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Let’s Tax Politicians’ Deceits!

Billy Gautreaux sent me this clip of a current U.S. presidential candidate to ask “What does she [Hillary Clinton] mean exactly?”  I’m unsure.  Here’s the relevant passage:

It’s just wrong that, you know, a hedgefund manager pays a lower tax rate than a nurse, or a trucker, or an assembly worker.

I can, however, register a pretty good guess as to what this current seeker-of-more-power-than-anyone-should-be-permitted-to-possess is referring to.  My guess is that she’s comparing capital-gains tax rates with personal income-tax rates.  The top capital-gains tax rate today in the U.S. is 20 percent; the top personal income-tax rate today in the U.S. is 39.6 percent.  And for both categories of taxable gains – personal income as well as capital gains – the rates are progressive.

If Ms. Clinton is referring only to one or the other of the tax categories, then she’s mistaken: workers (such as nurses, truckers, or ‘assembly workers’) who generally earn lower annual incomes (or enjoy lower amounts of capital gains) than do hedgefund managers do not pay higher rates of taxes on any of their incomes or gains than do hedgefund managers.  She should familiarize herself with at least the basics of the tax code before committing such embarrassing errors.

But, of course, Ms. Clinton in fact knows all this.  Being a politician on the make campaign trail, she’ll say and do almost anything that she suspects will win her more votes than it will lose her. Lying, deceit, and duplicity are, of course, tried and true tactics for politicians of all stripes and parties.  In this clip, she likely is implicitly comparing the top (or even average) capital-gains tax rate paid by hedgefund managers on their capital gains to the income-tax rate paid by single workers on all personal income they make above $37,450 (the dollar value at which the personal income-tax rate for single income-earners rises from 15% to 25%).

There is so very much mistaken about this comparison, I don’t know where to begin.  So I’ll just barely begin.  Most readers of this blog are intelligent enough to figure out each of the many problems with this comparison – such as that hedgefund managers pay the same marginal tax rate on X-dollar of personal income that is paid by a nurse or a trucker on X-dollar of personal income, although a nurse or a trucker likely pays a lower rate of capital-gains taxation on Y-dollar of capital gains than is paid on Y-dollar of capital gains by a higher-income hedgefund manager.  (See, for example, the 2015 U.S. tax schedule here.)

That Clinton would say such a thing is only further evidence (as if further evidence is needed) that politicians are deceitful and utterly untrustworthy.  If your tax accountant passed along to you such misinformation, you could sue him or her for professional malpractice, but if a politician deals in such lies and misinformation, they generally improve their chances of getting elected and, hence, of laying their hands on the levers of vast powers over the lives and fortunes of the masses.