For all the upset on Wall Street and on markets in Europe and Asia, the serious 7 percent skid in U.S. markets from their recent peak might predictably be blamed on some wide-eyed newcomer on the political scene, a radical fringe grabbing the steering wheel.
Not so. The Republican party still controls the House of Representatives. The Democrats solidified control of the U.S. Senate. The residents of White House, the Obamas, are not filling out change-of-address forms at the local post office.
Curiouser and curiouser, the tax code in discussion in Washington suddenly looks progressive with a return to a gradation of tax rates among the wealthiest 2 percent of the country. After all, if the wealthiest 2 percent includes those earning $300,000 per year and those earning $50 million per year, then it isn't exactly progressive for both those income earners to be lumped into the same tax bracket.
But that's precisely how the code reads today. There are only two tax rates to cover the wealthiest 2 percent, 33 percent and 35 percent. That's down from a 14-tiered system in 1970 in which the top rate was 91 percent, The New York Times pointed out recently.
At the very least, should President Obama keep his word, the tax rates for the wealthy will roll up to 36 percent and 39.6 percent, which would be done by not extending the Bush era tax breaks.
In addition, Obama is pushing to raise the tax rate for capital gains from 15 percent to 20 percent and to tax dividends as if they were income.
Here's the trick: If you don't know what capital gains might be, you more than likely don't declare any on your tax form. The same rule applies if you are scratching your head at exactly what is meant by dividends. That said, if capital gains are taxed at a lower rate than income and dividends are afforded separate treatment as well, then it is likely the wealthiest among us are getting breaks that are out of reach for 98 percent of the country.
Stands to reason. Further, budget talks are focused on those seemingly endless deductions (permission granted to call these loopholes) that are also not standard dinner table talk at most U.S. households.
Statistics back that up. The average tax advantage realized by the average U.S. family on capital gains was $23 in 2011, a recent study said. For the top 0.1 percent of all income earners, the average break was $356,000, the Times reported.
The reason is simple. The higher one's income, the more likely earnings are derived from investments.
For all the studies, meanwhile, where is the study that says the average $50,000 per year household, pro-rated based on the number of dependents, is directly responsible for creating X number of jobs per year and the average $500,000 per year household is responsible for creating X number of jobs per year?
This is this standard Republican argument, is it not? It is unacceptable to tax the wealthy too much, because these folks are the job creators and taking that money out of circulation will reduce the incentive to hire.
The prediction here is that there is a correlation between wealth and job creation that is direct, but thin, and breaks down at a certain level. Chances are, those with an income of $500,000 create more jobs than someone at the poverty line. With that in mind, someone earning $50 million per year should be creating jobs at the speed of light.
To do that, they need to spend themselves down to an average level and, of course, buy only American products. No trips to the Cannes film festival, no Italian suits, no African diamonds, no imported champagne, no jaunts to Bermuda -- and trade in the Porsche for a Ford Mustang.
That first. Then we'll talk.
In international markets Tuesday, the Nikkei 225 index in Japan shed 0.12 percent, while the Shanghai composite index in China fell 0.4 percent. The Hang Seng index in Hong Kong gave up 0.16 percent, while the Sensex in India lost 0.05 percent.
The S&P/ASX 200 in Australia rose 0.56 percent.
In midday trading in Europe, the FTSE 100 index in Britain dropped 0.21 percent, while the DAX 30 in Germany gained 0.23 percent. The CAC 40 in France slipped 0.13 percent, while the Stoxx Europe 600 was down 0.08 percent.
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