The Rich Are Not Docile Sheep Waiting to Be Shorn
"President Barack Obama's new health-care legislation aims to raise $210 billion over 10 years to pay for the extensive new entitlements. How? By slapping a 3.8% "Medicare tax" on interest and rental income, dividends and capital gains of couples earning more than $250,000, or singles with more than $200,000.
The president also hopes to raise $364 billion over 10 years from the same taxpayers by raising the top two tax rates to 36%-39.6% from 33%-35%, plus another $105 billion by raising the tax on dividends and capital gains to 20% from 15%, and another $500 billion by capping and phasing out exemptions and deductions.
Add it up and the government is counting on squeezing an extra $1.2 trillion over 10 years from a tiny sliver of taxpayers who already pay more than half of all individual taxes.
It won't work. It never works. Punitive tax rates on high-income individuals do not increase revenue. Successful people are not docile sheep just waiting to be shorn."
~Cato's Alan Reynolds in today's WSJ
Here are some reports on how tax increases on millionaires worked out in Maryland:
1. Wall Street Journal -- "Maryland's Mobile Millionaires: Income tax rates go up, rich taxpayers vanish."
2. Washingont Post -- "The number of self-reported million-dollar earners in Maryland has dropped by roughly a third compared with this time last year, renewing debate yesterday about whether the state's year-old "millionaires' tax" is driving rich people beyond its borders."
3. Baltimore Sun -- Top Payers Fade Away; Maryland Was Depending On Taxing Millionaires, But They're Disappearing.
4. Wall Street Journal -- Millionaires Go Missing; Maryland's fleeced taxpayers fight back.
35 Comments:
It starts with a minority group then it evolves to entrap the majority.
We are becoming Europe!
Freedom vs. Socialism. Time to choose.
Obama is counting on the fact that you can't escape America like you can leave a state (i.e. New York or Maryland).
But he will be wrong. If this all prevails, the producers will look for other places to live.
So, which nations will become the tax havens for the rich eeeeeevil bastards to flee to?
Clearly, it's time to revoke their passports, before it gets to be too late.
How can we enslave them if they flee?
Clearly, there's a precedent for this in the Fugitive Slave Laws.
Come back here you damned lazy Morlocks!!!
Ultimately, the middle class, i.e. over half of U.S. households, will pay for the government spending spree, one way or another.
The new health care law may be a massive tax hike to help pay for the on-going massive government spending spree. The poor already receive free health care. So, raising taxes to give free health care to the poor may be just a tax hike.
Most Americans seem unaware they've received little or no help from the government to pay-down the mountain of household debt. Instead, a mountain of government debt has been created, which most Americans will pay for.
Obama stated over a year ago we cannot afford another "bubble." He made that statement true. Now, all we can afford is a "lost decade."
One needs to consider that a lot of the income of the top tier is capital gains of which thru dec 2009 there were very few since 2007. As noted its much harder to escape the IRS than a state, and I would go one step further, if you expatriate yourself you get a permanent bar to re-entry to the US. Just like an illegal immigrant. Recall that one must pay taxes on world wide income if a citizen and if one chooses to renouce citizenship you get to pay capital gains as if you sold everything on the day you renounced the citizenship. Anyway short of tax havens and some third world countries taxes are lower in the US than elsewhere. Now the Caymans are not a bad place to live, but perhaps lacking some variety. In Europe you will pay more taxes than the US.
The rich do not have to flee America to avoid taxes on income. They have the most flexibility to adjust and defer their compensation to adapt to the tax code.
Google's CEO and its 2 founders earn $1/yr, as do the CEOs for Kinder Morgan (Richard Kinder), Capital One (Richard Fairbank), and Apple (Steve Jobs). Why? It allows them to defer the exercise options and the sale of stocks until it is most convenient. For example, when Congress passes tax breaks.
In 2006, a millionaire a day was leaving France due to high taxes.
http://www.washingtonpost.com/wp-dyn/content/article/2006/07/15/AR2006071501010.html
Of course it is no coincidence that there was that UBS dustup last year where UBS was forced to disclose accounts owned by Americans.
