Thursday, December 9, 2010

Bush Tax Cut ignorance makes me laugh


This whole debate and discussion about the extension of the Bush Income Tax Cuts make me laugh. Down deep though, I'm really enraged, but have resigned myself to the fact that there's nothing I can do about the inequity I'm about to point out. So, I just try to laugh about it.

First, understand that I make a living trading securities, from a home office, using only my own capital. I fell into this career after a number of years plying a trade as a CPA, and then CFO of a number of different companies. As a numbers jockey early on, I learned my way around the income tax code. And to this day, I'm probably more knowledgeable than most, and certainly most traders, about how the tax code extracts money out of the pockets of Americans.

Time and again, you'll hear a big deal made of the fact that LT Capital gains, and qualified equity dividends are taxed at only 15%. You read it in news article after news article. You hear it out of the mouths of politicians. It's nothing but pure T bullshit. It's lies told by ignorant people who don't have a forking clue how the income tax monster really works.

The vast majority of capital gains and qualified dividends in our country are earned and reported by upper middle class Americans who fall within the $200 K to $1 Million in annual taxable income range. In that range, it's next to impossible to avoid being subject to the AMT tax monster. When you trigger AMT, you wind up paying a flat 26% tax on your earned income, and 25% on your capital gains and dividends. And no amount of planning can help you avoid getting screwed by these higher tax rates. There is no 15% income tax for these unfortunate Americans. It's a full 10% higher because of AMT.

What enrages me though is how the ubber wealthy wind up avoiding these higher AMT income tax rates. Hedge funds, private equity shops, I-Banks, are chalked full of multi-millionaires whose income propels them far above the AMT. These lucky few pay tax at the 15% rate. We're talking about maybe a couple hundred thousand out of 143 million taxpayers.

It's even worse. These fortunate few generally are able to structure their income in offshore partnerships and/or get it classified as "carried interest", which is a protected pet of the Republican party and only gets taxed at 15%. These financial engineers make 10s and 100s of millions, and some even billions, and pay a pittance in income tax compared to upper middle class America. These filthy rich are the protected citizens in our country. These are the taxpayers sheltered by the Republican Party. But if you're slaving away to only earn between $200 K to about $1 million a year, you get screwed royally.

What I should really laugh at though is the gullibility of upper middle class Americans. Most of them are Republicans. And most of them are too stupid to understand how they get screwed relative to the super rich.

Bottom line though, here's the reality of what's going on in America. Despite what you read about the 15% tax rate on capital gains and qualified dividends. Despite the big deal you hear about an AMT "fix". Despite what Republican politicians will tell you. This is the hard, cold truth:
  • Most upper middle class Americans pay tax on their income at around 25%.
  • Extremely wealthy Americans pay tax on their income at only 15%.
And that's why I think Republican Politicians are so full of shit. To the one, they whine and cry about how it is that the super wealthy pay more of the income tax. In raw dollars, yes. But as a percentage of their income - it's not even close.

See why I'm enraged? For every $100 extra he earns, Warren Buffet keeps $10 more in his pocket than me. Does that much of a disparity really make common sense? According to Republicans, yes it does. But it should be an insult to middle class America - if they only understood just how much it is that they're really getting screwed by the Republican Party.

Republicans should stop protecting the super rich. Republicans should put a halt to "carried interest" being taxed at 15%. Republicans should ensure that the super wealthy pay taxes at the same incremental rate as middle class America. But no, Republicans protect the super wealthy in our country and hand them income tax candy with ease.

North Carolina deserves better than Republican Senator Richard Burr.

2 comments:

  1. Thank you for the compliment. I work constantly at being the best moron on planet earth ... given that the Republican Party is working hard to ensure that morons rule our world.

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