Capital gains. Political losses

In 1996, the Los Angeles Times called me a “P.R. Guru” and whether it was true or not, the accusation took on a life of its own and people began to believe it. Whatever one believes to be true becomes binding upon them and determines the outcome of their behavior. So since then I’ve had a decent track record at promoting causes that nobody else would touch or even conceive of as being promotable.

If there’s one thing I can’t stand it’s when a client or an organization that I’m promoting misses an opportunity for publicity when an “I told you so” moment arrives. Although it’s been decades since the California Peace & Freedom Party allowed me any official role in public relations, I almost wish that I was on speaking terms with the leadership (of my own party) so that I could nudge them into jumping on an obvious P.R. offensive that could help to convince the public that the party is still relevant. One of its key early issues has all of a sudden become the subject of major national debate and yet the party leadership and its candidates aren’t saying anything about it.

Ambrose Bierce once defined that “Radicalism is the conservativism of tomorrow, injected into the affairs of today.” In 1971-72, the California Peace & Freedom Party (PFP) launched an initiative petition drive under the leadership of the San Jose Eugene V. Debs PFP Club to tax capital gains at the same rate as ordinary income. At the time this was both a radical and a rational program of tax reform.

The ethical and moral implications of the differential between capital gains taxation — i.e., the tax on profits from stock, real estate, bonds, etc. — as opposed to the income one derives from working for a living is basic fairness. Why should somebody who invests for a living get a tax break while somebody who works for a living does not? The usual answer is that the lower tax rate is justified by the need to encourage investment to produce jobs, a trickle down philosophy.

So, at the risk of criticizing a simplified straw man argument, let me get this straight: if you don’t give somebody a tax incentive to invest money they won’t invest it? What do you think they’re going to do? Get a job?

I was the Los Angeles County coordinator for the PFP initiative to reform the capital gains law in California. I solicited and received endorsements for the proposal from the Los Angeles Democratic Club, UAW Local 645 and a lot of other mainstream organizations that recognized the simple fairness message of the proposal. Still in 1971-72, this was considered a radical notion, that people who earn the same amount of income should be taxed at the same rate regardless of whether they are a worker or a capitalist.

One Response to Capital gains. Political losses

  1. Steve G Tue, Feb 14, 2012 at 4:16 pm #

    I’d like to see it taken one step further. I think that investments for companies that have most of it’s workforce inside the USA should have the capital gains on those investments still taxed at a lower rate than ordinary income. But only if those companies are based in the USA and actually hire USA workers for most of it’s workforce. Investors don’t care where the products are made or sold, they only care about the bottom line. So if they were taxed at a higher rate for say investing in Apple, they would look at invest in a USA corporation who hires mostly USA workers and they would be keeping more of the profits they make by enjoying a lower tax rate on that investment. The same monetary investment you could send to a corporation in India and make 20% and be taxed at say 30% wouldn’t be as profitable as the same amount of monetary investment you could send to a USA corporation who hires mostly USA workers and still make that 20% profit, but have that investment be taxed at a lower rate. I understand at one time we needed people to invest in corporations and so a lower capital gains tax rate made it attractive to do so, but it’s one of the many things on a long list of things that are killing the USA today. We can’t keep on with the same policies that were necessary before, but are not necessary today, especially if today they hurt the US and not do much to help it.