To solidify the reach of the IRS, there was a provision slipped into the recent employment bill that will force foreign banks to report names, addresses, balances, and tax id numbers for accounts held by Americans or companies owned by Americans.
Pg. 10
http://www.us.kpmg.com/microsite/taxnewsflash/2010/Mar/Jobs_Booklet.pdf
http://www.zerohedge.com/article/its-official-america-now-enforces-capital-controls
Select any group X that and put them in battle with Congress. That is a battle I am not in; against an enemy of mine. How can I complain?
How can we enslave them if they flee?
There's no place that the US could not get to if provided the proper incentive.
There is nowhere for them to hide. The question is what incentives does it take to pursue (and easily overtake) indefensible islands?
The rich do not have to flee America to avoid taxes on income.
Fix the tax code so that their accountants are frustrated beyond belief. Nowhere to run, nowhere to hide, no loopholes on their side.
To solidify the reach of the IRS, there was a provision slipped into the recent employment bill that will force foreign banks to report names, addresses, balances, and tax id numbers for accounts held by Americans or companies owned by Americans.
That is rightful for the IRS to do if it is to properly calculate their actual tax liability.
interest and rental income, dividends and capital gains
The new tax applies to a lot more than that: it also applies to royalties, annuities, and distributions from S-corporations & limited partnerships. I assume the annuity bit is why Democrats are so heavily pushing annuities for IRA and 401k plan participants. That would all be bad enough, but the fact that the related income thresholds aren't indexed for inflation means a whole lot of people are going to have an unexpected tax bill in their future, just like AMT. That threshold is grossly misleading in any case: assuming 2% inflation the real income threshold is $188k today, because the $200k applies in 2013. You see the same shenanigans in the Cadillac Plan tax, which isn't indexed until 2014.
The included marginal rates quoted in new articles are all wrong, they don't include reinstituting deduction and personal exemption phaseouts.
Oh yeah, don't forget the new tax for long-term care. You must affirmatively opt-out in order to prevent it from being removed from your paycheck by your employer.
> that will force foreign banks to report names, addresses, balances, and tax id numbers for accounts held by Americans or companies owned by Americans.
Yes, I'm sure the foreign banks will be lining up to accede to that one. The Swiss and the Cayman banks will just be jumping to assist the IRS with that, with typical "Gallic" patience and politeness all around.
:-/
All that idiot law does is give the IRS an excuse to confiscate if it's discovered via some other means and not reported.
> How can I complain?
Indeed, by all means. If you're really really quiet, and really really lucky, maybe the wolves will eat you last.
The Chinese tactic of letting your enemies battle each other only works if either
a) they'll never beat each other and thus remain occupied unable to attend to you
b) you're big enough that, after they've whittled each other down to size, you can beat the remnants of the winner.
Being as both your enemies in this case are a lot bigger and you can't be certain of "a", your best move is instead to side with one or the other and score points that way.
> There's no place that the US could not get to if provided the proper incentive.
BWAAAhahahhahhahhaaaaaa... these idiots supposedly can't find Bin Laden, you figure they're going to take out someone a lot smarter?
> Fix the tax code so that their accountants are frustrated beyond belief. Nowhere to run, nowhere to hide, no loopholes on their side.
Yes, by all means -- kill the goose that lays the golden eggs for daring to want to keep one or two of them for herself!! Off with her head!! Yeah, that'll teach *her*!
Every time you type, seth, you show just how stupid you are.
It is interesting to note that the typical tax-paying American pays more than 40% of their income in taxes all 'round -- income, sales, fees, mandated expenditures, and so forth.
The Boston Tea Party involved a tax of about 2-3%, total.
At some point, the goose stops hissing and starts biting.
beneng:"The rich do not have to flee America to avoid taxes on income. They have the most flexibility to adjust and defer their compensation to adapt to the tax code."
exactly.
do you think that, back in the 50's and 60's, when the marginal rate was 90%, rich folks actually paid that? if so, i have a bridge to sell you.
Progressives like to make the argument that a small increase in taxes “is all that’s needed “ to pay for a particular social engineering project X.
