Taxes

RERUN–Paying Higher Taxes Can be Very Profitable

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(Originally posted in January 2010now an April perennial)

Chevy Chase, MD, is an affluent suburb of Washington DC. Median household income is over $200K, and a significant percentage of households have incomes that are much, much higher. Stores located in Chevy Chase include Tiffany & Co, Ralph Lauren, Christian Dior, Versace, Jimmy Choo, Nieman Marcus, Saks Fifth Avenue, and Saks-Jandel.

PowerLine  observed that during the 2008 election season, yards in Chevy Chase were thick with Obama signsand wonders how these people are  now  feeling about the prospect of sharp tax increases for people in their income brackets.

The PowerLine guys are very astute, but I think they’re missing a key point on this one. There are substantial groups of people who stand to benefit financially from the policies of the Obama/Pelosi/Reid triumvirate, and these benefits can greatly  outweigh  the costs of any additional taxes that these policies require them to pay. Many of the residents of Chevy Chasea very high percentage of whom get their income directly or indirectly from government activitiesfall into this category.

Consider, for starters, direct employment by the government. Most Americans still probably think of government work as low-paid, but this is much less true than it used to be. According to  this, 19% of civil servants now make $100K or more. A significant number of federal employees are now making more than $170,000. And, of course, the more the role of government is expanded, the more such jobs will be created, and the better will be the prospects for further pay increases.

If one member of a couple is a federal employee making $100K and the other is making $150K, that would be sufficient to allow them to live in Chevy Chase and occasionally partake of the shopping and restaurants. But to make the serious money required to  really  enjoy the Chevy Chase lifestyle, it’s best to look beyond direct government employment and pursue careers which indirectly but closely benefit from government activity…which are part of the “extended government,” to coin a phrase.

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Taxed Enough Already

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Very closely are noble issues bound up with material ones. Nothing could be more grossly material than the refusal to pay taxes, and the honest historian who comes to examine these occasional epic refusals will find often that the tax was reasonable and the refusal, on material grounds, absurd. Yet the refusal to pay taxes is one of the sacraments of history, the outward and visible sign of the inward and spiritual grace, the symbol of a resurgent spirit among an oppressed people, the assertion of the rights of man, the voice of liberty defying the dictates of authority.

William the Silent: William of Nassau, Prince of Orange, 1533-1584 by C.V. Wedgwood

The Sequester

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As we count down to March 1, we are hearing more and more about the dreaded sequester. The left is confused about its history.

How did this become Obama’s fault? It started with Mitt Romney, a once-influential Republican Party politician and its 2012 nominee for president. In the third debate with President Obama, Romney fretted that “a trillion dollars in cuts through sequestration and budget cuts to the military” would weaken America’s defenses. The president literally dismissed this with a wave of his hand. “The sequester is not something that I proposed,” he said. “It’s something that Congress has proposed. It will not happen.”

How did this get to be the story ?

The accidental Bible of Sequestration is The Price of Politics, Bob Woodward’s history of the debt-limit wars, and one of the least flattering portrayals of the president this side of Breitbart.com. In it, Woodward recounts a July 27, 2011, afternoon meeting between Senate Majority Leader Harry Reid and White House negotiators. Reid wanted a “trigger” as part of a debt deal, some way to force more cuts in the future without defaulting on the debt that summer. Chief of Staff Jack Lew and adviser Rob Nabors proposed sequestration, as a threat that could be averted if/when Congress passed a better deal.

OK. The White House staff suggested it. Why ? Because they assumed that Republicans would cave in rather than accept cuts in the defense budget.

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Warren Buffett The Hypocrite

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Taxes are very complex in that there are many different types of taxes designed to raise revenue and modify behavior that the government wants to incentivize or dis-incentivize. At the highest and most simplified level you have:

Sales Taxes – generally taxes paid by the buyer to the seller at the point of purchase (tax on food at the grocery store)
Income Taxes – taxes on money people earn paid to the Federal, State or Local governments. Often this money is “withheld” from your paycheck. Typically there are myriad deductions applied to determine the amount owed
Property Taxes – taxes levied on property owned based on valuation and paid to the local government annually
Excise or “Sin” Taxes – taxes on specific items that the government wants to dis-incentivize such as cigarettes and alcohol, collected at the point of purchase
Payroll Tax – tax on wages used to “fund” social security and medicare and are levied on the employer and employee alike, to a certain amount, with few or no deductions
Capital Gains Tax – tax on the profits of securities, properties or businesses sold when the amount received is greater than the cost
Estate Tax – tax on the accumulated assets of someone who died, paid to the government.

