Many people on the left think that increasing taxes on the rich will allow the government to do more. I have assumed that most knew how easy it is for the rich to actually choose how much they pay in taxes. I was wrong. For those who don't understand this is for you.
Let's pretend we are Bill Gates, richest man in the world. They pass a new tax law; every $1 you make over $100,000 in payroll is taxed at 100%. What do you do?
You tell Microsoft to reduce your salary to $0. Now you pay no tax on your employment income at all. You say I will get my income from capital gains, taxed at 15%. He says give me stock options, defer my income, buy a life insurance policy and make my wife the benefactor, etc, etc.
Then they pass another law, capital gain taxes are raised to 75%.
You stop selling stock. Good thing you have a nice portfolio of real estate. You don't sell the real estate, you take a loans on the property when needed. No income tax on a loan, no capital gains tax. Rents pay for the loan.
Let's say you get bored and you want a tax free trip to Iceland. Good thing you have a foundation. The foundation buy you first class tickets, hotel, etc, because you are going to give the country a donation and you have to go and present the check. Also, if your aunt Sally needs a job, you make her the President of the foundation.
Let's say they close the real estate loan loop hole. Not a problem. You buy tax free municipal bonds. No federal tax on the interest.
Let's say the government says if you don't pay now we will get you with the death tax, and they raise the death tax to 99%. Luckly you read Joe Kenndy's book on how to avoid death taxes, and you hire a team of lawyers, accountants, etc, and set up all kinds of trusts so that when you die, you actually die with $0, but your family for generations will remain billionaires.
Then of course as the founder, director, officer of the largest company in the world, you never pay for gas, cars, airplanes, boats, computers, cell phones, postage, paper clips or paper plates, because you can get all that stuff from the company. And, you can make sure the company has board meetings at your favorite travel locations around the world. You could live in 5 star hotels every day of the year, and it could all be business related, of course no money out of your pocket.
Needless to say it is nice being rich.
No matter what you do with tax rates the rich pay what they are comfortable with. The people who get screwed are the middle managers, programers, and hourly people who work hard to make a living but are not rich. When you raise taxes they have no choice but to pay them.
Please, Please, Please stop saying all we need to do is tax the rich to pay for this or that. The rich ain't going to pay for it. Middle class people pay.
Ever wonder why the old money democrats never support tax simplification. You think its to protect the poor. The reality is the more complicated, the easier it is for them to keep their wealth and to pass it on to their children. Do you really thin Kenndy or Kerry would support a tax plan that would cause their children to actually work? If you believe that, I got a bridge in Brooklyn I can sell you, well below market value-of course.
When Reagan and Bush lowered tax rates, tax revenues went up partly because rich people actually started paying more taxes. What would you do if 100% of your income was taxed, you would trade your services or skills for goods and services and minimize your income. The rich do the same. I don't suggest tax rates godd to 0%, there is an equilibrium at lower marginal rates than what we have today. The rich will pay taxes, but they will pay what they think is reasonable, not a penny more.
