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…