Capital Gains Tax

The Land of the Fee and Home of the Slave

In the days leading up to the IPO (Initial Public Offering) of Facebook stock as it became a publicly traded company, much of the news surrounding the company was made not by founder Mark Zuckerberg, but by Eduardo Saverin, a young man who became very rich after he invested his life savings in that unknown company running out of a Harvard dorm room. Saverin had announced that he was renouncing his U.S. citizenship, preferring to make his ties with Singapore instead.

In the aftermath of his announcement, it was claimed that he was doing so in order to avoid the heavy tax burden placed on his wealth by the United States. Senator Chuck Schumer (D-NY), a man of whom former Senator Bob Dole once said that “the most dangerous place in Washington is between Charles Schumer and a television camera,” wasted no time in turning this into face time with the press to score political points, joining with fellow Democrat, Senator Bob Casey (D-PA) in announcing their intention to submit the “Ex-PATRIOT” Act.

According to Schumer, this law would “re-impose taxes on expatriates like Saverin even after they flee the United States and take up residence in a foreign country.” Like a modern-day Rasputin, this would enact into law the assumption that politicians have supernatural powers of mind-reading, and would presume any person who renounced U.S. citizenship, while having a net worth greater than $2 million, or an average five-year income tax liability of at least $148,000, had done so for the purpose of tax avoidance. The law, eviscerating the Constitution’s presumption of “innocent until proven guilty” principle, would require the individual to prove to the IRS that they’d not done so for tax avoidance purposes, or risk additional capital gains taxes on any future investment gains.

Is Warren Buffett a hypocrite?

Is the Oracle of Omaha a hypocrite?  He is, according to the New York Post.  For those with faulty memories or who simply weren’t paying attention, Warren Buffett wrote an op-ed claiming that he and his fellow “mega-rich” weren’t really paying enough in taxes.  Obviously, this tore through the internet with both sides battling over Buffett’s arguments.  However, the Post claims that despite Buffett’s claims that he’s not taxed enough, his own company hasn’t even paid what it owes.

This one’s truly, uh … rich: Billionaire Warren Buffett says folks like him should have to pay more taxes — but it turns out his firm, Berkshire Hathaway, hasn’t paid what it’s already owed for years.

That’s right: As Americans for Limited Government President Bill Wilson notes, the company openly admits that it owes back taxes since as long ago as 2002.

“We anticipate that we will resolve all adjustments proposed by the US Internal Revenue Service (“IRS”) for the 2002 through 2004 tax years … within the next 12 months,” the firm’s annual report says.

It also cites outstanding tax issues for 2005 through 2009.

Um…oops?

Buffett is free to argue any position he wishes.  However, if he truly feels that he isn’t taxed enough, then why hasn’t Berkshire Hathaway, that he is chairman and CEO of, paid their taxes?  Or maybe it’s as the Post suggests, that he only wants to shill for President Obama.

Top Ten Tax Hikes in the Obama Budget

Written by Ryan Ellis, Tax Policy Director at Americans for Tax Reform. Posted with permission from Americans for Tax Reform.

What are the top ten tax hikes in President Obama’s new budget?

There are literally dozens of new tax increases in the FY 2014 Obama budget.  In total, they increase taxes by nearly $1 trillion over the next decade.  They would permanently bring the federal tax burden to 20 percent of economic output, a level only reached in one year since World War II (FY 2000, when the economy was roaring and tax revenues were pouring into Washington as a result).

Below are the top ten tax increases in President Obama’s budget (all numbers are over a decade):

1. Chained CPI. The budget would change the definition of inflation for all federal budget purposes, including federal tax provisions.  Because tax brackets and other tax items are indexed to inflation, slowing down their growth is an income tax increase.  This is a tax increase for all Americans who pay income tax, including middle class Americans.  In the past, Congress’ Joint Committee on Taxation has estimated that enacted “chained CPI” would be a $100 billion tax increase

Do Higher Tax Rates Hurt Growth?

Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

Because of Obama’s class-warfare tax hike and additional tax increases by kleptocrats at the state level, many successful taxpayers will now lose more than 50 percent of any additional income they generate for the American economy.

I discuss the implications of this punitive tax policy in this CNBC interview.

Normally, this is the section where I highlight certain points I made, or bemoan the fact that I failed to mention an important fact or overlooked a key argument. Today, though, I want to address the do-taxes-impact-growth issue raised by Robert Frank.

Investors trying to sell off assets before year’s end

stock market

With a compromise on the so-called “fiscal cliff” up in the air, investors are showing signs of worry. According to CNBC, many are working to sell off assets to avoid the coming hikes in the capital gains tax that will come at the beginning of the year:

For many of the wealthy, 2012 is becoming a good year to sell.

They’re worried about the “fiscal cliff,” which is when tax cuts expire and spending cuts are set to go into effect at the end of the year.

Fearing an increase in capital gains and dividend taxes, many of the rich are unloading stocks, businesses and homes before the end of the year.

Wealth advisors say that with capital-gains taxes potentially going to 25 percent from 15 percent, and other possible increases in the dividend tax, estate tax and other taxes, many clients are selling now to save millions in taxes.
[…]
If the Bush-era tax cuts expire, taxes on capital gains would revert back to its previous rate of 20 percent from its current 15 percent.  Another 5 percent may be added from health-care levies and changes in itemized deductions, bringing the rate to 25 percent for many high earners.

Taxes on dividends could go from 15 percent to over 43 percent. And the estate tax could go from 35 percent on estates worth more than $5 million to 55 percent on estates over $1 million.

