Hillary Spot readers continue to look over Edwards’ comments, and find them wanting.
Michael notes a subtle mischaracterization in his discussion of the Social Security taxes:
He also subtly mischaracterizes the cap as applying to “families.” In fact, the cap applies to individuals, which means that households with a husband and wife in the workforce have potential can get taxed on up to $188,400 of income.
It’s tough to say how this information impacts his argument, since he seems to be working very hard at not taking a position on the issue. If the system continues under the same rules but creates a “bubble” where no SS tax is paid between $94,200 and, say, $150,000, won’t that leave a lot of the middle class out in the cold? For example, an individual who makes $150,000 and has a stay at home spouse will benefit from the “bubble” to the fullest extent possible ($3,459.60 – using 2006 cap). However, a dual income couple who each make $75,000, but have the same gross household income as the other couple, will not see any benefit from the “bubble.” I’m wracking my brain trying to figure out who Edwards would root for in this scenario. In truth, neither feeds into his “two America’s” theme, so both couples will probably [get the short end of the stick].
Numerous readers pointed out that Social Security taxes are paid with 6.2 percent of your pay and 6.2 percent from your employer, up to (this year) $97,500. Edwards didn’t specify whether if the cap were raised under his plan, whether employers would be paying an additional 6.2 percent on the additional amount.
Hillary Spot reader David wonders who told Edwards about brokerages report capital gains and how individual’s taxes on those gains are paid.
On John Edwards MTP interview, he said, “we need to do a much better job of collecting the taxes that are —that are already owed. And a very specific example of something we should do, we should have brokerage houses report the capital gains that, that people are incurring, because we’re losing billions and billions of dollars in tax revenue, and billions and billions of dollars from capital gains not being reported.”
He is in error. All brokerage houses are required to report capital gain transactions on IRS Form 1099 where it is then further reported on the individual Schedule D. This information has been reported to the IRS for at least the last 22 years I have been in the brokerage business. Former Senator Edwards is grossly misinformed.
I guess Edwards could be referring to some sort of ongoing organized fraud scheme against the IRS, requiring collusion between the brokerage house and the taxpayer. But if that’s the case, and he knows about this being a common practice among, say, former trial lawyer multimillionaires, then he ought to be calling the FBI or IRS.
By the way, this isn’t the first time Edwards has run afoul of the facts when talking about taxes on investment. Back in 2004, FactCheck.org took Edwards to task for running an ad insisting that multimillionaires pay less in taxes than a teacher, but Edwards was comparing the teacher to a hypothetical multimillionaire with no income, only investment returns. How many millionaires have no income at all?
I recognize that in the Meet the Press interview, Edwards was speaking extemporaneously, and that he may not have every exact figure at the tip of his tongue. But the net effect of these little errors here and there create a sense that health care is a fairly easy fix once we get those rotten rich people to pay their fair share of taxes.
It’s almost as if there are two Americas: one in Edwards’ mind, and one that the rest of us live in.
A seven page release on Edwards’ health care plan is here. The New York Times puts the price tag at $120 billion.
A lengthy discussion of health care policy, revealing how there really aren’t that many easy answers, can be found here and here.
UPDATE: Man, this discussion is going to go waaaaay beyond my knowledge of tax law.
Hillary Spot reader John writes in, “Perhaps what Edwards was suggesting is taxing shareholders on unrealized gains — that is, taxing them on the appreciation in shares held in brokerage accounts but not yet sold. I can easily see Edwards advocating such a thing.”
Charlie points out, “Brokerage firms report sales of stocks, the proceeds of sales, and the dates of those sales to the IRS. They do not report the cost/ basis, which is needed for determining the amount of capital gain. They do not report the date of purchase, which is needed to determine whether the holding period is long term or short term. So there is
an opportunity to cheat under current procedures for those who choose to take that risk.”