My last post made me think about how clever the Republicans are. That 5% tax rate on dividend and capital gains income for lower income families is tactically brilliant. First, it makes a great sound byte:
Intrepid Reporter: Senator X, isn’t the new tax bill you just voted for a big give away to the wealthy?
Senator X: Not at all, my young friend. In fact, while we did cut the rate for the wealthy to 15%, we cut the rate on poor and middle income families down to 5%.Thats one-third as much.
Intrepid Reporter: Isn’t that essentially meaningless, given that only a handful of poor and middle income familes earn any income at all from dividends and capital gains. Virtually all of their disposable income is spent on day care, the mortgage, health care, maybe college savings. How many families with children making $41k have, outside of retirement accounts, more than $1,000 in stocks, Senator?
Intrepid Reporter: Oh, neat. I’ll write that up.
Second, it’s close to free: since the large majority of the people to whom the 5% rate will apply don’t have any dividend or stock income, the actual cost of this 5% provision is probably quite low (the costly part is lowering the rate on the wealthy from 35% to 15%). Third, insofar as the 5% rate does in fact apply to some people, who are they? Seniors! What’s so special about seniors? Well, of course we love each and every one of them. But in politics, what they are really known for is voting in large numbers. It’s a trifecta!