There is this Starbucks ex-CEO billionaire Howard Schultz who’s pushing to run as a 3rd party centrist candidate to be the 46th US president without any prior government experience, who truly thinks that he can change the way government works, today.
What many Wall Street tycoons want is an alternative to President Trump, who will also do everything possible to maintain their current levels of taxation as per the 2017 GOP tax cuts bill and the current impetus for deregulation, while not being so toxic. The answer to their prayers is Howard Shultz.
They get that this objective is not possible via the Democratic Party as its members would never go for cuts to entitlements without also taking a look at increasing taxes. The truth is that both are required to adequately address the issue of the US ballooning debt levels, as in the Simpson-Bowles model.
Many of these Wall Street types are crying foul over some of the tax increase proposals by Democratic Party voices like US Senator Kamala Harris and Rep. Alexandria Ocasio-Cortez, but I know of only one of this crowd, Steven Rattner who has offered viable alternatives. The same goes for their antipathy towards the Democratic Party concept of Medicare for all, which is becoming more popular with American voters. But where are their alternative suggestions?
On January 28, 2019, Steven Rattner for the New York Times penned the following op-ed piece, “A Better Way to Tax the Rich” (“Raise the capital gains tax and treat investment earnings like ordinary income.”)
“Kudos to our latest political supernova, Alexandria Ocasio-Cortez, for helpfully bringing taxes back into focus, with her call for a new top tax rate of 70 percent on incomes above $10 million a year.”
“That seemingly simple concept makes for a great headline, but it’s not great tax policy. While I’m all for raising taxes on the wealthy (in large part because we need to deal with our growing deficit), there are more sensible ways to do it.”
“For starters, Ms. Ocasio-Cortez seems to be ignoring the burden of state and local taxes, particularly for residents of places like her hometown. For us New Yorkers, the top rate for those levies is 12.7 percent. And thanks to the 2017 Republican tax cut, it is no longer deductible, bringing her proposed top rate to 82.7 percent.”
“There are other, better ways to raise revenue — in particular, by increasing the tax rate on capital gains and dividends and closing loopholes.”
“At present, a beneficiary of long-term capital gains or dividends pays 23.8 percent of the profit to Washington. That’s already a good bit less than the 37 percent top rate on so-called ordinary income.”
“Among the justifications for taxing profits on capital at a lower rate than income from work has historically been that companies pay taxes on their profits, so taxing shareholders on their gains represents a form of double taxation.”
“But the 2017 tax cut legislation reduced the tax rate on corporate profits to 21 percent, from 35 percent. So if taxes on capital gains and dividends were raised by those 14 percentage points, we capitalists would be no worse off — and American companies would still be more competitive globally, the theory behind reducing the corporate tax rate.”
“Evaluating the revenue raised by any of these proposals is a murky exercise. Any big increase in tax rates would lead Americans to try to game the system by changing their behavior. Nevertheless, an expert at the Tax Policy Center told me that Ms. Ocasio-Cortez’s proposal could raise around $300 billion a year.”
“My alternative could potentially raise as much revenue, using Congressional Budget Office estimates as a guide. That’s because a significant amount of the income of the ultra-earners comes as capital gains, and because my concept would apply to all capital gains and dividends, not just income above $10 million a year.”
“But while raising those tax rates closer to those on ordinary income would make the system fairer, other changes would be required to prevent owners of appreciated assets from avoiding their tax obligations. For example, the United States should eliminate the provision that forgives unpaid capital gains taxes on assets held at death.”
“And there are many loopholes that could be closed in the name of greater equity. In 2016, the Obama administration provided a helpful list of candidates: They range from jettisoning the special deductions and credits that producers of fossil fuels enjoy to eliminating the notorious carried interest provision, which allows private equity managers (including me) to pay the lower capital gains rate on what is effectively ordinary income. Of course, if capital gains were taxed as ordinary income, that problem goes away.”
“Another fruitful area for loophole-closing is the provisions that allow many real estate guys (including President Trump) to pay little, if any tax. For example, while the 2017 tax bill eliminated the rule allowing owners of most appreciated assets to avoid tax by exchanging them for other comparable assets, that loophole was left in place for owners of real estate. (This is also known as the step-up basis.) So a landlord who sells one building can avoid paying capital gains taxes on the profits when he uses those profits to buy another investment property.”