Of course the next social engineering scheme (Y) comes along and again the argument is that only a small increase in tax “is all that’s needed” for this particular scheme.
If you think about the Progressive argument they attempt to frame a particular social engineering scheme as existing alone. That the vast universe of social engineering schemes and associated taxes are cast aside in the argument.
Progressives want the public (you) to think of the newest pet project as isolated. Once they convince you that we are only debating project Z, and that Z exists alone and isn’t yet another building block of an already vast social welfare state, and Z is a grand idea based on “their view“, and that Z is much needed, and Z is really not that expensive, then comes the isolated sales pitch that merely a small increase in tax, a mere pittance, is all that is necessary to fund the newest scheme.
The problem then comes that if you propose 100 social engineering schemes, each only requiring a modest 1% tax on your disposable income, we eventually end up with a 100% tax on your disposable income.
Surely one thinks that a 100% tax could never happen. That’s unthinkable and will never happen. Maybe, maybe not. However, thinking of ALL taxes payable, the constant incremental increases of tax at the margin (those constant small increases) create a tax rate that approaches and exceeds 50% and is a major disincentive. 50% becomes 51% then 52% the 53%.
Don’t believe it?!? Check this list of taxes then think of the true effective rate of taxation you pay:
Accounts Receivable Tax
Building Permit Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Excise Taxes
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax (currently 44.75 cents per gallon)
Gross Receipts Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges IRS Penalties (tax on top of tax)
Liquor Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Personal Property Tax
Property Tax
Real Estate Tax
Service Charge Tax
Social Security Tax
Road Usage Tax
Recreational Vehicle Tax
Sales Tax
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone Federal Excise Tax
Telephone Federal Universal Service FeeTax
Telephone Federal, State and Local Surcharge Taxes
Telephone Minimum Usage Surcharge Tax
Telephone Recurring and Nonrecurring Charges Tax
Telephone State and Local Tax
Telephone Usage Charge Tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax
Add another tax here _______ .
The answer is that even John and Jane Q. Public, tax payers at large, once you add all the taxes together for an effective rate, are likely paying an effective rate of taxation near 50%. Ah the evil of it all! Taxed to death 1% at a clip.
W.E. Heasley, I agree, it's a slow process, until there's a rude awakening, which will be too late.
The new health care law will not be fully implemented till 2018, which coincides with the end of the structural bear market that began in 2000 (after the 18-year bull market from 1982-00).
OBloodyHell said...
Yes, I'm sure the foreign banks will be lining up to accede to that one. The Swiss and the Cayman banks will just be jumping to assist the IRS with that, with typical "Gallic" patience and politeness all around...
That what I thought, but then I read the bill itself. It is actually a well crafted control mechanism. Foreign banks have to sign an agreement with the US to do the reporting and withhold 30% of any transfers to accounts held by US citizens who do not provide a tax id.
If they don't agree and comply, US banks will have to withhold 30% of transfers to that bank. Since all dollar wires go through NY, seems like it could affect international trade payments and other transfers regardless of who owns the account.
No bank will want their other customers inconvenienced just to avoid reporting some information on Americans.
I think countries and banks will have something to say about this before it is implemented, but banks are going to have to make some decisions. There's 2 years until it takes effect.
Oa and there is always the Treasurys nuclear option with large bank groups (many of the banks are members of groups that also do business in the US). This is you will loose your license to do business in the US if you don't comply. Since its more than the US at least the EU is involved, this has more chance to go thru than if it was just the US. Germany has bought disks with lists of names of people with accounts. When all the G-6 agree that offshore banking needs to be cracked down upon then its more likely to succeed.
what funny is the people think europe is such a bad place to be rich.
it's not. it's much better than the US and you will pay much lower taxes.
all you have to do is keep your money offshore. unlike the US, the EU won't tax that.
yes, their tax rates on high income are awful. it's very hard to get rick or run a business there.
but if you are already rich and get most of your income from a non eu company or investments, you barely get taxed at all.
the top 1% of US taxpayers pay 40% of income tax.
if 10% get pissed and leave, that's a 4% deficit.
you'd be a fool not to be thinking about it right now.
