Los Angeles
Times, April 22, 2012
Better than the 'Buffett rule'
Why not raise taxes on capital gains but lower them on income?
by Tom
Campbell
Tom Campbell is dean and professor of law and a professor of economics at
Chapman University. He served five terms as a Republican in theU.S. House of
Representatives. He opines:
... There is a middle road on taxes, though. Congress could have
increased taxes on capital gains and dividends (which really is what is at
stake in the Buffett rule) but lowered personal income taxes by the same
amount. That wouldn't reduce the deficit, but it wouldn't add to it either.
More important, it would help our economic recovery. ... The question
shouldn't be whether wealthy people are paying their fair share but rather
how investment, consumption and taxes figure in our economic recovery.
...
Corporations presently
have exceptionally high levels of retained earnings. Apple, for instance, is
buying back its shares rather than using the money to fund more inventions.
This suggests that, at the moment, there's not all that much need to provide
incentives for investment in corporations. ... Without any change in total
government revenue, we would have incentivized a shift from investment
toward consumer spending. .... Consumer spending causes companies to hire
more employees to make the goods that consumers buy.
2-4-8 Response: Eliminate Capital Gains
Taxes
Capital gains are not real income. Capital gains are a
poor accounting (that does not consider inflation) of the appreciation of
certain assets (i.e. stock, real estate, gold, etc.). They have been taxed
over the years in an effort to have the investment class pay a fair share.
The tax is often deferred for 10, 20 or more years, or in many cases never
paid at all. A higher rate means nothing to those who don’t pay. More
importantly, the very existence of a capital gains tax impedes good business
decisions about when certain assets should be bought and sold.
Comprehensive tax reform for both individuals and
business and a new standard in tax fairness can be described in one
sentence. Tax individual and corporate income at a flat 8% rate (with no
deductions, credits or loopholes), tax individual net wealth at 2%
(excluding $15,000 cash and retirement funds) and impose a 4% Value Added
Sales Tax (VAT) on business.
The low tax rates will produce about $500 billion more
than current federal revenue with no need for AMT, payroll, estate, and
capital gains taxes or deferral of foreign income. “[W]hat's best for the
economy†is an 8% income tax rate to restore economic mobility to the
working class and having business taxes at the lowest rates of any developed
country.
Eugene Patrick Devany, JD, MPA
www.TaxNetWealth.com
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