Sunday, April 15, 2012

Millionaire Tax Sham


Any thinking person should recognize President Obama’s current attempt to implement the so-called “Buffett Rule” by imposing a higher tax rate on millionaires as the sham it is. Here are the reasons.

1. Budget experts report that at the most it will raise only $47 billion in taxes over the next ten years. That’s an average of less than $5 billion per year. This year’s budget deficit alone is projected to be over $3 trillion!

2. The President knows that this tax has no chance of passing through Congress this year. It is a bald faced attempt to gain headlines and win votes in an election year. It is not a meaningful attempt to cut the budget deficit.

3. Why didn’t he propose it three years ago when he had a majority in both houses of Congress? Instead, he and his party voted to extend the notorious “Bush” tax cuts. The President has just released his own tax return for 2011. Isn’t it funny that now that his book royalties are drying up, and his own income has dropped below a million, that he now proposes a tax on millionaires? In 2009, his income was over $5 million dollars, and in 2010 it dropped to $1.7 million. His recently released 2011 return shows an adjusted gross income of only $789674. This still keeps him in the 1% group but no one is occupying the White House in protest.

By the way, his income shows no capital gains and very little dividend income. Is this why he is so willing to increase taxes on those items?

4. A proposal to increase taxes on capital gains overlooks a very important factor.  Capital gains can only be taxed when they are realized. In other words, a taxpayer must actually sell something for a gain before it can be taxed. Someone like Warren Buffett will only pay tax on his Berkshire Hathaway gains if and when he decides to sell some stock. History shows that when taxes are raised investors usually put off taking gains.

Instead of a millionaire’s tax I would like to propose a tax that would have broad appeal. I call it the “Liberal” solution but it should appeal to Conservatives as well. Taxpayers are already allowed to voluntarily pay more taxes than they have to. On line 60 of his tax return President Obama could have elected to pay an additional or voluntary tax. He opted not to do so, and paid according to the prevailing Bush rates.

I propose that anyone who has condemned the Bush tax cuts just ask their accountant to calculate what they would have owed under the old system that prevailed during the Clinton years. This proposal should especially appeal to rich liberals in blue states like New York and California who are always in favor of higher taxes.

While they are at it, these liberals could ask their accountants to go back and re-calculate their tax liability for the past 10 years and pay up the difference. For example, President Obama could lead the way by re-calculating the tax on his 2009 income of over $5 million.

The “Liberal” solution does not have to stop with income taxes. Wealthy liberals could opt to pay their estate taxes under the old rules as well. Moreover, instead of setting up tax-exempt foundations that will never die and never pay estate taxes, liberal aristocrats like the Clintons, the Gores, the Kerrys, the Kennedys, and the Buffetts could leave their estates to the government. Don’t they think the government will use their money as wisely as their foundations? ###

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