This week we're going to dive head-first into the discussion about the top 1% of households by income. While there have been various definitions of the "rich," that should be taxed at higher rates, the Occupy Wall Street crowd has definitely honed in on the top 1% as the embodiment of everything wrong with America in general and capitalism in particular.
First, I have reprinted an excellent article by Alan Reynolds that brings a recent CBO report about income inequality into a much better focus. It seems that the CBO cherry picked some data to show income disparity is growing when, in reality, it has diminished over the last two years.
I will then provide a further analysis on the long-term capital gains and dividend tax rates which are drawing criticism based on pleas from Warren Buffett to be taxed at higher rates. I'll then end up with a dozen of the most popular tax breaks that are available to virtually anyone reading this E-Letter, as well as the cost of each in lost revenue. The unfortunate result of my analysis is that higher taxes for the top 1% of households isn't likely to make a meaningful dent in federal budget deficits and could cost jobs.