Should the Rich and Wealthy get something for paying all those taxes? (Humor)

Dividing Dollars I came across Top 10 'Bad Ideas' for Taxing the Rich and couldn't help but share it.

The premise, how to encourage the rich to pay more in taxes, in a tongue in cheek fashion.  Author Robert Frank summarized some of the "best" suggestions:

1–Naming Rights. Depending on your tax bill, you get naming rights for federal property such as highways, bridges, etc.

2–Frequent Flier Points. One reader wrote: “High income taxpayers would accumulate points based on their tax percentile, which could then be redeemed for the ultimate status symbols: merchandise frankly (yet discreetly) proclaiming the bearer’s high income bracket. Imagine, for example, a metallic Coach tote with a sterling ‘1%’ charm on the zipper, proclaiming that the woman carrying it is in the top 1% of US taxpayers. And what businessperson wouldn’t want the Montblanc half percent pen, with a simple ‘.5%’ engraved in the snowy tip of the pen? Those in the know would recognize and respect these symbols of achievement.”

3–A Parade. On April 15, rich people who paid more than $500,000 in taxes could march down Constitution Avenue and shake hands with the President and members of Congress at the end.

4–Tax the Foreign Rich. We should provide “expedited citizenship” to immigrants who will buy a home for a value of at least $300K-$400K. This will reduce our excess housing stock, bring capital into the country and probably bring in productive taxpayers.

5–Access Passes. The rich would get preferred access to public parks/national museums.

6–Exemption from jury duty.

7–The “Fat Tax.” Impose tax incentives tied to a person’s overall Body Mass Index (BMI), as well as a % change in BMI versus the prior tax year.

8–A telethon. A 24-hour live TV auction offering one-on-one experiences with 1,000 “A-List” Stars of entertainment, sports, business and politics with 100% of proceeds earmarked to help fund a specific U.S. Government program. Experiences might include lunch with the President, a concert with Lady Gaga and helicopter skiing with Will Smith. All proceeds would go to taxes and the stars would revel in the patriotism of helping the government.

9–Rent out paintings and other artifacts from the Smithsonian. “The Smithsonian provides 1,000 treasures that are each available for one-year (or more) rentals at $50+ million (plus shipping) annually to the highest (sealed) bidder,” one reader suggested.

10–Shame. Anyone who agrees to pay a higher tax rate will be exempt from having their names published in the local newspaper. Rich people, after all, hate adverse publicity.

I personally like 2, 4, 6 and 9 :)

Photo:  © Alexandr Denisenko | Dreamstime.com

 

Bagel with or without a schmeer of Tax?

New York City is justifiably known for its bagels - having lived in other parts of the country I can testify that it must be something in the water because they just can't get bagels right in Boston, Charlotte, Tampa or LA. What can't New York get right? How it taxes its famous bagels.

This a a true head scratcher. Buy an unsliced bagel - no sales tax. Buy a sliced bagel - sales tax. Now I know that everyone is looking for sales tax revenue, but seriously? What are they going to do, send in undercover bagel auditors to do a tally of sliced versus not? And what if the bagel is purchased wholesale pre-packed sliced with spread? Since you were not the perpetrator of the slice, are you subject to tax? Or if you offer a knife to your customers, do they need to pay for the privilege?

So if I buy a dozen unsliced bagels its $10.00. If I buy a dozed sliced it is $10.89 (the NYC sales tax is 8.875% made up of (1) City sales tax rate of 4.5%, (2) New York State sales tax of 4%, and (3) the Metropolitan Commuter Transportation District surcharge of 0.375% - making Jersey look like a good deal).

Tax laws are necessary and even good I daresay (I for one appreciate having roads, police, and the army), but smart and reasonable tax policy is needed. This is an example of the hair on the end of the tail of the dog wagging the whole canine.


Thanks to Steven Loeb in our Tax Department for bringing the absurdity to my attention.

Opposing Views on the Estate Tax / Death Tax

USA Today has two stories running today - one Our view on death and taxes: Loopy estate tax policy highlights D.C. dysfunction, and the other Opposing view on death and taxes: End the 'death tax'.  Both totally miss the point that there is a tax as a result of death no matter which way you lean - an estate tax would be assessed immediately, or there will be capital gains taxes to pay for decades to come.

In the first article, they quote a US Senator: "Sen. Jim Bunning, R-Ky., bluntly put it, [George] Steinbrenner "was smart enough to die in 2010."  Really?   Smart enough to die this year?  I am sure Mr. Steinbrenner's family and friends appreciate your comments on their loss.  USA Today then describes why there is no estate tax in 2010, including the recent political battles, and supports an estate tax by saying:

It makes sense to tax inherited wealth, derived simply by having the right parents, at a higher rate than money acquired through hard work or investment. Advocates of repeal rarely say where else they'd get the money to make up the lost revenue, because the inevitable answer is it would come from taxpayers of lesser means.

