Outsourced to Ezra Klein:
EzraKlein Archive | The American Prospect: Martin asks, "This weekend, Chris Wallace on Fox interviewed Sens. Schumer and Durbin. He noted that Sen. Obama wants to raise the capital gains tax, but that 50% of the people who get taxed make $50,000 or less, therefore making this a middle class tax hike. Is this true? Are they playing with the numbers?"
I can't tell you exactly which number set Chris Wallace is working off of, so I'm not really in a position to say whether exactly 50 percent of those getting taxed make under 50 percent. But there's definitely some trickery going on here. Lots of ordinary Americans have money in the stock market through pension funds and the like. But they have very, very little of it. A share or two of stock, a bit of property. In 2005, the wealthiest one percent of Americans received almost 70 percent of long-term capital gains, and paid 72 percent of the capital gains taxes. What Wallace is trying to do is confuse the issues of eligibility and exposure. Lots of Americans might end up paying a minimal amount of the capital gains tax, but the real exposure is among the wealthy....
That group there in the middle? The so-called average taxpayers Wallace is so concerned about? They make, on average, $176 from capital gains in a given year. They will pay next to nothing. The Top 1 percent makes $232,000! The capital gains tax, in other words, is a tax on people with capital gains. Those people are overwhelmingly the rich, and the rich are overwhelmingly the ones who pay the tax. The fact that lots of Americans have nominal holdings is effectively meaningless here. Wallace is just using them to mislead as to the tax's true target.