As per the 5/2/2018 Investopedia report by Will Kenton:
What is Step-Up In Basis
“Step-up in basis is the readjustment of the value of an appreciated asset for tax purposes upon inheritance, determined to be the higher market value of the asset at the time of inheritance. When an asset is passed on to a beneficiary, its value is typically more than what it was when the original owner acquired it. The asset receives a step-up in basis so that the beneficiary’s capital gains tax is minimized.”
BREAKING DOWN Step-Up In Basis
A step-up in basis reflects the changed value of an inherited asset. For example, an investor purchasing shares at $2 and leaving them to an heir when the shares are $15 means the shares receive a step-up in basis, making the cost basis for the shares the current market price of $15. Any capital gains tax paid in the future will be based on the $15 cost basis, not on the original purchase price of $2.
See Forbes analysis: A 70% Income Tax Rate For The Super-Rich? There May Be A Better Way…
he makes some very good points in his capital gains tax hike proposal. BUT, After dealing with one “businessman” in office with its miasma of conflicts of interest, nepotism and downright incompetence, I do NOT want to see yet another businessman running for the highest office in government. 8 years of “business” in place of governance will completely destroy our country.
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Mr. Schultz claims he wants to bring peoples together as an outsider with no government experience. Just how gullible does he think, we are.
I’m believing that he’s a less toxic version of President Trump but who would still keep the priorities of lower taxes for rich folks and deregulation. He and his mouthpiece Steve Schmidt are fooling no one. He’s the Trojan horse for the super rich.
If he can’t compete in the marketplace with his ideas within the Republican or Democratic Parties, then he’s coming in as a spoiler who could give President Trump a second term.
Most of the Independent registered voters who are the majority of US voters with over 40% are NOT true independents. Most either lean to the left or the right. There’s about 10% who are true independents.
As per the 2018 Conversation report, “According to the Gallup polling firm, the identity that people choose most often is actually “independent” – not Democratic or Republican. In 2017, 42 percent of Americans chose this label – up from the low 30s just 14 years ago, in 2004.”
“However, three-quarters of these “independents” admit, when asked, that they lean toward favoring the Democratic or Republican Party. Judging by how they vote or what they think of national political leaders, the truth is that these “leaners” really are partisans rather than independents. Apparently, many people who like to think of themselves as independent-minded and free of party influence just aren’t.”
“Only about 10 percent of Americans are what we call “pure independents” – that is, people who identify as independents and claim not to favor either of the two major parties. Nor has that percentage grown in recent years. This means that the vast majority of Americans – consistently around 90 percent – are partisans.”
I’m convinced that Mr. Schultz does not have a viable plan to get 270 electoral votes in 2020. He’s a phony politician who is already talking out of both sides of his mouth.
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Gronda, very interesting idea. I also love the chart on the recent Presidents. Keith
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There is going to have to be some tax increases, even as a correction to the 2017 GOP tax cuts as well as entitlement reforms.
I’m grateful for Mr. Rattner offering a solution.
Gronda, agreed. When the Simpson-Bowles Deficit Reduction Commission came out in December, 2010 when the debt was at $8 Trillion and a huge problem, the recommendations were $2 in spending cuts for every $1 in tax increases. It is now at $22 Trillion and is projected to be $34 Trillion. The Freedom Caucus made this their issue and now ignore it. The tax bill of thirteen months ago was malfeasance in my mind.
Yet, the Democrats must also pay attention to the spending cuts as well. Quite simply, the Committee for Responsible Federal Budget, CBO, The Concord Coalition and Tax Policy Institue all say we must have tax increases and spending cuts to solve our debt problem. The math will not work otherwise. The CRFB has some great material on where cuts can be made as well as tax increases.
When the CRFB meets with GOP lawmakers, they nod yes until the subject of tax increases comes up. The Dems nod yes until the subject of spending cuts come up. We need both and the next President must be mindful of these challenges. Our expenses are $4 Trillion and our revenue is $3 Trillion. As the interest on the debt grows, our ability to make demonstrable change is increasingly compromised.
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