The Santa Ana Sentinel

Taxation vs. Handouts

Posted in Election 2012 by J. González Solorio on January 16, 2012

The argument that many times comes from Obama’s most staunch supporters as a response to attacks made on the handout he wrapped up for Wall Street when he crowned them with the bailout is one which points out that tax cuts, even when granted across the board (income tax, capital gains taxes, etc.), favor the wealthiest, which is not true. When tax exemptions on capital gains are eliminated or cut by a set percentage, they apply equally to all businesses, be they a multi-national corporation or a mom and pop shop on the corner. The large corporation will of course be saving more money than a small business, but that’s because a large business brings in more revenue to begin with.

An equal percentage cut on earnings will mean a company reeling in $1 million dollars would logically be able to keep a higher amount (untaxed) than a company making $100,000.  Proportionately, they’d each be saving themselves the same percentage. It is the exact same situation when we talk about proposed cuts in income tax, or even the elimination of income tax altogether. A person who normally pays say $50,000 in a year in which they earn $200,000 (gross pay) is saving themselves 25% on income tax for that year, and obviously, $50,000 is the actual amount they save. In comparison, a person who normally pays say $10,000 in a year in which they earn $40,000 (gross pay) is also saving themselves 25% on income tax for that year, and, obviously, $10,000 is the actual amount they save. The person earning $200,000 a year will obviously be saving a lot more than the one making $40,000, but it’s not because of some inequality, the percentage they’re each saving is identical.

The cut of the capital gains tax will aid the small struggling business just as much as it will help the large established corporation. It helps the large business to continue operating, and will encourage the company to stay in the country, which is especially important during these times. The small business that may be struggling or just barely trying to get off the ground will greatly benefit from cuts in the capital gains tax. It allows the company to keep any profits made that year, so they may re-invest the money into the company, and increase chances of growth and higher returns the following year.

Any income tax or capital gains tax cuts aid individuals equally, and lend them confidence to continue, to build their business, to brace themselves for growth. The criticism on these types of actions from a government is quite different than government handouts. Those tax cuts allow all individuals, who work, and who have businesses, to keep more, if not all, of their money, rather than taxing them on it. Unlike tax cuts, government handouts, like Obama’s Wall Street bailout, go directly into our pockets, take out our money, and choose someone they feel deserves it more, which is one of the very actions the Constitution made clear was unacceptable. What’s even worse is that those who received this government handout on this occasion were not even working families nor the downtrodden, but rather, large banks, corporations who acted unethically and found themselves reaping the effects of their dirty deeds, in shambles. Rather than allowing those criminals to fail and absorb the poetic justice they had coming to they, their fraudulent crimes were rewarded with trillions of dollars to wipe the slate clean, and not a single individual was ever held responsible for their crimes in the housing ponzi scheme that caused the downfall of our nation’s economy. Some were even protected or absolved of criminal action that was set to begin, and by who? Barack Obama, the much-touted ‘hero of the downtrodden’.


One Response

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  1. Omar Ávalos Gallegos said, on January 16, 2012 at 9:48 pm

    Elimination of capital gains taxes isn’t for keeping big businesses in this country, we’ve already seen the wonders of keeping jobs here due to the non regularization and non taxation of the free market stance taken by Republicans. No defense of it changes the fact that it allows wealthy people to earn income on investments (stocks, mutual funds etc) and not get taxed for it.

    Why state the obvious? You’re saying that small and large companies would be taxed an equal percentage and that the larger company saves more money as a result of it generating more of it. And? Where do the bigger savings go? To some yuppie’s mansion? His yacht? His kids’ Ivy league education? How about the annual rate that the CEO of the company owned by the yuppie and his family makes?

    None of these defenses of this removal of capital gains taxes do anything to solve the problem of ordinary people not having enough money to afford things like healthcare and education. In fact, ordinary people don’t even have the luxury of worrying about capital gains taxes because they don’t have money to invest.

    I’ll give you the example of Carlos Slim. He generates a hell of a lot more money than most people and he’s allowed to save it. And?? Are people not living in poverty and struggling around him? This is a question of the distribution of wealth. Not enough of the wealth generated by taxes and big corporations is going around or being used for things like healthcare and education. There is no political will to force the wealth into sectors like these.

    So Ron Paul would be perpetuating the same thing happening here, the wealthy would be allowed to sit on their money, accumulate it, and not pay income tax on it when they invest it in order to grow it.

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