There has been talk in the media about wealthy individuals who advocate “higher taxes” for various reasons, and they receive disproportionate press coverage for their “selfless” actions. Warren Buffett in particular has called for higher taxes on the rich, specifically INCOME taxes, as you can note below:

As fiscal cliff talk buzzes around Washington and Wall Street, Buffett on Monday published a New York Times editorial calling on Congress to impose a 30% tax on people making $1 million to $10 million a year and 35% percent above that.

However, Warren Buffett is taking significant steps to actually avoid paying the ONE tax specifically designed for him – the estate tax. Here he joins with other billionaires on their “pledge” to give away their fortunes (to trusts that they would designate how the money gets spent).

Warren Buffett got 11 more billionaires to agree to give away half of their wealth to charity.

It is hypocritical for those billionaires like Buffett to set aside their money in charities to be directed for purposes that they “believe in” while everyone else’s money is funneled to Federal, State or Local governments to fund whatever that governmental body decides to do with it. You and I can’t control where our payroll, income, sales or property taxes go – and we have to accept that. Then Buffett, too, should accept that when he calls on higher taxes for everyone (but income taxes hardly dent him since his wealth would be taxed through capital gains if he chooses to sell or most likely the estate tax on all of his unrealized gains through his lifetime) he should dismantle his “estate tax” protections and just show up and give his billions directly into the US Treasury when he dies, to be used for whatever purpose the government chooses, likely to pay interest on debt that we issue to the Chinese or to pay for some sort of poorly run entitlement or wealth transfer scheme.

Warren – if you believe in the call for higher taxes, then just die without an estate plan, and let the Federal government get their 40% of your billions. It is the right thing for you to do, since you believe (apparently) that they will spend this money wisely.

Cross posted at LITGM

Why Paris Hilton Makes a Poor Poster Child for the Death Tax

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From Instapundit:

“The idea behind the estate tax is to prevent the very wealthy among us from accumulating vast fortunes that they can pass along to the next generation,” said Patrick Lester, director of Federal Fiscal Policy with the progressive think tank — OMB Watch. “The poster child for the estate tax is Paris Hilton — the celebrity and hotel heiress. That’s who this is targeted at, not ordinary Americans.”[emp added]

This is just one problem with that little story:

Conrad Nicholson Hilton  (December 25, 1887 January 3, 1979) was an American hotelier. He is well known for being the founder of the  Hilton Hotels  chain.

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In 1979, Hilton died of natural causes at the age of 91. He is interred at Calvary Hill Cemetery, a Catholic cemetery in  Dallas, Texas. He left $500,000 to each of his two surviving siblings and $10,000 to each of his nieces, nephews and to his daughter Francesca. The bulk of his estate was left to the  Conrad N. Hilton Foundation,[6]  which he established in 1944. His son,  Barron Hilton, who spent much of his career helping build the Hilton Hotels Corporation, contested the will, despite being left the company as acting President, Chief Executive Officer, and Chairman of the Board of Directors. A settlement was reached and, as a result, Barron Hilton received 4 million shares of the hotel enterprise, the Conrad N. Hilton Foundation received 3.5 million shares, and the remaining 6 million shares were placed in the W. Barron Hilton  Charitable Remainder Unitrust.[6]  Upon Barron Hilton’s death, Unitrust assets will be transferred to the Hilton Foundation[citation needed], of which Barron sits on the Board of Directors as Chairman.[7]

On December 25, 2007, Barron Hilton announced that he would leave about 97% of his fortune (estimated at $2.3 billion),[7]  to a charitable unitrust which would eventually be merged with the Conrad N. Hilton Foundation.[8]  By leaving his estate to the Foundation, Barron not only donated the fortune he had amassed on his own, but also returned to the  Conrad N. Hilton Foundation  the Hilton family fortune amassed by his father, which otherwise would have been gone to the Conrad N. Hilton Foundation 30 years previously had Barron not contested his father’s will.[emp added]

So, not only has Paris Hilton not inherited anything yet, because her grandfather is still alive, she won’t inherit anything major ever. It all goes to charity. Paris Hilton is a sleazoid, but she is a largely a self-made sleazoid. Her personal financial assets are almost entirely the result of her leveraging her, uh, other assets via secret sex tape into a bizarre celebrity career. She’s worth several hundred million now, none of it inherited.

Paris Hilton has been trotted out by Leftists for years as an example of the need for the death tax and yet apparently none of them bothered to actually check if she was actually an heiress. The elite Democrats who carefully construct the party’s talking points, don’t seem to even bother to check Wikipedia. (Or they do and just assume that the average Leftist voter won’t.)

The real point of interest here is not the inanity of the death tax, but rather the studied indifference of the Democrats and Leftists in general to actually studying the wealthy and telling the truth about them.

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