European Politicians Share Obama’s View of a ‘Balanced Approach’

Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

President Obama supports higher taxes, but he usually claims he only wants higher tax rates on rich people. Heck, he promised back in 2008 that “no family making less than $250,000 a year will see any form of tax increase. Not your income tax, not your payroll tax, not your capital gains taxes, not any of your taxes.”

I guess we’re supposed to forget the higher tax burdens that were imposed on the middle class by Obamacare in 2010 and the SCHIP legislation in 2009.

Obama’s other rhetorical trick is to claim he wants a “balanced approach.” Translated from Washington-speak to English, that means he wants more of our money. But it’s a soothing way to demand more money. After all, who’s against “balance”?

Mitt Romney destroys the Left’s narrative on his tax returns

Mitt Romney

Who would have thought Mitt Romney’s tax returns would be a welcome distraction? That’s what happened on Friday, after a week of being beat up for his remarks from a May fundrasier where he said that he’d written off 47% of voters, Romney campaign released his tax returns for 2011 along with a summary of this average tax rate from the previous decade:

Mitt Romney paid $1.9 million in federal taxes in 2011 on income of $13.7 million, an effective rate of 14.1% that reflects the Republican presidential candidate’s dividends, capital gains and other returns that are assessed at some of the lowest tax rates.

Romney’s tax return, which he released Friday, showed that he boosted his effective tax rate by not declaring all of the $4 million in charitable contributions that he made during 2011, instead only reporting $2.3 million. By doing so he stayed consistent with an earlier public statement that his tax rate for the year would not drop below 13%.

That last point about Romney not declaring all of this charitable contributions has made the Left apoplectic. They’re literally upset that Romney paid more in taxes than he was supposed to. Not only that, the substantial charitable giving — Romney gave almost 30% of his income to charity in 2011 and 13.4%  from 1990 to 2009 — takes away from the Left’s narrative that he is out of touch.

Senate Majority Leader Harry Reid (D-NV), who baselessly suggested last month that Romney had not paid any taxes in years past, once again slammed Romney over the issue:

Tax cuts are responsible for Clinton-era economic boom

cash

With Congress out of session, the party conventions going on and other issues coming to the forefront of the presidential race, the looming tax hikes seem to have fallen to the side, at least for now.

President Barack Obama and Senate Democrats have insisted that House Republicans go along with raising tax rates on the income earners making over $200,000 and families earning more than $250,000. House Republicans have balked at this over fears that raising taxes, particular during a time of slow job growth, would further hurt the economy. In response to this particular concern, Democrats and apologists of their policies often point to the economic boom during the late 1990s, which occured after then-President Bill Clinton’s tax hikes were passed.

Writing at the Heritage Foundation, Curtis Dubay dispels this myth of Clinton’s presidency, noting that the economy did not live up to its full potential after taxes were raised in the 1990s:

Clinton signed his tax hike into law in September 1993, the same year he took office. It included an increase of the top marginal tax rate from 31 percent to 39.6 percent; repeal of the cap on the 2.9 percent Medicare tax, applying it to every dollar of income instead of capping it to levels of income like the Social Security tax; a 4.3 cent increase in the gas tax; an increase in the taxable portion of Social Security benefits; and a hike of the corporate income tax rate from 34 percent to 35 percent, among other tax increases.

Senate Democrats persecute Facebook co-founder Eduardo Saverin

Earlier this week it was reported that Facebook co-founder Eduardo Saverin had renounced his United States citizenship rather than pay taxes on his share of the revenues of Facebook going public, saving him upwards of $100 million in capital gains taxes. The move raises eyebrows, it is becoming increasingly more popular rather than to face the higher tax burden in the United States, though Saverin, who was born Brazil, will owe some money, what is being referred to as an “exit tax.”

But some Senate Democrats aren’t willing to let Saverin off that easy. Sen. Chuck Schumer (D-NY) has introduced legislation that would target Saverin and other people who renounce their citizenship to leave the United States for more tax friendly confines:

Presuming that Saverin moved to avoid paying taxes, Schumer and Democratic Sen. Bob Casey of Pennsylvania on Thursday unveiled legislation to stop what they called a “despicable trend.”

Under their legislation, any American who renounces his or her citizenship for the purpose of avoiding taxes will be punished in two ways: They will be barred from re-entering the U.S., and their future investments in the U.S. will be taxed at a 30 percent rate.

Taking advantage of every Facebook one-liner available, Schumer said of Saverin, “Sen. Casey and I have a status update for him: Pay your taxes in full, or don’t ever try to visit the U.S. again.”

Class warfare produces less tax revenue in the UK

With President Barack Obama telegraphing his fall strategy of raising taxes on the wealthy in the name of “fairness,” we need only look across the Pond to our friends in the United Kingdom where a surtax on the evil and hated rich has actually caused revenues to decline:

The Treasury received £10.35 billion in income tax payments from those paying by self-assessment last month, a drop of £509 million compared with January 2011. Most other taxes produced higher revenues over the same period.

The self-assessment returns from January, when most income tax is paid by the better-off, have been eagerly awaited by the Treasury and government ministers as they provide the first evidence of the success, or failure, of the 50p rate. It is the first year following the introduction of the 50p rate which had been expected to boost tax revenues from self-assessment by more than £1billion.

Senior sources said that the first official figures indicated that there had been “manoeuvring” by well-off Britons to avoid the new higher rate. The figures will add to pressure on the Coalition to drop the levy amid fears it is forcing entrepreneurs to relocate abroad.

Over at Hot Air, Ed Morissey explains why President Obama plans are likely to do the same in the United States:


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