Thursday, July 31, 2008

Andrew Mellon: Friend of Tax Fairness

In his 1924 classic Taxation: The People's Business, Treasury Secretary Andrew Mellon wrote:
“The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business."
Key words here: inherently excessive. That's obviously in the eye of the beholder.

But he also wrote:
“The fairness of taxing more lightly income from wages, salaries or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man’s life and it descends to his heirs. Surely we can afford to make a distinction between the people whose only capital is their mettle and physical energy and the people whose income is derived from investments. Such a distinction would mean much to millions of American workers and would be an added inspiration to the man who must provide a competence during his few productive years to care for himself and his family when his earnings capacity is at an end.”
So explain to me and Andy again why we tax capital gains and "carried interest" at 15% while nurses and office managers are taxed at a marginal federal rate of 43% (28% + 15.3% FICA tax)?

Is it that now that we have Social Security for workers, we need to give owners a little Investor Security as well, or what?

1 comment:

Anonymous said...

Yes! I, too, support a flat tax of 15% all around!


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