Most of the benefit of the tax break on Muni bonds goes to the bond issuer. The interest rates on those bonds are much lower because people buy them specifically to lower their tax bill.
Another issue here is with the non-taxing of dividend income. Years ago, a lot of people complained about the double taxation of corporate income. It was taxed once when the corporation earned it and then again when it was paid out in the form of dividends. The solution was rather stupid - we lowered and in some cases eliminated the tax on dividend income. At the same time, corporations found massive loopholes to avoid paying corporate income tax. I think it would have made much more sense to eliminate the corporate income tax and to treat dividend income just like any other form of income. That way, dividend income would be taxed progressively based on the income of the recipient, so if a working class person has GM stock in their retirement plan, they don't lose their share of that income to a corporate tax but if a wealthy person has the same shares and gets dividend income, they pay a significant percentage of it in taxes.
One other major tax "dodge" they didn't mention is Roth IRA/Roth 401K accounts. You can accumulate large quantities of money in these accounts and never have to pay taxes on the earnings in those accounts again. That seems like a short-sighted way for current congresses to reward people by giving away future federal tax revenue. They had blocked contributions to Roth IRAs (but not Roth 401Ks) for high earners, but they effectively removed that block in 2010. Now, if you are above the cap for contributing to a Roth, you can instead contribute it to a regular IRA and then immediately convert it to a Roth. Those high earners are now burdened with making two calls to the broker instead of one to get money into a Roth.
= new reply since forum marked as read
