Low tax rates on investment income are unfair

Unlike Bernie Sanders, I love capitalism. I appreciate the right to invest, to earn money on my money. America, however, has gone too far in its love of capitalism. We glorify capitalism and capitalists. I say this in response to Speaker of the House Paul Ryan’s proposal that 50 percent of a taxpayer’s investment income (capital gains, dividends, and interest income) be tax-exempt with the other 50 percent taxed as “ordinary income.”

Consider that proposal within a simple tax system where income up to $50,000 is taxed at a rate of 15 percent and income above $50,000 at 25 percent. A household with salary income of $100,000 would owe taxes of $20,000 ($7,500 on first $50,000 and $12,500 on the second $50,000). In contrast, a household with $100,000 of investment income would owe taxes of just $7,500 as 50 percent of its income is exempt. Of note, the “working” household would also owe $7,650 in FICA taxes.

Mr. Ryan says that government shouldn’t pick “winners and losers,” yet his tax proposal clearly does. Two households similarly situated in terms of income owe dramatically different taxes. Our federal tax system has long offered lower tax rates on investment income than on wages and salaries — essentially favoring capitalists over workers. No rationale justifies favoring of one class of citizens at the expense of other. Capitalists require no tax incentive to invest, that’s what capitalists do — they invest! A rational capitalist will not bury his money in the backyard because investment income is taxed at the same rate as wages.

Few “working” households see significant benefits from investment tax preferences. These rate preferences do not apply to retirement plans where most have their savings. Clearly most investment income is earned by those households with the most money to invest. High-networth households reap virtually all of the tax breaks accorded investment income.

If “winners” are to be picked, why favor those who have already won? Or as George McGovern asked many years ago, why is income earned by sweat be taxed at a higher rate than income earned by money? Workers must demand fair and equitable taxation of all income. That won’t keep the rich from growing richer, but it will slow the growing disparity in income and net worth. ROBERT BEAVES Aleppo