Ahh, the famous "he who has more must share" argument.

On the flip side, in the second article Rep. Louie Gohmert, R-Texas, takes the position "[t]ime to end the death tax permanently.":

For anyone to reach his hand into a deceased person's pocket and steal is despicable. But, when someone dies and the government steals from the deceased, our laws legalize the theft.

He goes on to tell the story of the family farm that had to be sold to pay taxes.  

Ahh, the famous "how dare they" argument.

How how about a few actual facts to consider.

  • The estate tax impacts around 2% or less of the entire US population (for in depth factual information about who pays the estate tax and how generated look at  the Tax Policy Center "Tax Policy Briefing Book" chapter on Wealth Transfer Taxes).  So for the other 98% of US taxpayers, consider the estate tax  a source of revenue to the federal government that you don't actually have to contribute to. 
  • In 2009, an estimated less than 100 estates with family farms and small businesses were subject to tax - just 1.9% of all taxable estates.  There are current laws to defer taxation of farms and better ones have been proposed (see Family Farms to be Exempted from Estate Tax?)
  • Estate taxes were estimate to generate $13.8 billion in 2009.  The federal government spends $x each year - if estate taxes don't generate part of the income, other taxes will.
  • For more facts, look at Truths about the Estate Tax - Debunking the Popular Myths

And the most important, and most glaringly overlooked fact of all in BOTH USA Today articles - if there is no estate tax there is STILL a tax on inherited wealth.  That tax is the capital gains tax. Let's thing - if there is no estate tax all that appreciation on assets that has disappeared for 98% US taxpayers on a person's death will now potentially be subject to tax on the sale of assets.  An while an estate tax may seem harsh in light of the death of a loved one, consider the nightmare of finding proof of cost basis for assets purchased decades earlier.  For more information about the real realities of no federal estate tax, look at Federal Estate Tax "Death" in 2010 Creates Capital Gains Trap.

A thought - let's abandon rhetoric and look at creating good tax policy.

A conversation with Mike Huckabee on Tax Policy

Mike Huckabee Today former Arkansas Governor and Presidential Candidate Mike Huckabee spoke at the Morris County Chamber of Commerce Annual Meeting.  During a round-table session with Chamber's Board of Directors I had the opportunity to ask Governor Huckabee about his thoughts on our current tax system.   Now, I am a self-admitted tax junkie - I am totally fascinated by how the tax system influences the economy and behavior and how little critical thought politicians on both sides of the aisle seem to give to it.  So, I thought to myself, here is an opportunity to see what a former (?) politician would say about tax policy. 

To paraphrase my question:

Governor Huckabee, here in New Jersey we are in the most expensive state to live in and the most expensive state to do business in from a tax perspective.  How is it that the government's share in our work could be productive to our businesses instead of having a dampening effect?

Gov. Huckabee's first answer was to first invite me to move to Arkansas - apparently the tax environment is much friendlier.  But all joking aside, he made some very insightful comments, which I thought I would summarize here:

  • Corporate Tax does not exist. He expressed amazement of the fundamental lack of understanding in the American populations that corporations do not pay tax, they collect tax.  Think about it - when there is a new tax on oil companies, gas prices go up; on food companies, food prices go up; on banks, bank fees go up.  Taxes are a cost of doing business that is passed along to the ultimate consumers of good and services - you and me.  
  • A FAIR tax would jumpstart the economy.  Gov. Huckabee said that he used to advocate a flat tax, but now advocates a FAIR tax.  I have to say I am not a flat tax proponent (it is regressive - affects poorer people more as they must spend dollars on necessities - and anything to address the regressiveness takes away from from the simplicity of a flat tax) and I knew nothing about the FAIR tax until today.  Gov. Huckabee explained it as a tax on consumption - you buy gas, you pay tax; you buy oil to make gas, you pay tax.  It changes the tax from on productivity to one on consumption.  He inspired me to go out and learn more - so more posts will be had on this subject.  I will be visiting the FAIR Tax website today and reading The Fair Tax Book that Gov. Huckabee recommended.
  • Eliminate tax penalties for bringing offshore dollars into the US as an immediate solution to our fiscal crisis.  Right now, if you make money outside the US, you are taxed when you bring it into the US and potentially subject to penalties of 50% or more if you haven't previously reported the dollars.  Gov. Huckabee estimated 130 billion in offshore dollars that US companies and taxpayers won't bring back into our economy because it costs too much.  Eliminate those taxes and billions will flow into the economy from sources other than the US taxpayers pocket.

Gov. Huckabee shared that when he discussed the fair tax with his accountant he thought the accountant would dismiss the idea because it would put him out of work.  The accountant replied that he would like the idea where he could spend his time helping companies build their businesses instead of figuring out what their fair share of tax is. I will read more on the subject and see if I agree.