The Best Tax Cuts Go to the Rich
i guess i should have added !!! for emphasis just like S&L.
S&L is probably shocked by this report ( :) ),
and i am convinced he supports
the attempts to change this so that
middle class families dont pay more
than their fair share.
The Forbes 400
The Best Tax Breaks Go To The Rich
Janet Novack, 09.24.10, 03:40 PM EDT
Forbes Magazine dated October 11, 2010
The Forbes 400 will pay higher rates in coming years--but not as high as the millionaire next door.
For the 400 richest Americans, 2010 may go down as the best year ever when it comes to paying taxes. A fixture since 1916, the federal estate tax lapsed on Jan. 1, potentially saving huge sums for the heirs of Metromedia founder John Kluge, Texas pipeline tycoon Dan L. Duncan, Yankees owner George Steinbrenner and other billionaires who died this year (see "Departures").
The top individual tax rate on long-term capital gains has stood at 15% since 2003--its lowest since 1933. Because the top 400 earners derived two-thirds of their $345 million in average gross from gains, they got clipped by an effective tax of only 16.6% in 2007 (the latest available year), down from 29.9% in 1995. "As long as capital gains are taxed at a lower rate, the top 400 will pay less than the merely rich,'' says Leonard Burman, a Syracuse University professor. Indeed, the merely rich--those with adjusted gross of $1 million to $5 million--paid 24% because more of their income comes from salary and other earnings taxed at a 35% rate.
The good times can't last. Congress is still deciding whether to allow the top gains rate to return to 20% when the Bush tax cuts expire at the end of 2010 and what to do about the estate tax, which springs back to life come Jan. 1, 2011. Capitol Hill has already adopted a 3.8% surtax on gains, effective in 2013. States, too, are raising taxes on the rich. In November Washington State residents will vote on an initiative backed by Bill Gates Sr., father of Microsoft ( MSFT - news - people )'s cofounder, to impose a new income tax only on high-income folks. Above $1 million per couple, it would grab 9%.
When taxes do rise, the wealthy won't be able to avoid them with edgy shelters, as some have in the past. Texas banker and rich lister Andrew Beal is now appealing a federal district judge's ruling disallowing $1.1 billion in paper tax losses he generated from a $19 million investment in junk Chinese debt. The government says Beal used this technique "to stockpile over $4 billion in artificial losses to shelter future income." The judge ruled the losses lacked "economic substance" but didn't impose penalties on Beal, finding he had "reasonable cause" to believe his strategy would work. In March Congress eliminated that defense to penalties for future shelters lacking economic substance.
Then there's the Internal Revenue Service's creation of special "high wealth" squads to audit the rich and its ever more effective pursuit of offshore accounts. The Swiss are now handing over files on 4,450 Americans who had secret accounts at UBS ( UBS - news - people ) AG. Rich lister Igor Olenicoff has pleaded guilty to lying on his tax return about $200 million he kept offshore, including at UBS.
So will the plutocrats have to ante up more tax? Yes, but if the gains rate goes too high, they'll delay selling assets--cutting tax revenue, warns Michael Graetz, a Columbia Law School professor. Says he: "They obviously don't need the money for lunch."
The Richest People in America