Will taxing the wealthy really fix the deficit?
Just thinking… I’m sure I will get some hate mail for this column, but somebody needed to ask this question: When will we see a sensible deficit-reduction plan in which we all share equally in the solution instead of merely feeling good about “sticking it to the wealthy” and not fixing the problem?
It used to be a mark of distinction to be a successful business owner, and “wealthy” wasn’t a bad word.
So many worked harder, sacrificed and risked (and sometimes lost), but many eventually attained that lofty monetary goal at some point in their life. Today, however, many business owners are considered “greedy,” “evil,” “selfish” and unwilling to “pay their fair share.” Wealthy folks are being vilified, and often the talk from politicians is about how to tax them more.
The estate tax is consistently one of the top tax targets. Current estate tax law is set to expire at the end of 2012, reverting to a 45 percent rate on any estate worth more than $1 million.
An “estate” includes the value of all life insurance and most retirement plans. Add on to that a house (even at today’s depressed prices), cars, jewelry, etc., and you will find that actually quite a few folks not considered especially wealthy will find their estates in the government’s 45 percent cross-hairs next year.
Now take, for example, a small-business owner who employs 10-30 people. That business by itself will usually be worth enough to bump that person’s estate this tax situation.
If there aren’t enough “liquid” assets available, the business might have to be sold or even liquidated to pay the estate tax owed, possibly causing some or all of the employees to lose their jobs.
Total estate taxes collected in 2007 was $24.6 billion. (That is the most recent figures released by the government because estate tax returns take extra time to file.) So, even if the estate tax rate were set at 100 percent, it wouldn’t make a dent in the current $1 trillion-plus deficit.
Income tax is another favorite choice of the tax-the-rich crowd.
However, total income taxes paid by the top 1 percent of the wealthiest Americans amounted to 36.73 percent of all income taxes paid in 2009. We are already at the point where that 1 percent that the “Occupiers” hate so much is paying almost 40 percent of all U.S. income taxes.
The real question on the table is: “If taxing the wealthy at 100 percent of their estates and doubling their income taxes isn’t going to fix our deficit problem, then what will?”
That would likely chase most of the wealthy and business owners out of the country.
In my previous column, I showed how our income taxes are spent. I also showed that of the total spent each year, 27 percent is borrowed money. If we all just paid 27 percent more in taxes, there would be no deficit.
For example, if your 2011 tax bill were $2,000, it would only go up by about $10 a week ($540). If Congress could actually cut some spending, our increase in taxes would be less than 27 percent.
Did you hear? “The only person who gets anywhere playing both ends against the middle is an accordion player.”
• Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.