item.
(Let’s not include real estate or property tax.)
As you can see, it’s 44.65% of your top dollar. Say, the amount over $40,000. Those rates go even higher.
Now, if you are a very wealthy person who lives in a state without an income tax, and you get $1,000,000 of dividends from stock holdings every year, this is all you pay:
15% federal tax
Fair? Hardly. Moreso that you know that business is relying on our nation’s infrastructure and support much more than the New Jersey working stiff. In fact, it looks like the stiff is having to put the money up for it, and the business just rides along the top and benefits from it.
The military, the school systems, the old age pension funds (social security), the health care system: all these big ticket items are being footed by the middle class, by the people, like Obama says, who make less than $250,000 a year.
The social contract in America is broken. Time to write it right, like how it used to be.