FacebookTwitterGoogle+RedditEmail

The Capital Gains Escapades of Paul Ryan

Aside from the sub-three hour marathon he never ran, the most fanciful notion to come from GOP vice presidential candidate Paul Ryan is his proposal to eliminate capital gains taxes. The idea violates a central principle of tax equity, it mocks his tax reform and deficit-cutting pretensions, and it tends to confirm what the economist Paul Krugman has been saying for the longest time—Ryan is an over-hyped pretty boy, heavy on ideology but light on fiscal chops.

The tax principle that Ryan would flout is called horizontal equity. Simply put, it holds that people who make similar incomes should pay similar taxes. Obviously, with no tax on capital gains, there’s no hope of horizontal equity.

Not that there’s any such equity now. Capital gains (and dividends) are hugely tax-advantaged, with the tax on long-term gains currently at an 80-year low of 15%. If the Bush tax cuts expire on schedule, the capital gains levy is set to rise to 20% in 2013—still less than the tax the middle class pays on wages.

Things might have been otherwise if Ryan had voted differently as a member of President Obama’s bi-partisan fiscal commission, a.k.a. Bowles-Simpson.

The commission, you’ll recall, was charged by the president with developing a plan to attack the federal deficit and put the nation on fiscal terra firma. Led by co-chairs Erskine Bowles and Alan Simpson, the commission delivered as charged. A key ingredient in their plan was horizontal equity: equal taxes on all income, including capital gains and dividends.

Ryan chairs the House Budget Committee, and was the acknowledged policy-wonk leader of the Republicans on the commission. He’s fond of talking the talk on deficit reduction. Put to the test, he declined to walk the walk. He voted against the plan; it was his vote, essentially, that turned the promise of Bowles-Simpson into one more instance of gridlock, one more disillusion.

Coincidentally, another deficit-reduction plan came in close on the heels of Bowles-Simpson. This one issued from the Bipartisan Policy Center’s Debt Reduction Task Force, and it was co-chaired by former Federal Reserve official Alice Rivlin and ex-senator Pete Domenici. Its recommendations differed in important respects from Bowles-Simpson, but the plans had this in common: each called for horizontal equity, for equal taxes on all income.

In his acceptance speech at the GOP convention, Ryan slipped in a marathon-like mention of the Bowles-Simpson commission: “He [Obama] created a bipartisan debt commission. They came back with an urgent report. He thanked them, sent them on their way, and then did exactly nothing.”

Of course it was Ryan himself who effectively doomed Bowles-Simpson, making sure the report went to the White House without the necessary support to force a Congressional vote.

While the fiscal pretender Ryan calls for an end to capital gains taxes, others continue to call for horizontal equity.  A recent New York Times editorial scolded private equity firms for converting management fees into capital gains in order to take advantage of the 15% rate. “The best way to end this problem,” The Times concluded, “is to get rid of the special rate for capital gains. As long as income from investments is taxed at a lower rate than income from work, there will be no stopping the search for ways, legal or otherwise, to pay the lower rate.”

There’s another believer in horizontal equity too, but he’s no longer with us. President Ronald Reagan’s signature Tax Reform Act of 1986 called for equal taxes on all income. In a signing ceremony on the White House lawn, Reagan called the bill “a sweeping victory for fairness….and the best job-creation program ever to come out of the Congress.”

There’s no better time for an encore than 2012.

Gerald E. Scorse helped pass the bill requiring basis reporting of capital gains. He writes articles on taxes.

More articles by:

Weekend Edition
November 16, 2018
Friday - Sunday
Jonah Raskin
A California Jew in a Time of Anti-Semitism
Andrew Levine
Whither the Melting Pot?
Joshua Frank
Climate Change and Wildfires: The New Western Travesty
Nick Pemberton
The Revolution’s Here, Please Excuse Me While I Laugh
T.J. Coles
Israel Cannot Use Violent Self-Defense While Occupying Gaza
Rob Urie
Nuclear Weapons are a Nightmare Made in America
Paul Street
Barack von Obamenburg, Herr Donald, and Big Capitalist Hypocrisy: On How Fascism Happens
Jeffrey St. Clair
Roaming Charges: Fire is Sweeping Our Very Streets Today
Aidan O'Brien
Ireland’s New President, Other European Fools and the Abyss 
Pete Dolack
“Winners” in Amazon Sweepstakes Sure to be the Losers
Richard Eskow
Amazon, Go Home! Billions for Working People, But Not One Cent For Tribute
Ramzy Baroud
In Breach of Human Rights, Netanyahu Supports the Death Penalty against Palestinians
Brian Terrell
Ending the War in Yemen- Congressional Resolution is Not Enough!
John Laforge
Woolsey Fire Burns Toxic Santa Susana Reactor Site
Ralph Nader
The War Over Words: Republicans Easily Defeat the Democrats
M. G. Piety
Reading Plato in the Time of the Oligarchs
Rafael Correa
Ecuador’s Soft Coup and Political Persecution
Brian Cloughley
Aid Projects Can Work, But Not “Head-Smacking Stupid Ones”
David Swanson
A Tale of Two Marines
Robert Fantina
Democrats and the Mid-Term Elections
Joseph Flatley
The Fascist Creep: How Conspiracy Theories and an Unhinged President Created an Anti-Semitic Terrorist
Joseph Natoli
Twitter: Fast Track to the Id
William Hawes
Baselines for Activism: Brecht’s Stance, the New Science, and Planting Seeds
Bob Wing
Toward Racial Justice and a Third Reconstruction
Ron Jacobs
Hunter S. Thompson: Chronicling the Republic’s Fall
Oscar Gonzalez
Stan Lee and a Barrio Kid
Jack Rasmus
Election 2018 and the Unraveling of America
Sam Pizzigati
The Democrats Won Big, But Will They Go Bold?
Yves Engler
Canada and Saudi Arabia: Friends or Enemies?
Cesar Chelala
Can El Paso be a Model for Healing?
Mike Ferner
The Tragically Misnamed Paris Peace Conference
Barry Lando
Trump’s Enablers: Appalling Parallels
Ariel Dorfman
The Boy Who Taught Me About War and Peace
Binoy Kampmark
The Disgruntled Former Prime Minister
Faisal Khan
Is Dubai Really a Destination of Choice?
Arnold August
The Importance of Néstor García Iturbe, Cuban Intellectual
James Munson
An Indecisive War To End All Wars, I Mean the Midterm Elections
Nyla Ali Khan
Women as Repositories of Communal Values and Cultural Traditions
Dan Bacher
Judge Orders Moratorium on Offshore Fracking in Federal Waters off California
Christopher Brauchli
When Depravity Wins
Robby Sherwin
Here’s an Idea
Susan Block
Cucks, Cuckolding and Campaign Management
Louis Proyect
The Mafia and the Class Struggle (Part Two)
David Yearsley
Smoke on the Water: Jazz in San Francisco
Elliot Sperber
All of Those Bezos
FacebookTwitterGoogle+RedditEmail