Anonymous is right. A person can't easily leave the country. Where would you go? Three other things:
1. Are the Obama voters still happy?
2. The next election can't come fast enough.
3. Elections matter.
if you expatriate yourself you get a permanent bar to re-entry to the US.
To which my husband responded, "Why would you want to return to a country that is in decline and treats its citizens like serfs?". Indeed.
In Europe you will pay more taxes than the US.
Not true.
The top marginal tax rate in France is 47.5%. The top marginal tax rate in NYC will be 60% next year (local, state and federal). Europe is starting to look like a tax haven.
Singapore's top marginal tax rate is headed below 20%. And things actually work there.
It may be worth paying the cap gains tax to extricate yourself from American serfdom. This country is the Titanic and Obamacare was the iceberg.
morganovich said...
“the top 1% of US taxpayers pay 40% of income tax.
if 10% get pissed and leave, that's a 4% deficit.”
The math is wrong Morganovich. You are making the assumption that all tax payers in the 1% group have the same income. In other words, the top 1% can be further categorized by amount of income and hence the associated tax.
Morganovich, you have a solid career ahead of you at the CBO!
Yes, by all means -- kill the goose that lays the golden eggs for daring to want to keep one or two of them for herself!! Off with her head!! Yeah, that'll teach *her*!
If it's trying to kill you, you defend yourself. If that means you're having goose for dinner(and getting another golden goose), so be it.
At some point, the goose stops hissing and starts biting.
That's when you clip its wings.
Singapore's top marginal tax rate is headed below 20%. And things actually work there.
Less freedom than the US. The trains run on time, but don't expect to be able to drive an unmetered car or hold a Tea Party. Same thing with about any other destination.
Unlike other countries, the US will pursue you. While the status of bin Laden is unclear, we're making it quite hard for his followers to live.
[Singapore]less freedom than the US.
At some point that was true. Today, it that's debatable and tomorrow it simply won't be true at all.
The U.S. won't pursue non-U.S. citizens and the U.S. will pursuits will be taken less and less seriously as the United States continues to lose power and influence around the world.
I know you're not the brightest bulb in the marquee, Sethstorm, but it would behoove you to crack open a history book once in a while.
If you severely punish production, the most productive will leave and you'll be left with dolts like you who will be able to do nothing but wallow in your own shit. Study the history of Russia and every other country that's tried your prescription.
>Of course the next social engineering scheme (Y) comes along and again the argument is that only a small increase in tax “is all that’s needed” for this particular scheme.
Could be that's why they're called PROGRESSIVES. "Evolution not revolution" The goal is the same.
>Fix the tax code so that their accountants are frustrated beyond belief
Sethstorm,
Accountants don't get frustrated. They do ACCOUNTING. The more the merrier. They get PAID more to do more accounting.
>If it's trying to kill you, you defend yourself. If that means you're having goose for dinner(and getting another golden goose), so be it.
You may be the most literal person I've ever encountered. Do you think the fairy tale about the Golden Goose is really about a goose?
In the current discussion, Golden Goose refers to rich people who got that way by producing goods and services that benefit all of us, as evidenced by the fact that we are willing, or even eager, to pay for them.
Are rich people really trying to kill you? Where will you find another Golden Goose? In other words, where will you find more innovative, hard working people who make our lives better and become rich in the process?
>At some point, the goose stops hissing and starts biting.
That's when you clip its wings.
You must have been absent that day when goose anatomy was taught at your school.
To prevent BITING you clip its BEAK.
To prevent FLYING you clip its WINGS.
But thanks, Sethstorm, for providing comic relief in this discussion of an otherwise depressing subject.
Just to point out that in France there is also a wealth tax ranging from a tax of .55% if you are worth more than 720,000 euros. In addition there is a social tax of 7.5% on income and capital gains, as well as the VAT of 19.6$. Now capital gains are also taxed at 16% on the income side, so you have a 23.5% capital gains rate. Add a local tax based either on the number who live in a house if rented or the value of the house if owned.
