Here's a modest proposal on this tax day 2011. Tax investments like ordinary income.
For thirty years, we've been treated to the big whopper that cutting taxes on the rich creates jobs. Let's get real. Trickle-down—or, as my good friend Jim Hightower likes to call it, tinkle-down economics—hasn't worked. Case closed. After George W. cut taxes for his rich pals, far fewer jobs were created than after President Bill Clinton raised them in the 1990s.
Then in December, the Obama-GOP deal extended the Bush tax cuts for the wealthy at a two-year cost of about $70 billion a year. Now Congress is making $40 billion in painful budget cuts this year. Meanwhile, President Obama, Representative Paul Ryan and others are battling over budgets and tax plans for the next decade and beyond. For the most part, what's been missing from these suffocatingly narrow discussions is an easy source of income: taxing investments like ordinary income.
The folks over at Responsible Wealth believe not only that the Bush tax cuts on upper-income folks should be ended but also that money made from money (i.e., capital gains and dividends) should be taxed like money made from work, not at the preferential 15 percent rate. They have a simple calculator that calculates your tax savings using just three numbers from your tax form (or from your head), and an interactive graph with videos of people talking about their taxes. It's worth checking out at responsiblewealth.org.
Taxing capital gains and dividends at regular income rates would save $84.2 billion in 2011 alone, twice the amount we’re cutting from this year’s budget.