Thursday, October 07, 2004


Wage Income vs Dividend Income

John Edwards made a remark during the VP debate Tuesday night that struck me as wrong, but I didn't pay to much attention to it until this morning reading Power Line. I haven't read anything about the comment until today. Edwards said (I'm quoting from memory) that a rich guy sitting by his pool collecting dividends pays lowers taxes than soldiers in combat. The NY Times supported that assertion until corrected.
While some military officers may pay a higher rate, most soldiers do not. The monthly pay of enlisted troops in Iraq, as in other combat zones - and the pay of officers there, up to a ceiling - is exempt from federal income taxes.

Aside from the inacurate assertion by Edwards, his implication is: income is income, there should be no difference in the tax rate of income from wages or dividends. He avers there are two Americas. His party wants to pit class against class.
Why should someone earn income, invest after-tax income to get dividends and have to pay taxes at the same rate on the dividends? Isn't it good policy to reward, not penalize, investment?
We save such a small percent of our income compared to other countries, yet we reward consumption with tax writeoffs. We are to go buy all we can on credit cards, then consolidate our debts, refinance our mortgages, and do it all again. Meantime we get to write off the mortgage interest against our taxes. It is an upside down world that rewards consumption and denigrates savings.

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