Presidential election campaign brings up tax rates
A picture of the 1945 Detroit Tigers baseball team sits in my office. They were the World Series champions that year. I know they only had to beat the Chicago Cubs, but beat them they did. Losing must have hard on the Cubs that year because they haven’t been back to the World Series since. Of course, the Tigers haven’t exactly blown away the rest of baseball having also been back to the fall classic only three more times: 1968, 1984 and 2006. All of that has a good chance of changing in the next few years.
If you are Tiger fan, you know they just bought the services of Milwaukee’s first baseman, Prince Fielder, by signing him for the next nine years. They are paying him the princely sum of $214 million. I realize that is a lot of Little Caesar’s pizzas, but given that fact that Fielder is one of the best left-handed hitters in all of baseball and given the fact that Detroit already has Miguel Cabrera, one of the best right-handed hitters in all of baseball, and has Justin Verlander, the best pitcher in all of baseball, I’m anticipating that I will be hanging a new picture in my office come this October. The 2012 Detroit Tigers World Series championship team will be a welcome substitute to those 1945 champions.
Why did I mention the Cubs? I know this is a bold prediction, but I fully expect them to be back in the hunt for a championship within a few years. They recently hired a fellow by the name of Theo Epstein, the former general manager of the Boston Red Sox, to run their baseball operations. Epstein has made a career of making winners out of losers.
If you have watched the movie, “Money Ball,” you might remember that Epstein was one of the disciples of Billy Bean in Oakland. He took that particular form of religion from Oakland to Boston. They subsequently broke the curse of “the Babe” in Boston and won a couple of world championships. He is now moving to Chicago to break the curse of “the Goat.”
I hope he does it, too, and if he does, it would only be fitting that the Cubs beat the Tigers in the 2016 World Series. After all, the Tigers would already have won the 2012, 2013, 2014 and 2015 World Series. Four in a row would be enough. It would be time to let the Cubs break their curse. Go Tigers! Go Cubs!
There sure has been a lot of publicity about tax rates lately. It’s become a topic of discussion because we are in the midst of a presidential election campaign. Needless to say, Mitt Romney’s tax return has been thoroughly dissected. Since the Romneys paid just slightly less than 15% in tax on their 2010 tax return, it’s quite obvious that President Obama feels that the Romneys don’t pay enough tax. In fact, the President lately has mentioned and applied the “Buffet Rule” to the Romneys. It seems that the billionaire Warren Buffet pays an overall tax rate that is lower than his secretary’s rate.
As the President noted in his State of the Union address, the Buffet Rule states that an owner of a business shouldn’t have a lower tax rate than his secretary. Of course, in the Romneys’ case, they still paid more than $3,000,000 in federal taxes—a rather sizable amount. Their tax rate was 15% because the majority of their income was from investments. Investment income is taxed at the maximum capital gains rate of 15%. They took advantage of the same tax laws available to all of us. The Romneys do not have any special rules just for the Romneys.
I’m also pretty confident in stating that even though Warren Buffet pays 15% tax, the total amount of tax he pays is substantially more than his secretary not only pays but earns. He also took advantage of the capital gains tax rate rules. There are also no Warren Buffet tax rules.
A cursory examination of the Obamas’ 2010 tax return shows that they paid tax at the rate of approximately 25%. They paid that rate because a predominant portion of their income was earned from two sources: wages earned from acting as the President of the United States and income earned from having authored several books.
In our system, earned income is taxed at higher tax rates than investment income and their investment income was negligible. But if they did have investment income, it would have been taxed at the Romneys’ capital gains tax rate of 15%.
The Obamas paid total federal tax of just over $450,000—a rather sizable amount. They took advantage of the tax laws to get their tax down to $450,000. The same laws are available to all of us. The Obamas also don’t have any special rules for the Obamas.
Given all of the publicity given to the Romneys and the Buffet Rule, I just hope the Obamas pay a higher tax rate than their secretary.
All that being said about the Obamas, the Romneys and the Buffets of the world, we do have a bit of a problem in our tax system. Approximately 47% of all tax return filers take advantage of those same laws as the Romneys, the Buffets and the Obamas to eliminate 100% of their tax. Yes, that is correct, 47% of all filers not only don’t pay 15%, 25% or something in between. They pay 0%.
When the President says that everyone should pay their fair share, is he talking about the Romneys’ or Buffets’ 15%, his 25%, or the 47% paying 0%? I think he is just sore because Romney pays a lower percentage than he does. This is Jerry Coon quickly signing off before they suggest that the Coons’ tax rate goes up to 25%.
Jerry Coon is an Enrolled Agent. He owns Action Tax Service on Northland Drive in Rockford. Contact Jerry at www.actiontaxservice.com.