Tax policy — the true test of society

U.S. tax policy has more loopholes than the Alamo. Not only that, but (you’ll be startled to hear) almost all those loopholes favor the wealthy. Who’d have guessed?

Take the capital gains and dividend taxes — they’re only about half the top rate levied on regular income. And just who benefits from this largesse? Well, 28 percent of that saving goes to the top 0.01 percent of all taxpayers. That’s the top 1/100th of 1 percent. Sure, this could be a great economic stimulus if those folks all suffered from Imelda Marcos Syndrome and used their savings to buy shoes. Unfortunately, they just salt it away.

Nor do the rich have to pay Social Security tax on all their earnings the way the rest of us do. They’re capped at around $100,000. Just removing that cap would cure most of what ails Social Security today.

Then there are the hedge funds. Here in Connecticut, hedge fund capital of the world, we ordinary citizens are miffed that our clever neighbors pay only 15 percent (the capital gains rate) on their “earnings.� What a rip off!

And whatever happened to the old capital gains rate of 20 percent? Well, President G.W. Bush got Congress to lower it in order to stimulate the economy. Heckuva job, George.

Yet another gift to the rich is the mortgage interest deduction on your W-2 form. It was sold as an aid to purchasing a home for marginal buyers by giving them a tax break. So who ended up getting the biggest break? Mansion owners.

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As the press is careful to note, some of these gifts to the wealthy, the ones included in Mr. Bush’s 2003 cornucopia to the prosperous, will expire at the end of 2010. Dandy, but Mr. Obama campaigned on ending them now. That promise is fast disappearing.  Congress does not seem up to grappling with taxes in addition to health care and climate change. Indeed, Congress does not seem up to grappling with much.

Politically, you would think that senators and representatives might be eager to make the rich pay their fair share. They are relatively few in number, after all, and forcing them to pony up would mean more revenue to help attend to the needs of the many.

But the rich aren’t dumb. They donate a sliver of their stash to congressional campaigns to help lawmakers get re-elected. Until we achieve campaign finance reform, as Connecticut has done, our gold-plated tax laws are unlikely to improve very much.

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Of course it’s also prudent for compliant congressmen to come up with some sort of policy rationale to use as a fig leaf for obscuring these greed-based tax rates. The one best accepted by the press is that raising taxes on the wealthy would restrain investment. The media has readily swallowed that stinker although little evidence to support it is ever produced.

What really happens is that, given an extra windfall, the rich mostly buy up more securities, along with a cute little getaway on St. Kitts. Actually it’s the POOR who recycle windfalls back into the economy. They can’t afford stocks, bonds or options.

Thus, American disparity of income and wealth continues to grow. This despite the blessed experiences of Japan, Norway and Sweden, countries with much less inequality, which show that sharing the wealth reduces the incidence of criminal, educational, medical and mental problems. But then again, without such problems what would we columnists have to write about?

Columnist William A. Collins is a former state representative and a former mayor of Norwalk.

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