Dear Barack (cc: Hillary Clinton, John Edwards and all Democrats),
We've only met a few times, but we went to the same college, Occidental in Los Angeles. I graduated 50 years ago and went into the NFL, while decades later you ended up graduating from Columbia and Harvard and practicing law in Illinois.
Like so many on both sides of the political aisle, I appreciated your speech to the 2004 convention and your wonderful message of racial, ethnic and political reconciliation. Now, in the interest of good economic policy for America and in the interest of combating poverty and creating wealth among people of color, please don't treat capital gains (or dividends) as ordinary income. They're not, and here's why.
First, treating capital gains as ordinary income and taxing them at the same level, i.e. 36 percent or 39 percent, won't hurt the rich; it'll hurt the poor who want to get rich.
As you know, a person can't get rich on wages. He or she has to be able to earn, save, invest, reinvest and build an estate that can be passed on to other family members. Taxing capital gains as ordinary income is really counterproductive to a nation that wants to generate wealth, spark innovation, expand its technology, create jobs and combat poverty.
Our mutual friend, Earl Graves of Black Enterprise Magazine, said once, "Civil rights in America will never be fully ours until we not only stay in any hotel but have access to the capital to buy the hotel, not only eat at any lunch counter but have the capital to buy the diner."
For just a moment consider the unfortunate reality that the vast majority (more than 95 percent) of American wealth in stocks, bonds, real estate, homes and estates are held in the hand of white folks. The great fortunes generated by the Carnegies, Rockefellers, Mellons and Guggenheims were created when taxes were quite low and when there was no capital gains tax, no estate tax and no tax on dividends.
Now that people of color are getting their rightful shot at greater opportunities for education, advancement in the professional world and manifesting their entrepreneurial talents, we tax labor heavily and capital excessively.
Imagine this scenario: When you earn a dollar and spend it, your income is taxed but once. If you save it, you're taxed again. If you invest those savings, you face a capital gains tax that is unindexed (i.e., a fourth tax). Corporate income is taxed over 40 percent at the margin, and consumers end up paying for that, too. Dividends are taxed at 15 percent, and when you die (after 2011) your estate will be taxed at well over 50 percent.