Wednesday, April 11, 2012

Does This “Millionaires Tax” Look Simple?

"It's simple," says the President. Huh? Does this proposed tax act look simple to you?

Don't bother trying to make sense of it. Ezra Klein at The Washington Post has done the work for us: Everything you know about the Buffett rule is wrong.
Posted by JLM at 9:23 PM
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3 comments:

Jim Gust said...

Keep in mind that Klein is a liberal who supports this tax. So he's putting the best possible spin on it.

I know that the Buffett tax is a 30% minimum tax on realized capital gains, dividends and ordinary income. That's not so different from the 28% rate Reagan gave us in 1986.

But the big question is, will muni bonds remain tax free? If so, their value would skyrocket under this tax. I believe all future muni issues should be fully taxable.

11:32 PM
Jim Gust said...

There's no telling what final legislation would look like, but I just read the bill Harkin introduced that includes the Buffett tax, the version Klein is talking about.

The tax is imposed upon adjusted gross income, with an allowance for the charitable deduction. There is no addition of tax exempt interest, or even an attempt to reduce the tax benefit of the exemption.

Those municipalities have good lobbyists, and muni bond salesmen can sleep easy.

By preserving the muni bond exemption, there is no mathematical way for the Buffett tax to achieve its stated objective. It's ultimately just a backdoor way to take away long-term capital gain treatment from certain taxpayers. It won't work.

9:36 AM
JLM said...

What captured my fancy was learning that this version of a supposed Buffett Rule tax would not tax an income of $1.5 million or $2 million at 30% – even if the taxpayer invested nothing in tax-exempts.

Anyhow, with chances of enactment rated at five below zero, the details matter not.

9:44 PM

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