Lowering the capital gains tax is insulting to everyday Americans

Lowering the capital gains tax is insulting to everyday Americans
© Greg Nash

Thanks to nearly two years of deregulation and tax cuts, the economy is a booming success for the millionaires, billionaires and corporations that reap profits at the expense of a stagnating middle class. The Trump administration is now promising more of the same. In a recent interview, Treasury Secretary Steven MnuchinSteven Terner MnuchinTrump names Mulvaney acting chief of staff On The Money: House GOP struggles to get votes for B in wall funds | Fallout from Oval Office clash | Dems say shutdown would affect 800K workers | House passes 7 billion farm bill Conservative leader Meadows will not be White House chief of staff MORE proposed lowering the capital gains tax, which would be the equivalent of a tax cut of $100 billion over the next decade for the people in the country who need it the least.

This adjustment would be one of the single most regressive changes to our tax code ever, with 97 percent of the benefits going to the top 10 percent of income earners in the United States, and an astonishing 63 percent going to the top 0.1 percent. This proposal is part of a concerted effort to build an economy that works for those at the very top, and no one else. Why? Because there is earned income and unearned income.

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The names mean what they say. Earned income is money you earn by your hard work and sweat that someone pays you to do. If you teach our children or build our highways or care for us in a hospital, you earn your pay. On the other hand, if you are rich and make money living off of your investments, that is called unearned income, or capital gains. You do nothing to earn it since your wealth works for you.

Most reasonable people would agree that our tax code should give preferential treatment to those who work for what they bring home. Unfortunately, our current tax code does the exact opposite. The taxes on earned income range from 10 percent to 37 percent, while the taxes on long term capital gains range from 0 percent to 20 percent.

This difference is huge. Imagine a couple that earns about $77,000 a year after deductions. If that couple is working, they pay around $6,000 in federal income taxes. Someone living off of their stock portfolio who takes in the exact same amount of money, on the other hand, does not pay a single penny in taxes. Even the richest of the rich, those making tens of millions of dollars a year in unearned income, pay a tax rate below 20 percent, lower than a teacher or janitor earning $50,000 a year.

This is the original sin of our tax code. Our government made the decision to give idle millionaires preferential treatment while the working class is left paying the bills. The system has been rigged for decades, holding working Americans down while artificially propping up the investment income of the millionaires already at the top. If anything, we should be reconsidering whether those millionaires deserve the tax rate they are paying, not whether we should be giving them an even bigger discount.

A recent study by the United Way Alice Project showed that 43 percent of Americans do not earn enough to afford a monthly budget that includes housing, food, child care, health care, transportation and a cell phone. These are people our elected leaders should be advocating for, not the millionaire class. When working Americans are struggling just to survive and the rich have never done better, how can you justify yet another massive handout to the ultra wealthy? The answer is simple. You cannot.

Richard Trumka is president of the AFL-CIO.

Morris Pearl is chair of Patriotic Millionaires.