Back last fall I predicted that the election this year will focus, not on jobs, but on taxes. And as I predicted in my blog on Tuesday, in his State of the Union Speech, President Obama proposed a new tax on the “rich.” This time he proposes that anyone who earns over $1 million should pay a 30% tax. Funny the tax rate for income in that range is already 35% which kicks in at $350,000, the entry level for being in the “top 1%.”
Obama referred to this as the “Buffet” rule that came out of Warren Buffet’s cheap publicity stunt when he said his secretary pays an income tax higher than does he. Buffet has now released his and her tax rates. It appears that her tax rate places her in the top “1%” of all income earners, along with Buffet. So now we have the top “1%” tussling with each other over what is a “fair” tax. Sort of like the old aristocracy arguing over blood lines.
As I have detailed in several blogs now, the “top 1%” already pay 40% of all Federal Income Taxes. The top 10% pay 70%. And the bottom half pay no income taxes. The system is already highly “progressive” with the more fortunate earners carrying most of the freight. Anything more “progressive” would appear to be “confiscatory.”
I have also repeatedly said that I oppose a new,simple tax code. The fatter the tax code, the better for the tax payer. The thinner the code the better for the tax collector. And all the proposals I have heard for a “simple” tax code, e.g. the so-called “flat tax,” all start by saying that deductions for mortgage interest, school loans, high health care costs, donations to charities, and so on will be preserved. Of course any revision of the corporate tax code would keep intact the principle of deducting all costs from gross income. In sum, there would be no real change.
I agree that our tax system needs a total overhaul. Perhaps we should go to the EU “VAT” or value added tax. At this point there is absolutely no consensus on a “fair” tax on income so we probably need to go for more taxes on consumption.
By the way, what happened to creating jobs for the masses of unemployed?
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The President did call for passage of his jobs plan, with emphasis on infrastructure, and offered the 30% minimum tax for the richest among us as a way of paying for it. Now, let’s take Romney, for example, He paid 13.9% last year. That makes him the new “poster child” for this kind of tax reform. If Romney had to pay 30%, that would be about $3m more. Thus, he truly would be helping to create jobs.
Tom
Some candidates call for elimination of the capital gains tax which would make Romney’s tax bill even smaller. I believe the era of taxing on income is stumbling to an end. Consumption taxes, e.g. the VAT, are the order of the day. The Europeans learned this and we will probably follow suit.