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Thu Feb 21, 2013, 09:16 AM

Capital Gains Tax Cuts ‘By Far’ The Biggest Contributor To Growth In Income Inequality, Study Finds

Capital Gains Tax Cuts ‘By Far’ The Biggest Contributor To Growth In Income Inequality, Study Finds

By Travis Waldron

Changes in tax law that reduced the federal tax rate on capital gains income is “by far the largest contributor” to rising income inequality in the United States, according to a new paper from Thomas Hungerford, an economist at the Congressional Research Service.

Capital gains and other investment income was taxed as regular wage income from 1986 until 1996, when the capital gains rate was reduced. It was further reduced as part of the Bush tax cuts, and over the last decade, it has reversed the equalizing effects of taxes and allowed for massive income gains for the wealthy that translated directly into increased income inequality:

By far, the largest contributor to this increase was changes in income from capital gains and dividends. Changes in wages had an equalizing effect over this period as did changes in taxes. Most of the equalizing effect of taxes took place after the 1993 tax hike; most of the equalizing effect, however, was reversed after the 2001 and 2003 Bush-era tax cuts. <...>

The large increase in the contribution of capital gains and dividends to the Gini coefficient, however, is due to the large increase in the share of after-tax income from capital gains and dividends, and to the increase in the correlation of this income source with after-tax income.

Hungerford’s findings are similar to a study he produced for the Congressional Research Service in 2011, which found that while income grew 25 percent from 1996 to 2006 for all Americans, it grew 74 percent for the top 1 percent and 96 percent for the top 0.1 percent. That study also found that tax cuts on capital gains were the biggest driver of the disparity.

The capital gains rate increased to 20 percent at the beginning of 2013, and top earners will pay an even higher rate because of a surcharge to help pay for Obamacare. Still, the rate remains far lower than the top income tax rate, even as inequality in America is now comparable to countries like Pakistan and the Ivory Coast. (HT: Greg Sargent)

http://thinkprogress.org/economy/2013/02/20/1616651/capital-gains-tax-cuts-by-far-the-biggest-contributor-to-growth-in-income-inequality-study-finds/


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Reply Capital Gains Tax Cuts ‘By Far’ The Biggest Contributor To Growth In Income Inequality, Study Finds (Original post)
ProSense Feb 2013 OP
Laelth Feb 2013 #1
Sekhmets Daughter Feb 2013 #2
WCGreen Feb 2013 #3
ProSense Feb 2013 #5
Yo_Mama_Been_Loggin Feb 2013 #4
entanglement Feb 2013 #6
ProSense Feb 2013 #8
ProSense Feb 2013 #7
Wounded Bear Feb 2013 #9

Response to ProSense (Original post)

Thu Feb 21, 2013, 09:18 AM

1. Not surprised. k&r n/t

-Laelth

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Response to ProSense (Original post)

Thu Feb 21, 2013, 09:18 AM

2. Money is like a magnet...

it attracts money. By taking so much of what is a finite pie, the rich have impoverished much of the nation.

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Response to ProSense (Original post)

Thu Feb 21, 2013, 09:20 AM

3. Absolutely...

When you start giving preferential tax rates to one income over the other, people will naturally try to get more of their money from that part of the pile.

Owning stuff is much better in the eyes of the IRS than wages.

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Response to WCGreen (Reply #3)

Thu Feb 21, 2013, 09:55 AM

5. Exactly. n/t

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Response to ProSense (Original post)

Thu Feb 21, 2013, 09:26 AM

4. Yes and taxing it as income was started under......

Ronald Reagan.

Something the Republicans now refuse to acknowledge.

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Response to ProSense (Original post)

Thu Feb 21, 2013, 10:16 AM

6. Hedge-fund manager John Paulson made about $5 billion in 2010.

His gains were subject only to the 15% capital gains tax rate prevailing at that time (adding insult to an already grievous injury).

The principal beneficiaries of such reactionary policies are members of an acutely parasitic wealthy class (hedge-fund managers and the like). It is a recipe for enriching speculators.
Capital gains should be taxed on a progressive scale just like all other income.

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Response to entanglement (Reply #6)

Sat Feb 23, 2013, 11:11 AM

8. Same with Mitt, mostly capital gains n/t

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Response to ProSense (Original post)

Thu Feb 21, 2013, 05:08 PM

7. Kick! n/t

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Response to ProSense (Original post)

Sat Feb 23, 2013, 11:35 AM

9. K & R for D'uh factor...nt

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