Tax Proposals' Tangled Web

Quite frankly, taxing those measly Social Security checks is unfair anyway. And on the dividend front, the corporations issuing dividends already have paid tax on that money before they distribute it. Thus, those dividends are currently "double-taxed" because you pay tax again when you receive them. So those two suggestions should be no-brainers.

On the capital gains front, the panel is looking to take us back to pre-1986. Basically, instead of applying a flat rate on capital gains, like the current long-term rate of 15%, the panel suggests using a capital gains exclusion of 75%. That would mean 75% of your gains would be tax-free and you would owe ordinary income tax on the remaining 25%.

So currently, if you have $1,000 in long-term capital gains, you owe $150 (15%) on that money. Under the new proposal, you would owe ordinary income tax on $250 (25%). Using the highest proposed rate of 33%, that would bring your tax bill to $82.50.

"So the investing folks become the biggest winners here," notes Scharin. And the investing community generally means the wealthier Americans, and you know what happens when someone suggests a tax break for the rich.

Granted, you can't please everyone, but the current system is just too complicated, and right now, the middle class is getting hammered. The panel would do best to stop the politicking and try to focus on helping all hard-working Americans.