Did You Know Capital Gains Don’t Pay Payroll, Medicare Taxes?

Just saying.  Not only is Capital Gains taxed at the low rate of 15% compared to the top wage tax rate of 35%, but these gains are free of payroll taxes and taxes that pay for Medicare and Medicaid.

Nice being wealthy hey?  From an article by Bruce Bartlett, former top advisor to people like Ron Paul and President Ronald Reagan.

Significantly, much of Mr. Romney’s capital gains income achieved this treatment through a special tax loophole called carried interest. According to recently released documents, executives at Bain Capital, where Mr. Romney made the bulk of his estimated $250 million fortune, saved $200 million in federal income taxes and another $20 million in Medicare taxes because of the carried interest loophole…..

As long as a taxpayer decides when or if to realize gains for tax purposes, that is a very valuable loophole even if gains are taxed at the same rate as ordinary income. For one thing, a taxpayer can easily match gains with losses to avoid having net taxable gains. And, of course, capital gains would still avoid the 15.3 percent payroll tax, which applies only to wage income……

Beezer here.  No wonder the wealthy continue to amass more and more of the nation’s income.  They don’t have to pay taxes at the same rates most Americans pay.  We’ll never get out from under deficits and debt with the existing tax system.  To say it needs a major overhaul and simplification is a no brainer.  


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11 Responses to “Did You Know Capital Gains Don’t Pay Payroll, Medicare Taxes?”

  1. captaal Says:

    Guess what, the money invested in the market or other savings was already taxed. The profits from these investments will be taxed again at 15% which is the capital gains rate. Now that I explained that to you Beezy we can now begin our lessons on Americam history. Do you know who the 1st president was?

  2. captaal Says:

    According to you we live in a victomized society where all those who don’t have, don’t have because everything is unfair.NO, it’s not unfair, it’s is what we put into it accepting the successes along with the failures. If success is the goal, drive has to be the vehicle that brings us there.You think we should all arrive at the same point no matter the effort, it doesn’t work that way.Those who earn and save deserve the fruits of their labor but liberals like you resent the premise. You believe that if one is too successful they don’t deserve what they have earned and it should be taken from them and given to those who have either failed or were too lazy to put in the effort to do it for themselves. Beez, you and I are so different it shocks me but you are my friend.

  3. Chris Herbert Says:

    I accept failure and success. I just like success better. And I think more people succeed if the system isn’t rigged. Taxing wages more than capital gains and dividend income, in my opinion, rigs the system against actual production. Littering the system with special tax avoidance schemes rigs the system AND warps free markets. Lower capital gains taxes, for example, discourages real re-investment because it’s cheaper and easier to simply take out the capital gain, or distribute free cashflow back in the form of dividends instead of re-investing that capital.

    That’s why the lower corporate tax rates have gone since the early 1950s until today, the lower capital investment rates have gone as well. They correlate almost perfectly.

    A lot of our growth has come from technological innovation. But our ability to continue that process widely is compromised by the fact we’ve shipped so many factory floors offshore. And it’s on those factory floors that the next generation of innovation most often arises. We’ve gotten to the point where entire industries have disappeared in America. You simply cannot get a lot of infrastructure work done entirely by domestic industry because it no longer exists.

    That’s a huge mistake in policy and we’ve been making it for more than 3 decades. Now we’re going to have to rebuild from scratch. The sooner we get about doing it, the better.

  4. Chris Herbert Says:

    The more capital gains is actually applied to working capital, as opposed to financial gains capture, the better off we’ll all be. And the idea of once a dollar is taxed, that’s the last time that dollar will ever get taxed, is ridiculous. Dollars are fungible. They go everywhere. My expenditure is someone else’s income, for just one example. Thinking of some type of static dollar, that once taxed shall never be taxed again, is to me a fantasy dollar and totally mis-represents the real world. I have no clue as to the origin of this concept. But it sounds like political marketing spin as opposed to what a dollar actually is, and does in the real economy.

  5. the advisor Says:

    Of course you fail to mention that short term capital gains (all that trading and stuff you commies rail against) is taxed as income, which you fail to mention. Disincentivize long term investment and guess what you’ll get? Less investment. Never mind the double taxation argument as well. And the next generation of innovation has to be invested in by the private and capital markets. Good idea to make that less attractive? I think not.

  6. captaal Says:

    I could not have said it better Advisor.Ungortunately it only goes to deft ears.

  7. Chris Herbert Says:

    Paying income taxes on short term capital gains is so, yesterday. Hedge funds churn like butter but don’t pay income tax rates on their profits. Only the dumb retail investor shoulders income tax rates on capital gains. And even so, these profits are not burdened by payroll taxes or Medicare etc. taxes wage income pays.

    Low cap gains taxes encourage business and industry to cash in cap gains, instead of re-investing those gains back into real capex. That focus is short term, not long term. A 366 day focus is not long term, by the way, under any metric. Many national tax plans stagger the cap gains tax rate, lowering it the longer the capital is invested and not cashed out.

  8. Chris Herbert Says:

    Just to be clear on my basic point: Don’t privilege different types of income. If you take away the influence of differing rates on income types, you emphasize the individual preference instead. And that preference, in my opinion, will more accurately reflect economic need. So I’m more libertarian than you are, in this regard.

    Additionally, it simplifies the tax system, which almost everyone believes needs doing.

  9. the advisor Says:

    If you are looking for an argument against carried interest, you won’t find one from me. Funny how obama hasn’t tackled this issue given all his hedge fund connections.

  10. Chris Herbert Says:

    We do have an oligopoly problem, don’t we. Congress is bought and paid for, and the White House is also compromised by all the money. Romney and the Republican/Tea Party completely capitulated a long time ago. Tis why they get most of the oligopoly money. If it looks like Obama will get re-elected, look for a lot of last minute cash being thrown his way.

    Right now, keeping the money flowing may be Romney’s biggest challenge. He’s always been great at raising campaign cash, though. And he will still have a billion or so in TV ads from the secret PACs.

  11. Madeline Says:

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