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February 1, 2012

Obama's Class Warfare Totally Distorts the Facts


In the state of the union address, President Obama spent a few minutes about how the rich aren't paying their fair share of taxes. He pointed out, once again that Warren Buffett pays a lower tax rate than his secretary. He has added in the past that even Buffett thinks that's not fair.

Barack Obama believes that the rich should pay 30% of their income in taxes, if they make over $1 million. Let's address the "fair share" first.

Is It Really "Fair?"

In 2007, the top 1% paid over 40% of all income taxes collected. The top 10% of income earners paid over 70% of all income taxes collected. How is this unfair? In fact, the number of people who pay taxes in the United States virtually equals the number of people with zero income tax liability. Fair?

The liberals in government want to create more tax disparity so they can cater the votes of a growing "zero liability" group and retain power in government. Meanwhile, the "rich" are funding services that are mainly consumed by the "zero liability" group. This transfer of wealth is extremely dangerous and likely is a cause to Generation Y having a lower quality of living than their parents.

Income Taxes (progressive) vs. Capital Gains Taxes (15%)

Warren Buffett's secretary likely pays around 27% of her income in federal taxes. Warren Buffett, whose income is primarily derived from increases and returns on investments, pays a 15% capital gains tax rate. The two methods of income earning are totally different and hold different risk variations.

Most people's income is steady and is dependent on a salary or hourly rate. The government directly withdraws this money from their paychecks. Income is not variable. Capital gains are risked by an investor who may lose their money in the process of investing. The returns are variable depending on the management of the company being invested in, or the structure of the investment portfolio.

The investor is also using income that has already been taxed to make this investment. Warren Buffett has gotten so good and investing (plus stocks go up when it becomes public that he bought them, another easy boost) that I'm sure his capital gains tax income is just as easy to attain as his secretary's salary. But, for pension plans, middle class investors, and others trying to save for retirement, investment decisions don't come as easy. Should we punish these people as well with a higher capital gains tax rate?


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