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Suppose that
some editor offered me $1,000 to write an article. If there were no
taxes of any kind, this $1,000 of income would translate into $1,000 in
extra saving. If I invested it in the stock of a company that earned,
say, 8 percent a year on its capital, then 30 years from now, when I
pass on, my children would inherit about $10,000. That is simply the
miracle of compounding.
Now let’s put
taxes into the calculus. First, assuming that the Bush tax cuts expire, I would pay 39.6
percent in federal income taxes on that extra income. Beyond that, the
phaseout of deductions adds 1.2 percentage points to my effective
marginal tax rate. I also pay Medicare
tax, which the recent health care bill is raising to 3.8 percent,
starting in 2013. And in Massachusetts, I pay 5.3 percent in state
income taxes, part of which I get back as a federal deduction. Putting
all those taxes together, that $1,000 of pretax income becomes only
$523 of saving.
And that saving
no longer earns 8 percent. First, the corporation in which I have
invested pays a 35 percent corporate tax on its earnings. So I get only
5.2 percent in dividends and capital gains. Then, on that income, I pay
taxes at the federal and state level. As a result, I earn about 4
percent after taxes, and the $523 in saving grows to $1,700 after 30
years.
Then, when my
children inherit the money, the estate
tax will kick in. The marginal estate tax rate is scheduled to
go as high as 55 percent next year, but Congress may reduce it a bit.
Most likely, when that $1,700 enters my estate, my kids will get, at
most, $1,000 of it.
HERE’S the bottom
line: I
Can Afford Higher Taxes. But They’ll Make Me Work Less. |
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I think those that work "get it". Those that don't work, or are heavily subsidized by the government, only see that there is more for them if more is taken.
ReplyDeleteThere's only one eventual outcome: Somebody will have to accept less, whether it's by choice, or force. I think those that produce should make the decision. Those that don't, which includes most public sector workers, are an endangered species.
You forgot to mentioned that after 30 years, that 1K will be worth 250 in todays dollars.
ReplyDeleteMy cousin Joe is in this category. One of 11 kids, he is considered the black sheep of the family, prolly coz he hung around me too much back in the formative years. He owns and operates a construction company, and I speculate his payroll is $1M+/year. Again speculation, but he prolly retains a quarter mil. He has a fine family and a fine house. This tax increase gonna hit him, and one day he gonna be waking up asking why in hell he should bid on yet another job that eventually would net him close to bupkiss. And this guy's crew is as close to "shovel ready" as it gets.
ReplyDeleteTuring word: handnei. As my mother would say, better that than a poke in the eye with a sharp stick.
And there is no mention of the fact that taxes cause every last item you buy to be more expensive.
ReplyDeleteEvery dime spent on taxes by the employees and employers that make anything you consume will show up on you bill ... and you will pass that bill on to others who want YOUR services.
The net drag of even a 1% tax on our standard of living is incredible.
We have the means to live like absolute kings here in the twenty-first century ... but we have to take all the unproductive monkeys' ability to steal from us away in order to get there.
Charity NEEDS to be voluntary. The hippies are welcome to feed as many bums as they wish ... on their dime.
It is in there, but he doesn't mention that less wealth is created for the redistribution-tards to redistribute. The entire pie gets smaller. Plus, as in Alear's example where further employees are involved, they are also making less money, making the pie even smaller.
ReplyDeleteHe sums the whole thing up quite eloquently in the last sentence, "...don’t let anyone fool you into thinking that when the government taxes the rich, only the rich bear the burden."
GrinfilledCelt