The left is positively drooling at the prospect of soaking $1.7 trillion out of the pockets of the rich. They can feel that money against their soft hands as if it were already there.
Under Biden’s super-duper, very keen tax proposal in the infrastructure bill that has nothing to do with infrastructure, the tax on capital gains would nearly double, from 20 percent to 39.6 percent. Along with raising the personal tax rate, it’s supposed to generate $1.7 trillion in tax revenue over the next 10 years from the wealthy who aren’t paying their “fair share.”
But you don’t get to be wealthy in America by paying taxes. In fact, legally avoiding taxes is fairly easy if you have a decent accountant.
A study from the University of Pennsylvania’s Wharton Business School reveals that up to 90 percent of those taxes can be avoided by wealthy people who just aren’t feeling the same sense of love and brotherhood about the government that the left feels.
“We don’t think that the proposal has a lot of teeth,” said John Ricco, director of policy analysis at the Penn Wharton Budget Model, a non-partisan fiscal policy research group at the business school. “There are a lot of games you can play to avoid paying this tax.”
Mr. Biden’s proposal is to eliminate the difference between the tax paid on wages and the tax paid on investment gains for those earning more than $1 million in any one year. The president is also expected to propose upping the top income tax rate to 39.6% from the current rate of 37%. That means equalizing the capital gains tax with the income tax would effectively double the tax rate on investment earnings to to 39.6% from the current 20%.
But very few people, even among ultra-wealthy Americans, would end up paying the new higher tax, according to the Wharton researchers.
After all, the government can’t force wealthy people to sell their stocks.
Mr. Biden’s higher capital gains taxes would only apply to people with income over $1 million. Wharton’s researchers, however, believe that once an increase in the capital gains rate is passed, wealthy Americans would simply avoid selling stocks and other investments.
The wealthy could also minimize their taxes by paring gains in years when they have losses elsewhere in their portfolio, effectively lowering their taxable net gains for the year. Another strategy could be to sell off investments slowly over time to minimize the amount of tax owed in any one year.
“Capital gains is a discretionary tax,” Ricco said. “It is not like taxes you pay on income. You get to decide when you sell your investments, and therefore when you pay taxes or not.”
People never act in ways that liberals believe they will. One need only look at Communism and its dependence on the notion that people act, not so much in their own self-interest, but in the interests of their “class.” That and their bug-eyed view of human nature on what motivates people led directly to the downfall of that ideology.
The French, under President Francois Hollande, decided to impose a “soak the rich tax” on the wealthy in 2012. Before being declared unconstitutional, the 75 percent tax on earnings above 1 million euros proved the fallacy of such schemes.
The money that was gotten through the tax was quite small, and the projected revenues for 2013 and 2014 were actually down! The government had forecast that in 2013 through all these measures it would be able to collect around 30 billion EUR of extra tax income. What it in fact got was 16 billion, which is 14 billion below the estimated forecast!
The prime minister at the time, Manuel Valls, was quoted as saying: “Too much tax kills tax.” To which a normal person might add, “duh.”
The Wharton study calculates that Biden might collect almost a trillion dollars from his tax increase — about 700 billion short. When will they ever learn?