The “capital gains deduction”.
Do you have any idea of how absolutely outrageous this idea is? I’ll bet you don’t. That’s why wealthy corporations and citizens have seized upon it. They think they can pull one over on us. And they might be right. Because you don’t know how outrageous this idea is.
A lot of businessmen in Canada in the U.S. have been asking the federal governments of those two countries to increase (or create) a thing called a “capital gains deduction”. A capital gains deduction is a tax write-off that individuals can use to reduce their tax liability for profits they have made on investments. The Americans presently have a limited Capital Gains Deduction; Canada does not. That is, it has no capital gains deduction at all. The real question is, why should there even be one? Canada has it right.
If you work for three years at minimum wage, you might make about $25,000. The government taxes your income. You have to pay your fair share of the costs of roads, policing, defense, health care, education, and so on. You have to work hard to earn that money. You don’t like giving a chunk of it to the government, but that’s life.
Of course, you don’t pay as much tax on $25,000 as you do on $250,000. Why not? Well, for one thing, someone who makes $250,000 uses a lot more of the resources that the government provides to make those earnings possible. Without hospitals, schools, roads, and so on, no one is going to make a lot of money. Someone who makes a lot of money does so because he has lots of buildings, vehicles, telephones, employees, and so on. He also benefits more from the protection offered by the police and the military than that poor schmuck making $25,000 does. So it seems fair enough that they pay a larger share of the costs of providing those things. Besides, he is able to pay more. It’s healthy for our society to contribute what is needed to strengthen the entire community, not just ourselves.
Suppose that instead of actually working for that money that you earned it on investments instead. Let’s say you put $5,000 into Amazon.com and a few years later that $5,000 was worth $30,000. Then you sell your shares. You have made $25,000 without having to lift a finger, except to call your broker. You took a reasonable risk, and you were amply rewarded for it.
A lot of wealthy investors would like you to believe that the $25,000 they earned on investments is special… like Ralph in the Simpsons. It should not be taxed. Why? Well, the real reason is because they are greedy and they don’t want to pay their share of the tax burden. But they will tell you that it is a good thing that people invest in the stock market and the government should encourage such investments by eliminating the tax on the profits of such investments.
Isn’t work a good thing? Isn’t it a good thing that you go to a job everyday and actually contribute something to the economy? Why shouldn’t the government encourage that, by not taxing your income?
Well, the real reason is because you don’t get to shake hands with your congressman very much, and you don’t get to sit at the head table with him at big banquets to raise money for his PAC (Political Action Committee) and you don’t get to schmooze with him on some yacht out in the Gulf of Mexico so you can explain to him, in person, just how important it is that you not have to pay taxes on your income.
You have to understand two simple things about the Capital Gains Deduction. First of all, every deduction the government gives to an individual or corporation that can be applied to taxes that are owed the government is exactly the same as a hand-out. It is the government handing cash over to these individuals or corporations. It is like welfare, except that it is for the rich.
The rich would have you believe that a deduction is different from a hand-out. They’re right: only the rich get deductions because the poor don’t have money to invest. It’s a way for the government to give even more to those who already have a lot.
The second thing you have to understand is that the profit realized from capital gains is just like any other income. There is nothing holy about it. There is nothing charitable or humanitarian about it. It is the profit earned by rich people on investments. They keep this profit. It doesn’t benefit anyone but themselves. It certainly doesn’t provide any benefits that are not also provided by a working wage. [All right– obviously, investment is good for the economy. My point is, it’s just as good as wages, not better.]
And these people have the unmitigated gall to tell you that this deduction will be available to all Americans, regardless of race, colour, or creed. This is possibly just about the most cynical statement ever made about the tax burden. All those welfare mothers in New York? Right. They have the same opportunity to reduce their taxes as Donald Trump. All they have to do is invest $25,000 or so in the stock market. Gosh. It gives me a warm fuzzy feeling just thinking about it.
What these people are saying is this: we want to let everybody else pay for the government. We would like to keep our money.
The problem with their arguments, of course, is that people in Canada and the U.S. have already gone absolutely hog-wild with investments. Mutual funds, pension funds, unions, teachers, doctors, everyone is getting a piece of the action. The idea that the government needs to provide an additional incentive for people to invest in the stock market is absolutely bizarre.
You may think, well, everybody hates taxes. Isn’t it a good thing when you get to pay less? It sure is. So let’s all pay less. Let’s go to Ottawa and make an appointment with Paul Martin and tell him that we want a “working wage tax deduction”. We want the government to remove our tax liability (give us a hand-out) and make our wages tax-free. That would be great, wouldn’t it? The trouble is, Paul Martin would immediately say, “but where would I get the money from to run the country, if we don’t tax wages?” And we would shrug.
Ah… you may have noticed the absurd element in the above scenario. You go to Ottawa and make and appointment with Paul Martin? Ha ha!
But Paul Martin would never to meet with you, would he? Well, he might.
All you have to do is tell him that you are very, very rich.