The Tax-the-Rich Ideas Just Keep Coming
Serious societal change typically only takes place when the pressure for change hits “critical mass.” At one level, we’ve had critical mass for years now on seriously taxing America’s rich. Polls regularly show broad public support for having our wealthiest pay quite a bit more at tax time.
But we haven’t had critical mass on taxing the rich within our political class. That finally may be changing. High-profile pols old and new have of late been one-upping each other with sober proposals for trimming the super rich down to a much more manageable democratic size.
The latest significant player to add to this growing political class critical mass: U.S. Senator Ron Wyden from Oregon. He’s just announced his intention to push a bold new tax on capital gains.
Most Americans know precious little about capital gains income because most Americans get precious little income from capital gains. On average, capital gains income — profits from the sale of stocks, bonds, and other assets — makes up just 6.1 percent of the dollars Americans report on their tax returns.
But this average wildly overstates how much income everyday households collect from capital gains. In 2016, the latest year with IRS stats, capital gains made up a miniscule 0.7 percent of the income for households earning less than $100,000. Households making over $10 million, by contrast, counted on capital gains for nearly half, 46.4 percent, of their income.
The richest of our rich, our top 0.001 percent, grab an even higher income share, 55.1 percent, from capital games.
These fabulously rich don’t just grab the overwhelming bulk of the nation’s capital gain dollars. Our tax code gives them and their capital gains preferential treatment. A dollar of income from salary and wages can currently face a tax rate of up to 37 percent. A dollar of capital gains income never faces a tax slice more than 23.8 percent.
Taxing capital gains at the same rate as ordinary income would, of course, fix this tax favoritism on behalf of America’s most financially fortunate, and the United States has had periods of time that have seen the same tax rate on all income, whatever the source. Between the tax bill passed in 1986 and the tax bill passed in 1997, capital gains enjoyed no tax-rate break.
