The truth is, the GOP's sweeping plan to overhaul the U.S. tax code – the plan to create jobs and lighten the tax burden on America's wage-earning workers – is insulting.
That's because the justification for the cuts is based on hoary, old, fake tax policy narratives like: "Higher taxes on the rich hurt the economy," and "tax cuts for the rich trickle down," or "U.S. corporate taxes are the highest in the world," and "lowering taxes will bring outsourced jobs back home."
Besides being fake, nothing in any of these narratives addresses the new American economy, where more income is earned by companies and wealthy individuals through capital than through labor.
When you understand that, you'll see why income and wealth gaps are increasing all over the United States.
What's more, you'll see that the real, workable solution is in fact a few simple tax and tax-cutting ideas that actually spread the wealth.
Here's what I mean…
It's All About Where Your Bread Is Buttered
A study by the non-partisan Tax Policy Center in 2012 found that the higher up you go on the income ladder, the more one's share of income comes from capital gains.
For about 99% of taxpayers making less than $500,000, salaries and wages accounted for at least 75% of adjusted gross income.
For taxpayers making $500,000 to $1 million, salaries and wages made up about half of earnings.
But for individuals making $10 million or more, salaries and wages account for about 15% of income, with capital gains making up a whopping half of their earnings.
While salaries and wages are taxed as ordinary income, capital gains and long-term capital gains are taxed between 0% and 20% – and that's if you take gains.
Remember, there's no capital gains tax due on investments like stock holdings until they're sold for a profit.
Capital Gains: Shah Gilani's readers have had the opportunity to make a 44% average gain per day (including partial closeouts). Just look at this track record…
Then there's capital itself. Corporations, pass-through entities like partnerships and LLCs, and individuals who have capital, or anyone who can borrow capital and write off the cost of that capital, can employ that capital in innumerable ways. They'll not only not pay tax on it, but they can shelter income derived from it for years, if not forever.
Now, don't misunderstand me: There's absolutely nothing wrong or illegal about taking advantage of tax code rules that favor capital accumulation, capital investment, and capital gains.
The problem for average wage earners is the percentage of tax they pay (and what it costs to live) leaves them no capital with which to capitalize income shelters or make significant enough capital investments that generate wealth they don't have to pay taxes on.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.