All in all there are a lot of second order taxes here.
W.E. Heasley said...
"Check this list of taxes then think of the true effective rate of taxation you pay:
Mr. Heasley then lists a extensive list of taxes that we all pay to some degree. Carpe Diem often lists how goods and services cost less now as a percent of income. Why do people feel they are going backwards then? If they are making at least as much income then the answer is dealing with swarms of taxes. Your federal tax rate may be down but the totality of taxes is more oppressive.
Thank you to Mr. Heasley.
The top marginal tax rate in France is 47.5%.
I'm pretty sure that doesn't include "social insurance" taxes, their equivalent of our Social Security and Medicare taxes.
Add a local tax based either on the number who live in a house if rented or the value of the house if owned.
Isn't imputed income grand? They tax you on phantom income. Denmark has a similar scheme: if you own a house, you pay income tax on imputed rent the government says you could have received if you had rented your house to a tenant. That's in addition to a 1-3% real property tax. Apparently Denmark prefers a nation of renters to owners.
Don't they teach us in Economics that State and City Taxes are less effective because of mobility. BUT when it comes to Federal Taxes, to do the same, one would have to leave the Country all together which is highly unlikely. Hence, Federal taxes can be much more effective due to a lack of mobility...Comparing what happened to Maryland vs. what could happen to the broader US doesn't seem to be a good comparison.
Lyle,
I do understand that. However, the wealth tax goes largely uncollected. The French can offshore assets to avoid it and France found that it spent way more trying to collect it even when it is owed than it actually ever collected. It's still on the books, but only complete idiots ever end up paying it.
Offshoring assets is not available to U.S. citizens.
The French can also avoid taxes by simply living outside of France for just over half the year - an easy thing for entrepreneurs. That's not available to Americans.
The V.A.T is a consumption tax - and you get to choose your level of consumption. The capital gains tax you cited is lower than the cap gains tax that Obamacare has mandated in the United States for the wealthy (and it is they about whom we speak).
As for rented and owned homes, we also have a variety of property taxes on homes, cars and assorted other large goods as well as state and local taxes and social security.
Plus, American food is horrific :)
I'm not advocating moving to France. I'm just pointing out that the United States no longer has an advantage for the most productive members of society - which means America has lost its advantage for everyone. But don't take my word for it, stick around for the next 30 years.
I probably wont' because I've seen this movie before and I know how it ends. That's why I immigrated here in the first place.
I do understand that. However, the wealth tax goes largely uncollected. The French can offshore assets to avoid it and France found that it spent way more trying to collect it even when it is owed than it actually ever collected
Perhaps sharing intelligence on these people with the US (and other like countries) could fix this problem. You get some of theirs, they get some of yours. All involved countries win.
Those with offshore money lose.
The U.S. won't pursue non-U.S. citizens and the U.S. will pursuits will be taken less and less seriously as the United States continues to lose power and influence around the world.
That presumes that the correct incentives don't appear. At some point in the game, those folks will be pursued.
They would do their best not to paint a large bullseye on themselves - if they wish to survive. The problem is that what might save them is what they will not do.
If you severely punish production, the most productive will leave
...if they can, and if they survive the journey. Don't think that the wide reach of the US military and intelligence can't make for a few "accidents". Thankfully it is the last weapon used. But if they make a point to collapse the US by virtue of their departure, the ones that leave will have no place to hide.
You don't think that they won't be pursued at some point, do you?
"Perhaps sharing intelligence on these people with the US (and other like countries) could fix this problem. You get some of theirs, they get some of yours. All involved countries win"...
Wow! The lengths you want Uncle Sam to go to so you have Uncle Sam steal their money for you...
Blogger juandos said...
The thing is, it's already happened. The US and UK have shown interest in it, and (by a stretch) Switzerland. The only thing in your favor is that nobody has made a large enough point to flee.
If you're not doing it to deliberately/coincidentally/indirectly wanting to screw with people(e.g. taking jobs out of country or out of the picture), I have no care what you do. It's when you're deliberately taking the structural supports out of the economy (knowing full well of its collapse) that the US should act.
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