Posted by Bob Lord
We shouldn't be surprised by Mitt's rank dishonesty anymore, but coming from someone who says he knows business, this one is a doozy. On 60 Minutes last night, in explaining why it's ok for him to be taxed at a lower rate than folks making $50,000 per year, Mitt dishonestly claimed:
"It is a low rate," Romney said. "And one of the reasons why the capital gains tax rate is lower is because capital has already been taxed once at the corporate level, as high as 35 percent."
You can read a fuller write-up of the interview here:
http://www.huffingtonpost.com/2012/09/23/mitt-romney-tax-rate_n_1908112.html
There's not even a grain of truth to support what Romney claims and, as an experience businessman, he knows it.
Capital gains are gains from the sale of capital assets. Corporate stock is only one type of capital asset. With other capital assets, such as real estate or treasury bonds, there is not even if a tax-paying corporation involved, so two levels of tax are not even possible. More fundamentally, the starting point for determining in gain on the sale of stock is the sales price. The sales price is based on the future prospects of the corporation's business. If I invest in a start-up and the start-up develops a valuable patent, I can sell my stock at a whopping gain way before the coporation earns any profits. So, nothing "has already been taxed once at the corporate level," as Romeny disingenuously claims. Moreover, my gain is based on the anticipated future profits, which may very well never materialize. If, one month after I sold my stock, another corporation developed technologically that rendered the first corporation's patent obsolete, I'd still have my gain, even though the corporation likely never will make money. So, Romeny's justification reduces to "I should pay less tax because years after I pocket my gain the corporation may pay tax on profits remotely connected to the sales price of my stock." What a jerk!
What's galling is that Romney knows these concepts and knows them well. He went on television and, for the umpteenth time, lied through his teeth to the American public. The guy is scum, absolute total stinking rotten scum.
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Mr. Lord,
More simply stated: Capital gains taxes are not a second tax on money previously earned, but a tax on the “gains” or new profit. That is why capital gains taxes are computed from a “basis” or a “gain” above the original sales price.
As for a need for incentive; the fact that taxable profits are diluted by capital losses seems a sufficient perk to me. It’s the only deal common gamblers are offered by the IRS.