Month: December 2012

  • Taxing the Rich

    It's very interesting to me that the debate in congress and with the Oval Office centers on taxing the rich.  For disclosure, I will have my taxes increase under the proposed changes, so read this with a grain of salt.

    The discussion on taxing the rich is actually quite a sad misdirection in that the concept that made so many upset with Romney was his effective tax rate in the teens.  The present changes do nothing to affect his tax rate, nor most of the 0.1% and up, because the majority of their wealth is from capital gains rather than in wages.  Small business owners are in this category as well - their business earnings will be taxed as personal income tax at the highest rate should they exceed 200K/250K depending on marital status.

    Net effect?

    Working professionals are taxed more, truly wealthy are largely unaffected.  This has 0 effect on a trust fund kid or an heiress, as they have no wages.  Many Congressmen and Senators become wealthy from investment as well, taxed at capital gains rates... and many finance firms earn their money from capital gains rates as well - although some of these Bush era changes are going to expire as well.  If the top tax bracket tax does go up, it just widens the gap between the truly wealthy and the rest of us.  

    If the government really wanted to narrow the GINI, this isn't the way to do it - the towering piles of capital exist in the leadership of both liberals and conservatives - I find it humourous that these tax changes will not disproportionately affect them.