Capital Gains Are Ordinary Income to Many

During the last election cycle the issue of unique treatment of capital gains tax surfaced as it was determined that Mitt Romney and many other very wealthy Americans pay a lower tax rate than their secretaries because much of their income is derived from investments and not a salary. Those investments, if held longer than a year prior to their sale are taxed at 15% in most situations which is significantly less than the rate high income earners pay on ordinary income, usually around 35%. The rate is on par with the ordinary income level for a single tax filer who earns $8,926 – $36,250 annually based on 2013 rates.

What makes capital gains so special? A capital gain occurs when an amount received when selling an asset is greater than the amount paid for it. Sale of stock is the most common capital gain, however it includes almost any investment including bonds, real estate, equipment, and works of art but usually do not include personal use items. For tax purposes capital gains have been distinguished from ordinary income since 1913 though the rate at which they are taxed has changed several times since then. The drop to current level of capital gains tax of 15% was achieved through Bush II era legislation and represents the lowest it has ever been in US history. Though I don’t recall the Occupy movement ever claiming it as a specific gripe it well should have, and in 2011 Warren Buffett, one of America’s wealthiest (and most successful) investors, added to wealth disparity discussion when he claimed that the favorable treatment he receives on his earnings is unfair

A Rich Man’s Game

With a base in long-term investments capital gains disproportionately affect the rich, and luckily this is not a significantly disputed fact. However, it is my belief that this favorable treatment is unethical and detrimental to the collective welfare of our nation, which will be disputed by some. I propose that capital gains should be taxed just like regular income because after I disprove all the reasons the rich say it is necessary, all that’s left is an unfair mechanism which systematically helps rich to get richer.

The proponents of capital gains getting taxed lower than ordinary income rates usually do so under the guise that it sparks investment which sounds like it could be accurate. Lower taxes on an activity increases the propensity to do it, but it’s actually an argument based only on speculation. When you apply the policy to the behavior options of the investor the capital gains tax makes no difference in the level of investment.

Regulatory Capture and Cognitive Capture

I was familiar with the concept of regulatory capture, the idea that an industry can persuade the government, or another entrusted regulator, to not do their job of regulating. This is usually done through the vast amounts of influence the business carries in the money it generates and it can be practically done through several means including lobbying, financial contributions (legal bribery), bribery (the illegal kind), insider appointment, blackmail, and situational/political leverage. This leads to a very favorable climate for the industry, allowing it to go on doing whatever it was planning on doing without interruption, and over time can even lead to opportunities to push the boundaries of its operations further since it can go on without any real consequences. This creates situations where lobbyists paid by the industry actually write legislation with built in loop holes so both the industry and the politician can come out winners. The industry gets the rules in place, or lack thereof, that it wants while the politician will boost their reputation claiming they are regulating or fixing something with their Swiss cheese legislation. This is the relationship we have in the United States between our corporate world and our politicians. It’s essentially the same relationship as bribery and corruption and it has existed for just about as long as both industry and regulation have. However, I was never acutely aware of the specific term regulatory capture, and I feel better now that I know it and can quickly refer to the concept by recalling this term.

There is a related term called cognitive capture, which I recently came across and it describes quite well what I’ve been feeling about US society on an even large scale, and really global society as well, for some time but didn’t quite have the vocabulary to say. The term is borrowed from the psychological condition where the mind cannot perceive even important things in its field of senses because it is too distracted with other things in that field. In its borrowed definition is means that nearly everyone who is connected to society is too mesmerized by the modern capitalist world, and in some sense bribed by it, that they can’t see the injustice and plutocracy of it. And even worse, the mind can’t realize the distractions are systematic, intentional, and yes, even logical.

Vipassana Meditation: Part III

Part I and Part II of this epic tale

Day 7 –So I woke up with a realization that after that literally insane experience when falling asleep that I definitely needed to see this process through. I had obviously touched on something and found some real scary things inside of me.

Even if it was making strange things happen, I was learning a whole bunch and that these new experiences and challenges were just the sort of things I wanted, and ultimately the type of thing that is on a road to a rare destination. I went to morning meditation with renewed energy and determination to get better at the technique and see what else there was I could learn. Even if I thought I was destroying some of the sankharas that I liked, I determined that I probably couldn’t do any long-term damage to my ambition, my sex-drive, or anything else worth caring about in just 10 days so I was probably going to be fine. Besides, I had committed to do this for 10 days, so I was going to give it a full 10 days.

But in another immediate twist of attitudes, and despite waking up so resolved that I was definitely seeing the process through, by the afternoon I had once again decided that I was going to leave. I thought I had reached the limit of how far I wanted to go…

Vipassana Meditation: Part II

Part I in case you missed it and want to start from the beginning...

Day 3 – I began to make up personalities about the other people who were taking the course with me. Without the ability to talk or gesture or make eye contact, you just had to assume a lot about people if you wanted to give them any sort of identity. I determined that I thought roommate #2 was really pretentious and didn’t like me. I was dead wrong about this. He turned out to be a very nice humble guy. I was kind of annoyed by anyone else in the class who would breathe loudly or make lots of noise in the meditation hall. I felt like they had no social awareness and I wished that they would learn how to be still and silent so that everyone else could focus on their meditation. It turned out that by Day 5 everyone had gotten pretty good at doing this and found a way for themselves to be comfortable (and silent!) during the class.

Vipassana Meditation: Part I

Last August after quitting my job and ridding myself of all other obligations in the world, I was able to take some time from what used to be my very busy and hectic life to go on 10-day Vipassana meditation retreat. Most times I would try to explain this concept to someone they would respond with some variation “Oh, sounds like Eat, Pray, Love.” While I feel it makes my experience seem generic, and perhaps even a bit girly since I don’t usually personally relate to storylines told from a female perspective, it undermined my true motives for trying it as many assumed I was inspired by images of Julia Roberts, the lead actress in the film version of Eat, Pray, Love; Pretty Woman; and some Hugh Grant and Richard Gere movies. While I currently feel being compared to Julia Roberts is more of an insult than a compliment, and having never read the book or seen film, I was insulted by the notion. Perhaps someday I will get around to watching the movie or reading the book for an actual comparison and when I will do I might admit that it isn't such an insult. But currently that's not the case.  

I think that an experience this interesting and personal should travel by word of mouth and not be mass marketed. But if it inspires people to take action in their life, I guess it really isn't a problem. For better or for worse that’s how good stories have been spread since the days of the Bible. So I should probably just get used to it.

Since this whole idea is really based on my own perceptions and experiences I really want to explain the concepts as best as I can in my interpretation. There are web pages you can find that will explain more about Vipassana meditation and explains it in a way perhaps more suitable to those who teach it, particularly S.N. Goenka, the primary person responsible for establishing many of these meditation centers around the globe, but since my purpose is to retell the story as I perceived and experienced it, I feel for this case I should explain this in my own words. Also, just as a warning, reading this may lead you to the conclusion that I'm a crazy person, and I'm OK with that.