Proposed Capital Gains Tax Will Benefit Middle Class

capital gains taxIt is no secret that Congress is home to some of the wealthiest Americans. The average salary of a congressional member is $174,000 annually, and about 200 members are multimillionaires. Their salary alone puts every congressional member in the top 6 percent of earners in the U.S.

The vast majority of congressional members come from upper-middle class families, where connections to senior political members and other social and religious groups are plentiful.

In his State of the Union address, President Barack Obama addressed higher taxes on the wealthy, which are unpopular and unlikely to pass in Congress. His increase is substantial — raising it from 23.8 to 28 percent on couples making over $500,000. This bill in particular received backlash from Republicans.

“Taxes on capital income, such as the capital gains tax, are among the worst ways to raise revenue from the perspective of economic growth,” said Greg Mankiw, professor of economics at Harvard University.

Tax credits would go toward the middle class and the increase in taxes would raise around $200 billion in the next decade.

Former Rep. Tom Perriello wrote, “During the 2010 lame-duck session, Congress passed an $858 billion tax-cut extension, leaving in place generous [Bush-era] tax breaks for the wealthiest Americans. Why was such an opportunity to address inequality and spur economic growth via our tax code missed? … Most of those who prevented the bill from getting a vote before the election privately argued that the income threshold was too low.”

President Obama recently released a plan for a new tax strategy that would affect the rate of the capital gains tax and close lucrative loopholes that avoid the capital gains tax. In addition, he is proposing to close a loophole that allows heirs to avoid paying taxes on large estates.

The economy has recovered since the economic crisis of 2008, and much of this is due to Obama’s financial politics of raising taxes on the high-income earners in America. These tax increases do benefit the middle class by approximately $320 billion in tax credits that would be allotted.

The tax credits will go toward expanding higher education and providing greater support for child care. In addition, they provide substantial assistance to families in the middle-income classes. They provide about $500 for married couples to curb the cost of child care for working-class Americans.

– Maxine Gordon

Sources: NPR, The Atlantic, The Washington Post, Yahoo News