Wednesday, January 26, 2011

A Question About Tax Philosophy, and The State of The Union Address

Bear with me here. There's something that has bothered me all year, and I'd like to figure it out.

Suppose I believe that it's a good thing to pay taxes in order for the government to provide services that make our society a better place, and that in fact it is the government's job to do this.

Suppose, theoretically, that I've decried special tax deductions loopholes & tax shelters for the wealthy to prevent them having to pay the full allotment of tax due on their income and assets. Suppose I have built a career on supporting this outlook.

Let's suppose that my income for one year is already $5.5 Million, and of that, I will pay about 33% in taxes (including Self Employment taxes), which is about the same percentage that nearly every self-employed person will pay on their income, even those who only made $50 Thousand. So while it looks like a lot to say I paid $1.5 Million in taxes, it's actually not any more, percentage-wise, than, say, Joe the Plumber pays.

What if I were to have a windfall of $1 Million, and the current tax laws (which I claim are unfairly tilted toward the wealthy) will allow me to shuttle that money into my favorite tax-free charities without paying any tax on it.

In the process, I don't get a "charitable deduction", but I get something even better: I get lots of free publicity as a benefactor to these charities, and I don't have to claim the windfall as income.

If I chose not to use the loophole (which I have despised), and did claim the windfall as income, and then made the donations directly, I'd have to pay an extra $14,700. But, instead, I redirect it and "save" the money for the charities, instead of "giving" it to the government.

So in this fantasy, I, a millionaire several times over, who is campaigning to close loopholes and raise taxes on "the rich", take the loophole and avoid paying any taxes at all on $1 Million dollars.

Now, pretend all that is true, and that it isn't me, but the President of the United States.

Welcome to reality.

And 10 months after the one person in the entire universe who should be setting an example & willingly paying every penny in tax that could possibly be owed took the rich man's loophole and avoided paying a single penny of tax on the $1.4 Million Nobel Peace Prize, and took a Foreign Tax Credit of $59,000, while reporting an income - not net worth but one year's income - of $5.5 Million, Mr Obama came before the House for the State of the Union Address, and spoke thusly on 1/25/11:

"For example, over the years, a parade of lobbyists has rigged the tax code to benefit particular companies and industries. Those with accountants or lawyers to work the system can end up paying no taxes at all. "

"So tonight, I’m asking Democrats and Republicans to simplify the system. Get rid of the loopholes. Level the playing field."

"And if we truly care about our deficit, we simply can’t afford a permanent extension of the tax cuts for the wealthiest 2 percent of Americans. "

"Before we take money away from our schools or scholarships away from our students, we should ask millionaires to give up their tax break. It’s not a matter of punishing their success. It’s about promoting America’s success."

Not even the conservative media picked on on this, at the time or any time since. The entire world seems to feel that avoiding paying taxes is ok as long as it is legal even if it is a trick or a "loophole", even if one is the Head Tax Collector. Even if one is the President of the United States and made a campaign of complaining about loopholes for the rich.

No it isn't illegal. It doesn't violate the rules.

But isn't this odd? Am I odd for thinking it odd?

Photo: a flock of wild turkeys in Central Texas


  1. Look at the bright side, he gave 100% of the money to charity. He could have kept it all for himself.

    $250 K Fisher House
    an organization that provides housing for the families of those being treated at major military and Veterans Affairs medical centers

    $200 K Bush/Clinton Haitii Fund
    for relief and reconstruction efforts in Haiti

    Other organizations receiving some of Mr. Obama’s prize money include the Posse Foundation, which helps nontraditional high school students get into college; the United Negro College Fund; the Hispanic Scholarship Fund; the Appalachian Leadership and Education Foundation; the American Indian College Fund; Africare; and the Central Asia Institute, which promotes girls’ education in Pakistan and Afghanistan.

  2. Thanks for commenting. :-) What do you think of this statement lobbying against reducing Federal subsidies for those same causes and how it relates to the President's unwillingness to give up his own tax break? "Before we take money away from our schools or scholarships away from our students, we should ask millionaires to give up their tax break."



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