Monday, September 19, 2011

The deception behind Obama's tax on millionaires

John Steele Gordon explains why Obama's plan to raise taxes on those earning more than a million dollars is not what Obama is pretending it is.
So President Obama’s latest tax proposal is just a disguised attempt to raise the dividend and capital gains taxes on those with incomes of more than $1 million to about 70 percent from the current 50 percent. The result, of course, will be a rush to avoid these taxes, using exactly the same method that Warren Buffett uses to avoid paying them: they’ll shelter their wealth under a corporate umbrella.

Warren Buffett’s Berkshire Hathaway Corporation paid $5.6 billion in corporate taxes last year on income of $19 billion, a 29 percent rate. (By the way, its tax form ran to 14,097 pages; just imagine what its tax compliance costs must have been.) Warren Buffett owns about 30 percent of Berkshire Hathaway, so he, in a very real sense, paid not just the $6 million in federal taxes he claimed in his Times article, but $1.68 billion more in the form of corporate taxes. But Berkshire Hathaway pays no dividend and I doubt that Buffett has sold any of his stock in the company. Thus he has no capital gains to report from his Berkshire Hathaway holdings.

So while he paid, roughly, the same effective tax rate as his secretary if you count his share of the corporate taxes paid (and you should), he would not owe much more under President Obama’s stick-it-to-the rich plan. Most of his billionaire friends wouldn’t either. Those most affected would be the upper middle class, as usual, who don’t control the corporations they invest in.
What a surprise! Obama endorses a plan that wouldn't bring in much money, but would still provided an opportunity for major demagoguery against the rich.