Why the Capital Gains Tax is Un-Christian and must be changed

The capital gains tax is the tax on the profit a person or corporation makes on the investment of capital, usually money, on non-inventory goods.  Most commonly this applies to stock and real property.

This tax rewards those with enough money to invest.  The tax is now just 15% far lower than the tax on wages for most middle class tax payers.  The argument for the rich being allowed to pay just 15% is they invest in things that help the economy grow. 

The argument is at least flawed and in over 90% of the cases reviewed by the IRS not true.  Most capital gains is from people who buy stock in existing companies hold it over the required 12 months and then sell the stock and make a gain or profit.  This provides no capital to expand the company, so it has no real positive effect of the economy.  In fact it could have the effect of causing a negative impact on the company because excessive selling of the stock can cause the stock to fall in price reducing the total value of the company. 

The other common application is when some buys property – a single family home for instance and lives in the home for over 12 months and then sells the home and makes a profit.  That profit too is taxes at just 15%.  This is also true for investment property residential, commercial and industrial.  Most people buy from other investors and again there is no positive effect on the economy.

So in general the tax benefits those who have wealth and can buy stock and real estate.  It is true there is some risk in this activity, but in most cases the actual activity of buying stock and real estate has zero positive effect on the economy.  Oh I know it provides income to stock brokers and realtors, but this is money earned for filling out forms. 

The number of people using capital gains has increased dramatically over time to avoid paying personal income tax that has a top rate of 35% or over twice the rate of the capital gains tax.

While millions take advantage of this preferred capital gains tax rate the real advantage goes to the richest Americans who have the money to buy large amounts of stock and real estate.

In fact many of the richest Americans have figured out how to use this to avoid paying income taxes on most or all of their income.  CEOs now take a huge part of their compensation (really wages) in stock and stock options rather than in wages that are taxed as income.

A good example of this is someone who buys 100,000 shares of stock of an existing company and pays $20 per share, for a total of $2 million for the investment.  The $2 million goes to an individual and not to the company to provide jobs, expansion, etc.  

The stock goes up to $25 per share in 13 months and is sold for a profit of $500,000.  No real economic gain is provided to anyone but the person who had the money to buy the stock.  They would pay 15% on the $500,000 or just $75,000 in capital gains tax.

If taxed at the income tax rate the tax would be 35% or $175,000.  So this individual avoided taxing $100,000 in taxes.

The total capital gains tax paid in 2008 was $106 billion.  If that had been at the top income tax rate of 35% the total to the US government would have been $247 billion.

The only real difference in the gain from investment and working is there is some risk when you invest – a gamble.  So the lower capital gains tax rate is really a reward for gambling.

The real question for those who claim to be Christians is the following:  Is taxing money earned from honest hard work, wages, at over twice the tax rate of the tax on money made from gambling moral and Christian?

What does the Bible say?

1 Timothy 6:17

17 “Charge them that are rich in this world, that they may not be highminded, nor trust in uncertain riches, but in the living God, who giveth us richly all thing to enjoy”

JAMES the brother of Jesus condemns the rich

James 5:1-5

1“Go to now rich men, weep and howl for your miseries that shall come upon you.

2 Your richest are corrupted, and your garments are moth-eaten.

3 Your gold and silver are cankered; and the rust on them shall be a witness against you, and shall eat your flesh as it were fire. Ye have heaped treasure together for the last days.

4 Behold the hire of the labourers who have reaped down your fields, which is of you kept back by fraud, creith: and the cries of them which have reaped are entered into the ears of the Lord of sabaoth.”

We know for example that many of the CEOs who get stock and stock options abuse Chinese workers to increase corporate profits.  So the words of James above do apply to those CEOs.

We also know that over 70% of all the rich in America inherited their money and do no useful work.  They do invest and use capital gains to avoid paying their fair share in taxes.

What would Jesus do?

The Christian Solution:  Put a lifetime limit on capital gains of $5 million.  All profit from capital over the limit would be taxed at the income tax rates.

This would decrease the gambling and would make taxes more reasonable for all Americans.  It would treat money made from honest hard work the same as money gained from gambling.

Tell me why I’m wrong and why Jesus wants gambling to be rewarded over honest work.

Please email your elected representative and tell them what you think.

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