CTJ Report Calls on Congress to Close the Tax Loopholes for Capital Gains and Dividends
A new report from Citizens for Tax Justice argues that since Wall Street needed a government bailout that taxpayers have no interest in paying for, this seems like a good time to close the biggest subsidy currently enjoyed by Wall Street: The tax loopholes for capital gains and dividends. These loopholes subsidize people whose income results from investments rather than wages, as well as the Wall Street brokers who rely on their business.
President Bush and his allies in Congress significantly expanded a loophole for capital gains (which was previously taxed at a top rate of 20 percent and is now taxed at only 15 percent) and created a new one for corporate stock dividends (which used to be taxed just like any other income but are now also subject to a top rate of 15 percent). As the report explains, the result is that someone living off their wealth can pay taxes at a lower rate than someone who works for wages and has a lower income.
The report also refutes some misconceptions about these tax subsidies, including the "supply-side" idea that they somehow pay for themselves.
Closing these loopholes is not a particularly radical idea. President Reagan signed a tax reform law in 1986 that applied the same tax rates to all income, regardless of whether it took the form of wages or investment income.