As a lifelong Conservative Republican and ardent Trump supporter, I find myself agreeing with Kamala Harris on an important issue: taxes.
To be clear, I don’t agree with her the way she would want. Take for example, in a recent 60 Minutes interview, Harris repeated a trope that so many public figures like to tout when talking about taxation:
“…It is not right that teachers and nurses and firefighters are paying a far-- a higher tax rate than billionaires and the biggest corporations…”
In short, she is saying the tax system is unfair, and I agree with her on that basic concept.
Let’s start with the specific conversation on tax rates paid by “billionaires and the biggest corporations” versus what is paid by “teachers and nurses and firefighters:”
According to Indeed, the average base salary of a firefighter in Virginia is $57,524, meaning that a single firefighter is slotted into the 22% tax bracket. At the same time, a billionaire—if he is earning a salary—is in the 37% tax bracket. Therefore, not only did Vice President Harris not tell the truth about who is paying what, it begs the question of why this is considered “fair” in the first place.
In the 248 years since winning our independence, America has created the U.S. Constitution, fought the Civil War, and lived through difficult social transitions during the Women’s Suffrage and Civil Rights Movements to reinforce the concept of every citizen being equal. Yet, Kamala Harris—and sadly many other Americans—continue to bitterly cling to the profoundly unfair idea that equal Americans should be treated unequally when it comes to paying taxes.
Warren Buffet, and others, will point out that billionaires earn very little in the way of salary, and that much of what they take in comes from capital gains on the sale of appreciated stocks and bonds, not to mention the distinctly “Inside-The-Beltway” conversation over the so-called “Carried Interest Loophole.” This discussion goes to the belief, which is also increasingly shared by many on the political Right, that earning money from an investment is somehow a less honorable means of supporting an individual and his family. Cue the social media memes of a rough-looking farmer standing next to an impeccably-dressed Monopoly-like figure.
Let’s then, look deeper. First, any money that is invested, must first be earned. Earning the money that becomes investment capital requires doing…work. Take Ray Kroc, for example. Lauded as being the individual who took McDonald’s from a small group of restaurants into a global behemoth. Kroc, however, had a variety of jobs before that, including selling paper cups and milkshake machines. Those jobs require the payment of income taxes. When Kroc sold milkshake machines to the McDonald’s brothers in 1954, he was a married man and head of his household. Assuming he was earning $150,000 or more, he would have paid a whopping 87% in income taxes. That figure would go as high as 91%, if his income surpassed $400,000. Even with the myriad of tax deductions and strategies one could use to lower the tax burden, the fact remains that to earn the amount of money needed to become an investor and avail yourself of capital gains, you must first pay taxes at rates which are equal to or higher than “teachers and nurses and firefighters.”
Second, as an investor, you then take an incredible amount of risk. After all, neither Ray Kroc nor Warren Buffet had any guarantee their investments would pan out. What if Warren Buffet saw Time Magazine’s January 26, 1968 cover, which featured Stuart Saunders, president of the Penn Central—then America’s largest railroad—and made a significant investment? Less than two years later in mid-1970, the Penn Central had become America’s largest bankruptcy. Such an investment of the already-taxed money earned by Buffet through his work would have landed him panhandling at a Penn Central train station. Likewise, what would have become of Kroc’s taxed earnings had Americans not embraced the Golden Arches?
Therefore, investors are compensated for their risk by paying a lower tax rate on the results of their investments. First, the money they are investing is taxed at the same rate as those Kamala Harris is highlighting. Second, putting that money to work—be it the purchase of stocks and bonds in the public markets and through private equity, or placing bets on entrepreneurs as venture capitalists—means you take risks that go far beyond what one takes to receive a paycheck in exchange for your work. After all, once the paycheck is in your hand, it’s yours. But one shift in a marketplace comprised of billions of people can quickly wipe the investor out…so why should we treat him unfairly when it comes to taxes?
I have already, happily, cast my vote for President Donald J. Trump. However, if Kamala Harris wins, I’ll happily work with her to remove the unfairness in the tax code that I have outlined here. I’m also very happy to work with her to end the dangerous rhetoric that denigrates those who take the risks which make it possible for us to spend our day discussing politics and pop culture, rather than working all day, every day in the hope of having “just enough” to feed ourselves.
Let’s end tax unfairness now.
