When Romney resisted releasing his tax records unless he becomes the GOP nominee, the discussion that was started by the Occupy movement found new life. The fundamental issue is fairness in the U.S. economic system—not class warfare, as some would like to characterize it. Many in the Occupy movement believe that corporate influence in the political process unfairly disadvantages working people and rewards greed. One of the areas unfairly influenced by wealthy corporations and persons is the tax code. Many Occupiers want that system reformed.
The 1% have
the means to not only influence the debate, but to buy the political leverage
necessary to secure favorable outcomes. The absolute majority of the 99% want a
fair system that neutralizes these influences. They don't want giveaways from
the 1% and they are not opposed to capitalism and private property ownership.
The NYT
reported that Mitt Romney, for instance, “has called for keeping the current
low rates for capital gains and eliminating capital gains altogether for
taxpayers making less than $200,000.” Joe Scarborough, a conservative
commentator and former lawmaker, defended the low 15% percent tax rate paid by
Romney and other wealthy individuals by suggesting that the money taxed at the
15% rate is actually taxed twice: first it is taxed as income at a higher rate
and then taxed again as investment income. That is a disingenuous and misleading
characterization of the facts. Here is why:
Let's say a
hardworking Joe makes $100,000 a year. That income will be taxed at a rate closer
to 35% than to 15%. After years of hard work, Joe saves $50,000, which he
invests. At the end of the year, Joe receives a statement showing that he
earned $2500 through capital gains, dividends, interest, etc. Only the $2500
Joe earned on top of his original investment of $50,000 will be taxed at the
15% rate; Joe is not taxed at a 15% rate on $52,500 (his original investment
plus his gains). So there is no double taxation.
Now let's look
at another scenario. John is a software engineer who has worked for Microsoft
since the early 1990's. John's yearly salary is about $67,000. But when John
was hired, he took the stock option the company offered its employees, which
consisted of 5000 shares priced at $5 a share. After more than five years, John
was able to sell these shares for the market value of $300 per share (a gross
sale value of $1,500,000). The net income (after deduction for cost and fees)
is taxed only once, at the 15% rate. Furthermore, it is only taxed the year it
is sold, not every year John saw gains through increase in stock prices.
Let's look
at a third example. Brinn is a programming guru. He quit school to start an
Internet company. His company was so successful he valued it at $1,000,000 and
made it a public company. Before the initial IPO, Brinn decided arbitrarily to
fix the value of each share in his company at $1. Now Brinn's company is
available for public trade, but not before he reserved 500,001 shares for
himself and 200,000 shares for his employees or his favorite charity. Brinn is
now the CEO of the new public company, too. He decides that he will receive $1
a year in salary, but will receive additional compensation in the form of stock
options.
Because
Brinn's company is awesome, everyone wants in. Joe used some of his saved money
to place a bid to buy some shares. Before Joe is able to fulfill his order, the
price of a single share in Brinn's company jumps to $50. Suddenly, Joe becomes the
proud owner of 100 shares costing him about $5000, which drives Brinn's wealth
to over $25,000,000.
Five years
later, Joe sells his 100 shares at $100 per share (earning about $5000 on top
of his original investment). Brinn, on the other hand, earns $50 million. He
will pay the 15% tax rate on those earnings, because he does not have to claim
it as earned salary income on his tax return. That is a best case scenario. Another equally likely scenario is this: after five years, Joe is forced to sell his shares to pay for an unexpected event. Although the price of the stock was up at some point near $100, when Joe needed to the cash however, the stock was $48 per share. Joe lost $200 in this investment. Brinn is still $47 per share ahead.
Capital venture
investors use a multitude of methods to avoid paying the higher tax rate that
99% of monthly wage earners must pay. Stock options, property reclassification,
tax shelters, and charitable donations are just few ways they control their
wealth and avoid paying higher taxes. Business professionals have access to
tools and knowledge that allow them to find the loopholes they need to pay
minimum taxes.
Moreover,
corporations and wealthy individuals "tax" the infrastructure, the
natural resources, and environment more than the rest of us. They use
heavy trucks on our highways and roads to transport their goods. CEOs travel in
private jets that pollute our environment while hundreds of us travel crammed
in crowded airplanes, buses, and trains. They use more energy in their
huge mansions and air-conditioned offices in skyscrapers, while the
99% share fewer resources and use communal services.
In short, the
99% are not asking to take the 1%’s money, they just want a fair system that
offers everyone equal access to resources, to public servants, and to the law.
The 99% want true equal opportunity.
No comments:
Write commentsShare your thoughts...