Monday, November 26, 2012

Taxing Those Who Like to Pay Tax

Jim Gust calls the proposed AMT for the rich "sensible-seeming" but fails to mention the sheer genius of Warren Buffet's idea.

Most of us don't like to pay income tax. Most of us sure don't want to pay more income tax. Most, but not all.

Among those labelled "rich," more and more wealth holders have gone to considerable trouble to pay significantly more income tax than required. You know them as creators of I Dig It Trusts. (With these trusts, basically Dad moves income-producing assets into a trust for the kids but continues to pay tax on the income flow.)

Raising taxes on those who already volunteer to pay more! How can you improve on that?

The reality, of course, would be more complicated. As Jim notes, those harvesting millions in interest from tax-exempt bonds might escape such an AMT, although adjustments could be made. Buffet's proposal would hit heavily the top 400, generally taxpayers who realize once-in-a-lifetime capital gains. Do they deserve the same tax treatment as corporate big-shots who, year after year, "earn" fifty times as much as their rank-and-file employees?

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