Monday, March 26, 2012

Feed the Rich! Tax the Poor!

The Republican Budget Eliminates Tax Deductions for the Working Class and Reduces Taxes on the Fabulously Rich

"I could use a reduction in my taxes, after all, I'm a job creator. I employee and pay my chauffeur, my lawyers, my gardeners, my stock broker, the pool man, my tailors, my yacht crew, my chef, my pilots, my accountant, my valet, my golf coach, and my maids. And I also need to keep this sweet young lady off the streets too. Reduce my taxes and I can hire more people."

Wall Street Journal - A new congressional report by the nonpartisan Congressional Research Service detailing the value of the Republican's proposed major tax breaks show that they would amount to more than $1 trillion a year—roughly the size of the annual federal budget deficit.

House Republicans proposed to reduce or eliminate an unspecified array of tax breaks for low income and middle-class taxpayers in order to offset the costs of lowering the marginal tax rates, both for corporations and the top marginal rate for wealthy individuals - - from the current 35% to 25% - - and also, taxing capital-gains income at lower rates than ordinary income earned through regular wages.

Capital gains is how the top 1% makes most their money, and is taxed at only 15% (which hasn't been this low since 1921, when the preferential treatment for capital gains was first introduced at a rate of only 12.5%)

The offsets include the exclusion from taxable income for employer-provided health insurance, the biggest break, at $164.2 billion a year in 2014; the exclusion for employer-provided pensions, the second-biggest, at $162.7 billion; and the exclusions for Medicare and Social Security benefits. Other big breaks include the mortgage-interest deduction (the third-largest), the earned-income credit for the working poor; and deductions for state and local taxes.

That likely would leave little for reducing tax rates, perhaps only enough for one or two percentage points in the top individual rate, while maintaining the same level of revenue, the report said.

House Republicans dismissed the report's significance. A House GOP aide said. "Probably tomorrow there will be a report saying the Earth is round."

The top-ranking Democrat on the House Ways and Means Committee, Rep. Sander Levin of Michigan, said the report foreshadows a difficult fight over tax breaks that will pit the interests of middle-class households against those of higher earners.

"Some of the most popular tax provisions—including the exclusion for health coverage and the deduction for mortgage interest, largely benefit middle-income families," Mr. Levin said in a statement.

House Republicans point to data showing that upper-income taxpayers benefit much more per capita from tax breaks than lower earners, so reducing breaks across the board would maintain a progressive system, they say.

But what they don't say is that their new proposal would greatly benefit the top 1% much more.

Inheritance Taxes for the Spoiled Rich Kids of the Top 1%

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act was signed into law by President Obama on December 17, 2010 when the Bush tax cuts were extended for two more years because Republicans had held federal extended unemployment benefits hostage in exchange for the deal.

This new law provided sweeping changes to the rules governing federal estate taxes, gift taxes and generation-skipping transfer taxes, but only for the 2010, 2011 and 2012 tax years.

Washington continues to debate what to do with the federal estate (inheritance) tax. The top rate is now 35% and is scheduled to rise to 55% in 2013. Currently there is still a $5 million exemption on the federal estate tax and gift tax (a once-in-a-lifetime wealth transfer for the living).

2010 was "a good year to die" when the tax rate for inheritances was 0%, and the wealthy also had a reduced gift tax as well. Many believed that Congress would reinstate the federal estate tax—and impose a new Generation-Skipping Tax (tax assessed on distributions from an estate to beneficiaries two or more generations down, like for Kim Kardashian and Paris Hilton) — and raise the tax on gifts too.

Besides the federal estate taxes, the tally of states that impose a state estate and/or inheritance tax for 2012 is 22 states plus the District of Columbia. (Republicans, the top 1%, and Forbes Magazine calls this tax a "death tax").

An op-ed in the Wall Street Journal claims that polls show that roughly two of three Americans want this tax abolished, but there was no link provided, nor was a pollster named to back up that claim). The author also says that "Mister" (not "President") Obama wants a 45% federal estate tax rate next year, which in many states (with their own estate tax) might mean a more than a 50% combined rate.

Editor's Note: If this is true, then this is a GOOD thing. Dead people don't need money to live on, and their spoiled rich kids won't be left starving to death and homeless in the streets either. If $5 or $10 million a year in tax-free money from their trust fund isn't enough for people like Kim Kardashian and Paris Hilton to survive on, then they can get a damn job like everybody else, or live on the money they earn from their idiotic "reality" shows.

An Overview of Estate and Gift Tax Exemption, Rate and Portability in 2011 and 2012

  • For 2011, the federal estate tax exemption will be $5 million and the estate tax rate for estates valued over this amount will be 35%. The estate tax has also become unified with federal gift and generation-skipping transfer taxes such that in 2011 the lifetime gift tax exemption and generation-skipping transfer tax exemption will be $5 million each and the tax rate for both of these taxes will also be 35%.
  • The estate tax, gift tax and generation-skipping transfer tax exemptions have been indexed for inflation for the 2012 tax year such that each will be increased from $5 million to $5.12 million beginning on January 1, 2012.
  • Portability: Allow married couples to pass $10 million on to their heirs free from federal estate taxes.
  • Portability may be relied on in states that do not collect a separate state estate tax, AB Trust or ABC Trust planning may still be required in states that collect state estate taxes, particularly in states where the couple has a large estate.
  • Unlike the estate tax exemption, the generation-skipping transfer tax exemption has not been made portable between spouses for the 2011 and 2012 tax years

John Travolta

The IRS had sought more than $1 million from John Travolta for un-paid taxes, but he only had to pay $607,000. He got away without having to pay the $500,000 in interest and penalties. Travolta's net worth is guessed to be $200 million.

Like Tom Cruise, John Travolta is a member of Church of Scientology, a controversial organization that has long lobbied to do away with the IRS all together. (Read: Lobbyists, Special Tax Rates & Tax Evasion) The more one earns, the more inclined they are to evade taxes.

(Pictured below) John Travolta's private Boeing 707 and Gulfstream jet parked in front of the Travolta family estate, which has a 15-car garage. He uses the privately-owned Greystone Airport, located in the unincorporated community of Anthony (7 miles northeast of Ocala, Florida). A former Revlon model manages the estates.

Click here to download a small animated photo of flying over John Travolta's house

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