Equity Too Unseen

Re-juggling power and wealth:

Let’s take two wealthy capitalists. One has $10 million in tax-free municipal bonds which earn about $500,000 (5%) in low-risk, no-tax returns. The second one has $10 million sunk into a small business with a payroll of 25 employees and a brick-and-mortar office-warehouse. This “small business” generates millions in payroll and thus in payroll taxes, pays huge property taxes and sales taxes, and also generates tens of thousands of dollars in local government “junk fees” (business licenses, parking permits, fire inspection fees, etc. etc.)

The municipal bond investor is unaffected by the recession/depression until such time as one of the local governments which issued the bonds he owns goes bankrupt. He pays virtually no business or capital-related taxes.

Now let’s consider a third capitalist who has $10 million in boutique hedge funds. Accounting legerdemain enables this capitalist to report much of his hedge-fund generated income as long-term capital gains, thus limiting his Federal taxes to 15%. He pays no business-related or payroll taxes, and doesn’t even pay any FICA (Social Security) taxes on his income.

Many will note that the buyer of municipal bonds is providing capital which is spent repairing roads and schools, etc. and thus this money is productively invested. Others will claim the hedge funds might have provided capital to far-flung firms and thus “greased the wheels” of some distant productive enterprise.

Nice, but which capitalist is actually supporting his community with jobs and taxes?

Our Government has truly failed.